In a recent case before the California Court of Appeal, the issue centered on the interpretation of an insurance policy provision for covered causes of property loss. Many insurance policies, from automobile insurance to home insurance policies, include explicit language stating the terms for coverage. In this case, the plaintiff sued his insurance company for breach of contract and breach of the covenant of good faith and fair dealing regarding coverage for water damage to his rental house after it collapsed.
Artyun Vardanyan owned a rental property covered by an insurance policy issued by Amco Insurance Company. On December 6, 2010, Mr. Vardanyan submitted a claim to Amco stating he believed there was water damage to the flooring, caused by the walls. Amco sent an independent insurance adjuster, who then instructed Amco to have an engineer inspect the house.
The engineer’s report reflected leaks in the roof, gutters in disrepair, and corresponding water damage in the walls and other areas. The engineer stated the sources of moisture contributed to the damage, as did the poor construction and property decay.
Amco denied Mr. Vardanyan’s claims for loss. They cited policy exclusions for damage caused by leakage of water or seepage. Mr. Vardanyan hired a public adjuster to help with his claim, and he ultimately filed this lawsuit against Amco. Mr. Vardanyan claimed the house collapsed, and the policy provided for coverage for collapse.
Evidence from both sides demonstrated multiple causes of damage to the house. Mr. Vardanyan claimed that the coverage for the collapse of his rental as a result of hidden decay applied here. At issue was whether the court could give a special jury instruction, proposed by Amco, stating that if one of the causes of the collapse was a peril other than those covered, there could be no insurance coverage. Mr. Vardanyan insisted that the jury instruction should be general and state that if a combination of covered and excluded risks is the cause of the loss, the loss is covered if the most important cause is a covered risk.
Amco moved for a directed verdict. Mr. Vardanyan appealed after the trial court granted Amco’s motion for a directed verdict.
The appellate court first stated that a directed verdict is reviewed in the light most favorable to the appellant. Here, the policy provision defined coverage, not an exclusion. Turning to the efficient proximate cause doctrine, the court stated Amco’s construction of the insurance policy provision holds that coverage is excluded if a peril not listed in the policy contributed to the loss, even at a minimum.
A reasonable insured, the court stated, would not expect that a listed, covered peril, when combined with an unrelated, unspecified peril, would result in the exclusion of coverage. The court concluded that a policy cannot extend coverage for a specific peril and then exclude coverage for a loss caused by that covered peril combined with an excluded peril, without determining which peril was the proximate or predominant cause of the loss.
Regarding the burden of proof argument set forth by Mr. Vardanyan, the court stated Amco’s special jury instruction did improperly place the burden on the insured to prove his loss fell within the provision. The insurer should have the burden of proving a loss was excluded.
In this case, the appellate court found the judgment on Mr. Vardanyan’s claims for breach of contract and breach of the covenant of good faith and fair dealing should be reversed, and it remanded for a retrial.
The premises liability attorneys at Sharifi Firm can help you in a claim for compensation following an injury or accident. Our office provides a no-obligation consultation and can be reached by calling 1-866-422-7222.
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