Kane v. Royal Insurance Co. of America

Ltd., KANE; Kane; Penny Nicky’s, Nick corporation; River and Fall

a Colorado Association,

Chalet Condominium non-profit corporation, Peti

Colorado

tioners, OF

ROYAL INSURANCE COMPANY

AMERICA, corporation; an Illinois Foreign

American and Insurance Com corporation;

pany, Re a Delaware Pennsyl Company,

liance corporation, Respondents.

vania

No. 87SC341. Colorado,

Supreme Court of

En Banc.

Jan. 1989.

Rehearing Denied Feb. exclud-

considered a “flood” and therefore coverage petitioners’ ed from under the (2) policy; “all risk” insurance and Wheth- moving er the “efficient cause” of the dam- negligence parties age was the third fail, allowing to rather than the the dam itself, coverage so that should not by the flood exclusion. be barred question in the We the first af- answer negative. the second in the firmative and Accordingly, judgment we affirm the district court.

I. 15, 1982, morning July On the Rocky Lake Dam in Mountain Na- Lawn tional Park failed. The water released French, Stone, P.C., Joseph C. French & swept into the Fall River. the dam downhill Boulder, petitioners. Haynes, M. for David restaurant, motel, complex, A condominium Jolliffe, Hill, Ar- William C. Anstine & path lay and resort in the of the water. Denver, Anstine, Royal Co. Ins. thur H. by petitioners, property The was owned Foreign Ins. America and Co. Kane, Penny peti- and leased to Nick and tioners, Senter, Overturf, Fall River Chalet CondominiumAs- Greengard Mark C. Nicky’s, (collectively in- Denver, sociation and Ltd. for Reliance Co. sureds). property to the The Hart, Wiley Mayne, E. Curt Holland & extensive. Denver, curiae Krechevsky, for amicus Adams-Arapahoe failure, Dist. No. Joint School Royal dam Prior to the Foreign 28-J. Insur- Company and American and Company (Royal) had issued a busi- ROYIRA, Justice. comprehensive policy Nicky’s, to Ltd. ness physical loss covering risks of direct all pursuant to granted certiorari C.A.R. We specifically ex- property except those Larimer 50 to review an order of the Coun- Likewise, Reliance Insurance cluded.1 which, relying on Bartlett ty District Court (Reliance) special Company had issued a Co., Divide Insurance v. Continental policy Fall River Chalet owners business (Colo.App.1984), held that P.2d 412 risks, covering all Association Condominium petitioners’ property was specific subject to physical of direct then found that by a flood. The trial court policies is- in the exclusions respon- policies issued the insurance (collectively Reliance by Royal and sued coverage for the loss- provide did not dents insurers) substantially similar. granted the by petitioners and es claimed summary judg- respondents’ motions for loss, for their but Insureds filed a claim ment. coverage claiming that an denied insurers exclusionary relieved peti- clause granted on we The issues which policy con- liability. The Reliance of Lawn them of Whether the failure tion are: following exclusion from cover- Dam, causing to inundate the tained Lake Park, age: can be property Estate petitioners’ provision specific special type unless the contains of cover- "An ‘all risk’ is a usually age extending excluding particular under loss from cover- expressly to risks not insurance, Indus., recovery Bacjac allowed there- age.” Corp. other Dev. Steamboat losses, resulting other than those Inc., under for all (Colo.App.1985). insured, fraudulent act of the from a willful or II. liable for loss: shall not be Company argue

