270 P.3d 1235
Nev.2011Background
- Fourth Street Place, LLC owns the Building in Las Vegas and purchased an all-risks policy from Travelers (March 19, 2004–March 19, 2005).
- Roof repair during November 2004 left the roof exposed; tarps were placed but wind blew them away, allowing rain to enter.
- Significant interior damage occurred; building uninhabitable; tenants evacuated.
- Travelers denied coverage in December 2004 and reaffirmed denial in March 2005.
- District court granted Travelers’ summary judgment; held rain damage not from a covered loss and faulty workmanship excluded coverage; efficient proximate cause not applicable; bad faith not shown.
- Fourth Street moved for partial summary judgment arguing tarps were part of the roof and that efficient proximate cause could apply; district court amended findings but not the judgment; this appeal followed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is the rain damage excluded by the policy’s rain limitation? | Fourth Street contends tarps are part of the roof and wind damage occurred, triggering coverage. | Travelers argues rain damage requires first-damage to roof/walls by wind or hail; rain without prior wind/hail damage is excluded. | Rain limitation applies; tarps not a roof, so damage did not result from a covered loss. |
| Does the faulty workmanship exclusion preclude coverage here? | Fourth Street argues the exclusion should not apply to ongoing repair work. | Travelers argues the exclusion applies unless faulty workmanship itself causes a covered loss. | Faulty workmanship excludes coverage here because it did not cause a covered loss; rain damage was not from a covered cause. |
| Should the doctrine of efficient proximate cause apply to create coverage? | Fourth Street argues the insured peril (faulty workmanship) proximate-caused the loss, despite rain limitations. | Travelers contends efficient proximate cause does not apply because neither cause is a covered loss; wind/rain not connected to a covered loss. | Efficient proximate cause does not apply; no covered cause of loss established. |
| Is lost business income coverage available without a covered loss? | Fourth Street seeks coverage for lost income independent of a covered loss. | Policy requires a covered loss as a prerequisite for lost business income. | No lost business income coverage since no covered loss and efficient proximate cause does not apply. |
Key Cases Cited
- Allstate Ins. Co. v. Smith, 929 F.2d 447 (9th Cir. 1991) (faulty workmanship interpreted to include product; ambiguity resolved in insured’s favor in that case)
- Dewsnup v. Farmers Insurance Co., 239 P.3d 493 (Or. 2010) (functional definition of roof for rain limitation; temporary coverings may be roofs)
- Am. Excess Ins. Co. v. MGM, 102 Nev. 601 (Nev. 1986) (read policy as a whole; ambiguous terms construed against insurer)
- Orr Ditch Co. v. Dist. Ct., 64 Nev. 138, 178 P.2d 558 (Nev. 1947) (interpretation of terms by context; noscitur a sociis guidance)
- Garvey v. State Farm Fire and Cas. Co., 770 P.2d 704 (Cal. 1989) (adopted efficient proximate cause reasoning; causation in California)
- Victory Peach Group, Inc. v. Greater New York Mut. Ins. Co., 707 A.2d 1383 (N.J. Super. Ct. App. Div. 1998) (distinguishable; tarps case with incomplete repairs lacks coverage absent explicit provision)