The California Department of Insurance published a bulletin reminding insurers of the efficient proximate cause doctrine and its relevance to losses caused by the recent wildfires.
The efficient proximate cause doctrine states that when a loss is caused by a combination of a covered and an excluded risk, the loss is covered if the covered risk is the efficient proximate cause. However, the loss is not covered if the covered risk was just a remote cause or if the excluded risk was the efficient proximate cause.
The California Supreme Court has ruled that the efficient proximate cause doctrine is the “preferred method for resolving first party insurance disputes involving losses caused by multiple risks or perils.”
After wildfires, there may be an increase in losses caused by flooding, mudflow, debris flow, mudslide, or landslide. While these are typically excluded in a homeowners policy, if it is determined that a wildfire or another covered peril was the efficient proximate cause of the loss, those losses should also be covered.
The bulletin can be found here.
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