Insureds there is policies because the under the insurance by, contrib- 12. caused Dam failure is not a “flood” Lawn Lake by any of the to, aggravated uted exclusion and contemplated the flood following: Specifical- the term “flood” is not they assert that since “flood” ly, water, waves, flood, tidal wa- (b) surface no distinction is and defined waves, of streams overflow or tidal ter naturally artificially and made between water, spray from or of or other bodies floods, property it is reasonable foregoing, all whether driven any of natural the term with owners to associate or not. wind events, disasters. Conse- not artificial by Royal contained issued ambigu- clauses are quently, the exclusion in all ma- language identical exclusion with strictly be construed ous and should respects. terial reject argu- against the insurers. We the term seeking ment because we believe complaint filed a Insureds then ambiguous applied to the “flood” is not coverage the insur- under determination of this case. damages. facts The insurers policies and which, relying on the ex- filed answers Ambiguous language clause, coverage. they denied clusionary against the should be construed contracts moved for sum- and insurers Both insureds See, v. e.g., Republic insurer. Ins. Co. granting summary mary judgment. (Colo.1988); 229, P.2d 232 Jernigan, 753 insureds, held the trial court judgment for v. Fidelity & Guar. Co. United States ‘flood’, waters’, ‘flood “terms that the 446, 450, Bank, 147 Colo. First Nat’l include a situation not ‘surface water’ [do] (1961). 202, Unambiguous con P.2d artificially-impounded contained of an tracts, however, should enforced accord escapes and causes body of water that See, Jernigan, 753 ing e.g., to their terms. further held damage.” The district court Bank, 232; v. P.2d at United Griffin cause of that “the ‘efficient [insureds’] (1979). 239, 242, 866, 868 599 P.2d Colo. of the dam and damages’ the failure was disagreement between the Mere contemplated the in- within not a flood as meaning a term does parties about exclusion.” surance ambiguity. Rural Elec. not create Union in Bartlett v. Con- months later Several Comm’n, 661 P.2d Public Ass’n v. Utils. Co., 697 P.2d tinental Divide 247, (Colo.1983). ascertaining “In appeals, (Colo.App.1984),the court of provisions of a document whether certain identical exclusion- construing an almost language ambiguous, the instrument’s involving the Lawn ary in a case clause and construed harmo must be examined failure, property held that the Lake Dam plain generally accepted ny with the and by a flood and was was employed, refer meaning of the words and coverage in- under the thus excluded provisions to all the ence must be made judgment After the policy. surance agreement.” Radiology Professional by operation appeals was affirmed court of Ass’n, 195 Area Health Corp. v. Trinidad equally of an divided of law because 253, 256, Colo. Divide Ins. Bartlett v. Continental (citing Cooley, 158 Colo. Christmas (Colo.1986), re- the insurers 730 P.2d 308 (1965); Fideli 406 P.2d 333 United States summary judg- motions for their newed Bank, 147 ty Co. v. First Nat’l & Guar. court, concluding that it The trial ment. (1961); People ex Colo. reasoning decision of was bound Hinderlider, 98 Park Reservoir Co. v. rel. “policies that the appeals, held the court (1936)). Colo. provide did not of the [insurers] meaning accepted generally losses” and to the for their [insureds] “flood” does not include a of the term granted the motions. against insurer, natural construed the term distinction artificial between finding escaping New example, floods. For Webster’s that “water burst 1974), (2d ed. de- Dictionary 535 water mains” was not a “flood” within the World overflowing fines of wa- “flood” as: exclusion clause Id. at “[A]n inundation; dry; normally ter on an area P.2d at 940. deluge_” Ninth New Colle- Webster’s that the main in The fact Femdale (9th 1988), ed. defines

