National Fire Insurance Company of Hartford (National Fire) insured Northwest Bedding Co. (Northwest) under an all-risk commercial property policy. It covered Northwest’s buildings and business personal property against “direct physical loss of or damage to Covered Property…caused by or resulting from any Covered Cause Of Loss. The Spokane, ‘ area experienced heavy snowfall during the winter of 2007-08. At the end of February, the Washington State Department of Transportation and others diverted snowmelt through trenches in Northwest’s vicinity, several of which ran through the area surrounding it. The water overflowed the trenches onto Northwest’s property, inundated its building, and damaged both the building and business personal property inside it.
National Fire determined that the loss was the result of surface water, was excluded from coverage, and denied Northwest’s claim. Northwest sued National Fire for damages and a judicial declaration that the loss was covered. Both parties agreed that there were no issues of material fact and filed cross-motions for summary judgment. The trial court agreed with National Fire, granted its motion for summary judgment, and denied Northwest’s. Northwest appealed.
Northwest argued that the loss resulted from an excluded peril, surface water, because it resulted from third parties channeling water onto its property. National Fire contended that the loss was clearly the direct or indirect result of surface water caused by an unusually fast snowmelt.
The fact that the water was channeled onto Northwest’s property by ditches did not change the fact that the loss resulted from surface water. National Fire also argued that any claim that the loss was due to diversion instead of surface water became untenable when the water overflowed the ditches and returned to a state of surface water.
Northwest also argued that the trial court failed to identify and give legal effect to the efficient proximate cause of this loss. It is usually a question of fact for the fact finder but is a question of law if the facts are undisputed and the inferences from them are plain and incapable of reasonable doubt or difference of opinion. In this case, both Northwest and National Fire agreed on the essential chain of events that caused the damage. The dispute centered on whether the original diversion of water by a third party was a distinct peril that was the efficient cause of Northwest’s loss.
The appellate court determined that the efficient proximate cause is the predominant cause that sets the chain of events that produces the loss into motion. If coverage applies to the efficient proximate cause of loss, the loss is covered even if other events in the chain are excluded. The efficient proximate cause rule applies when two or more independent forces operate to cause a loss. It is applied only after determining the single act or event that was the efficient proximate cause of loss and that the efficient proximate cause of loss is a covered peril.
In this case, the court determined that the overflow of a drainage system constructed or manipulated by other third parties was not a peril independent from the snowmelt and surface water and flood that inundated Northwest’s premises. It stated that diversion of water flowing in a large area, whether from snowmelt or not, is what the average person purchasing insurance would expect the words “flood” and “surface water” to encompass. It affirmed the trial court’s summary dismissal of Northwest’s suit.
Court of Appeals of Washington, Division 3. Northwest Bedding Co., a Washington Corporation, Appellant, v. National Fire Insurance Company of Hartford, a Foreign Corporation; CNA Foundation Corp., a Foreign Corporation, Respondents. No. 28044-6-III. Feb 11, 2010. 154 Wash.App. 787, 225 P.3d 484