California Insurance Commissioner Dave Jones issued a formal notice to all property and casualty insurance companieson Jan. 29 regarding homeowners' claims from the recent mudslidesand debris flows.
|The notice acknowledges that homeowners' and certain commercialproperty insurance policies frequently have exclusions for lossesfrom mudflow, debris flow, mudslide, landslide or other similarevents. Under California insurance law, the exclusions are notenforceable if the facts establish that the wildfire, which is acovered peril, was the "efficient proximate cause" of thesubsequent flowing, mudflow, debris flow, mudslide, landslide, orother similar events.
|Related: Mudslides ravage California coastal town
|The efficient proximate cause doctrine — which is aninterpretive rule for first-party insurance disputes — states that"When a loss is caused by a combination of a covered andspecifically excluded risks, the loss is covered if the coveredrisk was the efficient proximate cause of the loss," but "the lossis not covered if the covered risk was only a remote cause of theloss, or the excluded risk was the efficient proximate, orpredominate cause." [State Farm Fire & Casualty Co. v. VonDer Lieth (1991), 820 P.2d 285]
|According to the insurance code and case law, if the facts showthe Thomas Fire, a covered peril, was the efficient proximate causeof the subsequent mudflow, mudslides, debris flow, landslide, oranother similar event, then the damage caused by those eventsshould be covered under the property owner's insurance policy.
|The complicating factor for most Californians will bedetermining what actually caused their losses. The notice alsoreminds insurers not to deny the claims before "undertaking adiligent investigation regarding the cause of loss and aftercarefully considering the facts."
|Related: California says wildfires are making home insuranceunaffordable
|"Californians have suffered greatly with all of the devastatinglosses from wildfires that struck the state in the last threemonths of 2017," said Jones in a statement. "Preliminaryindications are that the Thomas Fire burned vegetation which wouldotherwise have absorbed rainfall and held soils in place, which inturn resulted in the mudflows, mudslides, debris flows orlandslides. If the evidence shows the Thomas Fire or another perilcovered by a homeowner's insurance policy was the efficientproximate cause of mudflow damage, I expect insurance companies tostep up and cover these financial losses."
|Residents and business owners in Santa Barbara County affectedby the mudslides should file a claim with their insurance companyas soon as possible. If consumers have issues navigating the claimsprocess, or they think their claim was wrongfully denied, they'readvised to contact the Department of Insurance at 800-927-4357 oronline at www.insurance.ca.gov forassistance.
|Related: California proposes stronger laws to help wildfire survivors withinsurance claims
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Rosalie Donlon
Rosalie Donlon is the editor in chief of ALM's insurance and tax publications, including NU Property & Casualty magazine and NU PropertyCasualty360.com. You can contact her at [email protected].