giate Dictionary 474 object a man-made like the dam this rising overflowing term as: “[A] case does not control our decision. Under body normally especially] of water onto Femdale, the term “flood” is the facts of dry Dictionary Law land....” Black’s ambiguous not the water was because (5th 1979), ed. similar definition: contains a object, released from a man-made but also “An inundation of water over land clearly a because a water main is not so usually it. Water which inun- water,” “body of see Ninth New Webster’s of earth it dates area of surface (9th 1988), Dictionary 474 ed. Collegiate expected ordinarily not be to be.” would and the amount of water released because normally dry The of insureds’ inundation clearly was less an “inundation” or “del- squarely generally land falls within these uge,” see Webster’s New World Dictio- “flood.”2 accepted definitions of the term 1974). (2d nary Cumulatively, ed. v. Divide Ins. See Bartlett Continental for the doubts were sufficient Femdale (no Co., (Colo.App.1984) 697 P.2d 412 dis- in- court to resolve them in favor of the natural tinction in insurance between sured. flood; and artificial causes of to make such Here, however, there is no basis for would be to rewrite the terms distinction ambiguous holding that the term “flood” is policy). great overflowing of applied to “the as argue Develop Insureds that Ferndale failure of Lawn Lake caused water” ment Co. v. Great American Insurance is, this exclusion is con Dam. That when Co., (1974), Colo.App. generally harmony with the ac strued requires us to reach a different conclusion. cepted meaning of the term “flood” and Femdale, disagree. court of We case, of this there the context of the facts appeals found the term “flood” used a large-scale inundation is no doubt that this similarly policy exclusion worded insurance a “flood.” of water was ambiguous in to be a situation where to the factual distinction be- addition city broken water line caused “inunda case, the defini- tween Femdale and footings tion of the and foundations upon of “flood which completed being tion waters” partially condominiums supports conclu- court relied our at Femdale constructed Id. [insured].” result, ambiguous term “flood” is not at 940. As a the court sion that the 527 P.2d July Dam in language On the Lawn Lake of at least one Colorado statute 2. sending County, ruptured provides evidence Colorado as it stood in 1982 also some Larimer ordinary usage is not limited to of water to the town of Estes that “flood" in torrents flood flooding: natural Park.... time of the At the Except section, provided flood.... as in subsection of this added). (emphasis Id. at 302 shall be the owner of a reservoir Furthermore, Irrigating Ditch & Farmers damages arising leakage liable for all Kane, (10th Cir. Co. v. 845 F.2d 229 Reservoir therefrom or overflow of the waters floods 1988), arising from the Lawn Lake a case also breaking caused the embankments failure, the court referred to the "flood” Dam reservoir. such several times as follows: 37-87-104(1), (1982 (amend- Supp.) 15 C.R.S. § genesis interpleader in a This action has its 1986) (empha- repealed and reenacted ed flooding deaths caused several added). sis flood.... great property in and around and Similarly, Associ- in Millers’Mutual Insurance Estes Park.... ation v. Iowa National Mutual Insurance per- (D.Colo.1985), "other ... The defendants F.Supp. [included] another case 618 arising failure, damages as a result sons" who suffered ... out of the Lawn Lake Dam the Lawn Lake term was used to describe what oc- "flood” flood. added). (emphasis Id. at 230 curred: Grier, Although case.” 243 P. at 757. The Femdale this case. under the facts of term,” be a “relative if Appleman, word Insur quoted from 5 J. court up from the construction the back of water ance Law and Practice § “ can be of a sewer and street embankment are those waters follows: ‘Flood waters’ “flood,” then we have no ordinary referred to as a flow highest line of above the rising concluding that they difficulty stream, speaking generally of a stream, overflowing of Fall is also a “flood.” river, River or natural have overflowed formed a continuous course and have water Next, analogize use of the insureds flowing ordi body with the water term “flood” in 33 U.S.C. 702c to channel_” Ferndale, nary use in the insurance exclusion term’s paragraph here. The second of U.S.C. liability any kind city 702c states: “No ruptured Although leakage from a upon the United shall attach to or rest not fall within this defini- line does byor floods or any States tion, rising overflowing of Fall any place....” Insureds flood waters no dis- does. This definition makes River 33 U.S.C. rely on two cases which deal with artificially naturally and tinction between term “flood” 702c. These cases limit the ease, floods, the Fall and in this naturally floods. in the statute to high- “above the clearly River overflowed States, v. Valley Cattle Co. United ordinary line of flow.” est [its] 1966); (D.Hawaii F.Supp. Guy F. Atkin Dorsen, rely Robert Insureds also on Merritt, Chapman, & Scott son Co. Surety Casualty v. Aetna Inc. (N.D.Cal.1954). F.Supp. 406 Corp., 126 (D.C.1983), Re- F.Supp. 495 and Mateer v. Atkinson, the Valley In Cattle and 247 Md. liance Insurance congressional intent in con courts relied on (1967), proposition that the A.2d 797 for refers to natural cluding that “flood” cases, term “flood” These case, however, In we ly caused floods. Femdale, damage from broken like involve meaning of the are not concerned with damage from the water mains rather than in a federal statute where term “flood” addition, body In overflow of a of water. Here, congressional intent is relevant. we deluge or they do not involve a overwhelm- meaning of the are concerned with present in the case ing rush of water as is in term “flood” an insurance Therefore, these cases are dis- before us. Therefore, Congress if had intended even tinguishable on the same basis as Fem- events, that restrict “flood” to natural to dale. meaning of the term does not dictate the City Tulsa Insureds next contend that However, policies at issue. the insurance (1924), Grier, 243 P. 753 Okla. insureds, we contrary position to the argument the term supports their interpretation of the term believe that the Grier, In meanings. “flood” has variable by the in 33 U.S.C. 702c followed § city plaintiff successfully sued of the federal courts is con majority vast damages property to real flood analysis conclusion. sistent with our and and street from the construction of sewer In Insurance v. United Aetna Co. of a closed the course embankment which Cir.1980), (9th States, which 628 F.2d city argued that the embank- stream. 702c application of 33 U.S.C. involved flooding no more ment and sewer caused collapse of the of the Teton the context the construction. than occurred before Dam, response argument to concluding improvements caused a that the 702c would not to floods that section of the inunda- difference the extent vast by negligence, stated: tion, re- court stated: must be the. “[I]t government negli- Any flood caused ‘flood’ is a rela- membered that the word gence part by the natu- term, is also caused may and refer to mere surface tive inconvenience, extant at the time causing temporary ral conditions water negligence: e.g., the amount of the rain- quantities of may also refer to such and and hence preceded the flood present fall which as caused the being naturally of water stored. artificially the amount To both attempt distinguish ordinary floods. to between conditions and unusual natural ... would finally argue Insureds that the federal very inquiry be a difficult task. Such an government, through the National Flood necessarily would frustrate section Program, recognizes the natu- purpose govern- permitting 702c’s ral/artificial distinction for the term engage ment to in flood control without argument “flood.” We believe that this agree liability. fear of We with the incorrect. Eighth Circuit that such a test would Congress formerly authorized the Secre- “lead the court into the morass of ‘con- tary Housing Development3 and Urban causes,’ tributing causes,’ ‘superseding to pro- establish a national flood insurance ” ‘intervening causes.’ gram persons pur- allow interested

