City of West Liberty v. Employers Mutual Casualty Company, 922 N.W.2d 876

The City of West Liberty owned an electrical power plant insured by Employers Mutual Casualty Company (EMC) under an all-risks policy (Apr. 1, 2014–Apr. 1, 2015).
On Nov. 7, 2014 a squirrel contacted an energized 7200-volt clamp and grounded frame, creating a conductive path that ionized the air and produced electrical arcing.
The arcing killed the squirrel and caused $213,524.76 in direct physical damage to the transformer and related equipment.
EMC denied coverage relying on the policy’s “Electrical Currents” exclusion: loss caused by arcing or electrical currents other than lightning (with a fire exception).
West Liberty sued for declaratory relief; the district court granted summary judgment to EMC, the court of appeals affirmed, and the Iowa Supreme Court granted further review.
The Iowa Supreme Court affirmed summary judgment for EMC, holding the loss was caused by arcing and thus excluded; efficient-proximate-cause analysis did not apply because there were not two independent causal perils.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Does the policy’s electrical-currents exclusion bar coverage for the damage?	West Liberty: the squirrel was the efficient proximate cause (a covered cause) so exclusion for arcing should not defeat coverage.	EMC: the explicit exclusion disclaims coverage for loss caused by arcing; arcing caused the damage and no fire occurred to trigger the carve-out.	Held: Exclusion applies—arcing caused the loss and is excluded; no coverage.
Is the efficient proximate cause doctrine applicable to avoid the exclusion?	West Liberty: the doctrine applies where an initial covered peril sets in motion subsequent events leading to loss.	EMC: doctrine inapplicable because there were not two independent causes; the squirrel did not cause damage independently of the arcing.	Held: Doctrine inapplicable—only a single causal event (arcing) produced the loss; efficient proximate cause cannot be used to evade the exclusion.

Amish Connection, Inc. v. State Farm Fire & Casualty Co., 861 N.W.2d 230 (Iowa 2015) (discusses anticoncurrent-cause provisions and concurrent-cause analysis)
Qualls v. Farm Bureau Mutual Insurance Co., 184 N.W.2d 710 (Iowa 1971) (efficient proximate cause principle where insured peril sets other causes in motion)
Kish v. Ins. Co. of N. Am., 883 P.2d 308 (Wash. 1994) (efficient-proximate-cause rule inapplicable where loss is in fact a single cause despite characterization)
In re Katrina Canal Breaches Litig., 495 F.3d 191 (5th Cir. 2007) (efficient-proximate-cause doctrine requires two distinct independent causes; flood was sole damaging force)
Quadrangle Dev. Corp. v. Hartford Ins. Co., 645 A.2d 1074 (D.C. 1994) (electrical arcing was the proximate cause; failures that merely prolonged arcing did not independently cause damage)
Home Ins. Co. v. Am. Ins. Co., 537 N.Y.S.2d 516 (App. Div. 1989) (loss entirely from arcing excluded even though moisture precipitated the arcing)