Efficient Proximate Cause Rule Applies only to Losses with Two or More Causes
From the Desk of Kyle D. Riley: Under Washington’s efficient proximate cause rule, a loss is covered if it is caused by two or more perils combining in sequence to cause a loss and a covered peril is the predominant cause of the loss. This is true even where the chain of events includes a source of loss expressly excluded by the policy. But where an insured’s costs to repair are partly imposed by a city’s building code, does the rule apply? Read on to find out.
Claims Pointer: In this case arising out of a house fire, the insured asserted that the efficient proximate cause rule mandated coverage where the alleged causes of loss were a fire and a city’s building code. The Court of Appeals determined that the efficient proximate cause rule did not apply because non-compliance with a city’s building code is not a peril under the meaning of the rule. The case provides insight into how courts approach the efficient proximate cause rule and is a helpful reminder that in evaluating losses, all perils must be considered, including perils excluded by the terms of the policy.
Lesure v. Farmers Ins. Co. of Washington, No. 48045-0-II, Washington Court of Appeals, Division 2 (December 21, 2016)
Loretta Lesure’s (“Lesure”) Port Angeles home was partially damaged by fire. The home was insured by Farmers Insurance Company of Washington (“Farmers”). The policy provided coverage for the cost to repair or replace the home up to the policy limit of $112,000. However, the policy also excluded losses resulting from the “[e]nforcement of any ordinance or law regulating construction, repair, or demolition of a building or other structure, unless endorsed by this policy.” Lesure purchased an optional endorsement for coverage of building code and ordinance upgrades with a liability limit of “10% of the total limit of insurance applying to the covered property.” ...