Aetna, (citations omitted). 628 F.2d at 1204 chase flood insurance. 42 U.S.C. by holding immunity It concluded that the (1977). The pro- definitions the statute provision is not limited to water viding program for that state: term “[T]he attributable a natural disaster. meaning may ‘flood’ shall have such prescribed regulations of the Director Furthermore, Supreme the United States [formerly Secretary], include inun- Court, James, in United States v. 478 U.S. rising dation from waters or from the over- 106 S.Ct. 92 L.Ed.2d 483 streams, rivers, flow of or other bodies of meaning considered “flood” and water_” 4121(a)(1) (Supp. 42 U.S.C. § (1986). in 33 702c “floodwaters” U.S.C. § 1987). regulations expand Federal this def- James involved two consolidated cases “damage general inition to include from a recreational users of reservoirs of flooding condition of in the area re- which projects injured federal flood control were causes, sults other than natural such swept they through or drowned when were breaking as the of a dam.” 44 C.F.R. retaining structures those after structures 61.4(b) (1987). Emergency The Federal opened by Corps were the United States Management Agency regulations support Engineers flooding. holding to control our conclusion that the term in- (1986)grants that 33 702c U.S.C. immuni- § naturally artificially cludes both ty damages, to the United for the States caused events. Court said: Nór do the terms “flood” and “flood- interpreting In a contract of insur any uncertainty waters” create ance, ambiguity courts will not force an in context of accidents such as the ones at against it order to resolve an insurer. issue in these It is cases.... thus clear Co., Hawkeye-Security Martinez v. Ins. plain language from 702c’s that the § 1017, 184, 188, 195 Colo. 576 P.2d terms “flood” and “floodwaters” (1978). An cannot insurer be held liable to all waters contained in or carried beyond scope the of risks which have been through project a federal flood control clearly in the insurance Id. purposes of or related to flood con- 188, at 576 P.2d at 1019. trol, as well as to waters that such Terms used in an insurance con projects cannot control. given meaning tract are to be their accord Id., 106 S.Ct. at 3121. ing usage. to common Reed v. United 568,

The term “flood” as used in 33 Fidelity U.S. States & Guar. 176 Colo. 572, 1377, (1971). 702c is not limited C. to natural In inter floods, contracts, naturally preting but instead includes both insurance courts are not Likewise, artificially liberty floods. at to raise doubts where there are we believe that the term “flood” in the none or to make a new contract between Higgins insurance under review includes the insured and the insurer. v. Emergency program. (Supp. The Director of Federal the minister this 42 U.S.C. 4011 1987). Management Agency is now authorized to ad- discharge of water from 163 Colo. than accidental Fire Connecticut appeals affirmed, (1967). system. The of 295-96, the court P.2d holding that the court was correct in trial ambiguity where decline to force an We discharge the determining that the of wa- in is clear meaning the of the term “flood” ground plumbing sys- into the from the ter Ac- the context of the facts of this case. proximate the efficient cause tem was the cordingly, affirm the decision of we support adoption of the the loss. of its district court on this issue. rule, moving “efficient cause” court general set forth in 6 quoted principle III. Couch, Cyclopedia Insurance Law G. that, if the Insureds claim even (1930).4 quotation provides: That mov applies, exclusion the “efficient flood determining a loss is whether within [I]n risk, ing cause” of their loss a covered there exception policy, is a an leading to namely, party negligence third causes, concurrency of different effi- argu Dam. This failure Lawn Lake cient cause—the one that sets others Trinity on Uni Koncilja ment is based motion—is the cause to which loss Co., Colo.App. versal Insurance attributed, though other causes (1974). We believe it, operate may follow and more immedi- Furthermore, distinguishable. factually ately producing the disaster. moving we believe that “efficient Colo.App. Koncilja, 35 P.2d at language of yield rule must cause” 940-41. policy There question. although noted the set- The court fore, reject argument. we insureds’ tling operated earth have more leakage wa- Koncilja, from a broken damages, producing immediately pipe ter the floor of a house embedded proximate predominant or efficient cause ground house to beneath the leakage the loss was the accidental turn, which, caused the house subside plumbing system. The court reasoned crack. The insur- settle and homeowners’ policy provisions that where inconsist- against occurring policy insured ance they give together read rise to ent or when discharge, result of leak- ambiguity “[accidental as to the extent age or steam overflow water coverage, the should be construed contract plumbing system.” within a ... Id. against the in favor of insur- claim 528 P.2d at 940. homeowners’ which, company draftsmanship, its ance ground on the that the insur- was denied ambiguity. The court then con- created the by, re- excluded loss “caused to be cluded that loss intended excluded to, sulting aggravated “any contributed meant by the exclusion clauses earth by any earth water below the movement or “water below surface” movement” [or] ground.” having the 528 resulting surface Id. from causes no relation to plumbing escape P.2d at 940. of water from the the system. court the home- The trial reasoned that policy Koncilja, caused the proximately

owners’ loss had been Unlike insurance plumb- provisions in this case are escaping policy the not within together ing read system and was therefore a covered inconsistent when policies cover the exclusion to not The “all loss. It construed loss,” but underground physical had not risks of direct only to water which “subject provisions or to to all the contained escaped system from the domestic provisions exclude by anything other herein.”5 Those cover- earth movement caused Couch, Koncilja incorrectly principle. Cyclopedia this See 18 G. Insur- 4. The court attributed of Couch, 1983). (2d quote Cyclopedia G. Insurance Law 74:711 ed. rev. § to “6 of Instead, (2d Anderson).” this ed. R. §Law 1466 Royal policy. language is from the The quote of Couch. 5. This is found in 1930 edition edition, revised, policy is in all material re- edition Reliance identical The current second language setting spects. same similar forth the includes Couch, by, resulting The current edition of age “loss ... from, to, revised, aggravated by provides: prin ... second edition contributed or “The ciples closely flood.” of causation should not be so par as to defeat the intent of the applied party negligence Third is not a cov ties as manifested in the contract of insur inconsistency ered risk which creates or Couch, Cyclopedia Insur ance.” 18 G. of ambiguity language of between the cover 74:696, (2d ance Law ed. rev. age language and the of exclusion. Al 1983). provides: The edition second revised negligence though party loss from third is limiting In view of the wide use of policy, that covered under an “all risk” policies speaking clauses in in terms of a expressly subject is to the lan provisions, “sole” cause or similar it be- guage of the exclusions included pursue comes to the matter academic here, language Under the beyond recognizing the contract that of by, re the insureds’ loss which may by express terms “dis- insurance its from, sulting aggravated to or contributed which, qualify” in the of a cause absence regardless of the by a flood is excluded policy provision princi- under such a or any contributing of other cause. existence law, ples general of tort would be Koncilja, there is no inconsisten Unlike Thus, proximate it deemed a cause. has cy ambiguity inclusionary or proximate held been that doctrine pol exclusionary language of the insurance application ascertaining cause has no icies in this case. liability upon policies contain which Moreover, moving cause” the “efficient relieving company insurance clauses Koncilja does not control rule set forth liability death is caused or our decision this case. We believe directly indirectly, or or contributed rule, moving cause” if it were the “efficient disease, wholly partially, by and the or yield adopted by to be must to a evidence shows that disease contributed principle namely, well-settled of law: to the death. a contract for the courts will not rewrite See, Insurance Law Couch, e.g., Republic Cyclopedia Ins. Co. v. parties. 18 G. 1983). (Colo.1988). 74:705, (2d at 1017 ed. rev. There- Jernigan, fore, moving cause” rule the “efficient Couch, Cyclopedia Both editions of yield qualifying enlarging or words must Law, are consistent with this agreed parties and included in the edition, conclusion. In the 1930 the section policy.6 immediately preceding the section from quoted language of the exclusion court states: which specifically excludes loss general proximate as to and re- here “The rule to, contributed changed by by, the inser- “caused mote cause be aggravated by any following: ... qualifying enlarging tion in the added.) Couch, Cyclopedia Insur- (Emphasis flood.” We would be 6 G. words.” Hocking also (1930); rewriting policy if to hold that ance Law see we were the cause to v. British Am. Assurance the “efficient cause ... Wash. (where the loss is to be 113 P. 259 fire insurance which attributed.” language qualifies or en- provision stating that of this exclusion policy included larges phrase by” with “con- liable for “caused company “shall “aggravated by.” There to” and directly indirectly by or ... order of tributed caused to” authority,” applies is no doubt that the flood “contributed any the exclusion civil authority “aggravated” is the insureds’ loss. There- of the civil or whether the order loss). fore, apply the “efficient of the we decline to direct or the indirect cause the qualifying Koncilja and it where the exclusion includes en- We believe the court erred when moving applied in a larging the “efficient cause” rule "contributed words of causation such as the with an exclusion worded the same as by.” Koncilja case “aggravated is to” and Insofar as is, this case. That the “efficient conclusion, exclusion in moving inconsistent with our it is overruled. in a case cause” rule should not plaintiffs is included within abrogates by suffered the the where it moving cause” rule policies. coverage of the insurance agreed. the parties the language to which Air World Finally, in Pan American I. Casualty Surety ways, v. Aetna Inc. v. Great Development In Co. Ferndale Cir.1974), (2d F.2d 989 Colo.App. American Insurance exclusion, stated: construing similar (1974), the Colorado 527 P.2d 939 relevant Remote causes of causes correctly recognized that Appeals Court of of an insurance to the characterization subject to several some term “flood” is commercial context of this loss. In the meanings. Id. at “plain” what different stops at inquiry litigation, the causation The court noted that 527 P.2d at 940. loss; it physical cause of the efficient dis commentators sometimes courts and meta- to their trace events back does not types certain of inun agree as to whether “due to beginnings. The words physical meaning of the term dations fall within inquiry this resulting from” limit or appeals The court of there “flood.” Id. surrounding immediately the facts ambig the term “flood” was fore held that loss. inundation of water uous and that an Here, American, at 1006. 505 F.2d Pan by breakage city of a water line caused by, also, “caused that the words we believe from under the not excluded to, aggrava- contributed excluding policy by provision insurance inquiry to the limit the causation by” ted “flood, surface wa caused [or] surrounding the loss. immediately facts resolved ambiguities are to be ter” since judgment of the trial Accordingly, the 260-61, 527 against the insurer. Id. at affirmed. court is P.2d at 940. does, believe, majority I do not as LOHR, J., dissents. distinguishable in readily that Femdale MULLARKEY, JJ., and ERICKSON case, although present principle from the join in the dissent. The admittedly are not the same. the facts characterized the flow of LOHR, Justice, dissenting: court Femdale “inundation,” and the inunda- water as an majority respectfully dissent. The I breakage by the of an tion was caused “flood” as contained holds that the term of water. artificially created containment free from ambi- that caused the court Those are the facts inundations of water guity and covers Femdale, hold as it did appeals breakage of a dam. the dam from the failure of the inundation Trinity overrules majority also fairly character- present case can Co., Colo.App. Universal ized in a like manner. and holds that argue “flood” should ap- plaintiffs moving cause” rule does not “efficient only to inundations interpreted to refer there is no incon- be ply to this case because by natural conditions or events. inclusionary caused sistency the relevant between case, the term “flood” the exclusion- exclusionary I clauses of ary is found the context natu- majority of these clauses disagree on both with “flood, flooding, i.e., surface “flood” as ral causes of my view the term issues. waves, waves, water, or tidal tidal water policy is Even used in the streams or other bodies of wa- majority is correct in overflow of assuming that ter, foregoing, any of the all spray from concluding that the term is free ambi- This in driven wind or not.” this whether guity and that the inundation the term “flood” could coverage, I itself indicates that believe case is excluded interpreted encompassing natu- inclu- be is a conflict between the that there Bly v. Auto Owners Ins. exclusionary pol- ral causes. sionary clauses Cf. (term (Ala.1983) Co., 496-97 analysis So.2d icies and that under the method policy in en- damage “earth insurance type in of movement” Koncilja set forth

687 coverage by involv not excluded from compasses phenomena natural flood only provisions policies. of these examples ing because earth movement phenomena); policy in natural mentioned II. Catering Airline ston & Ari Forbes, 472, Supply v.Co. N.J.Super. 211 majority Even if the is correct in conclud- Div.1986) 1278, (Law 1284 A.2d 511 ing petition- movement,’ (“words lan ‘earth like other place of business is excluded from ers’ construed, being must be guage policies in coverage by provisions the flood light in the of other words contained read policies, policies question the “all-risk” in exclusion”). in the same negligent cover acts party any of a other source not third interpreted Several courts have similar specifically excepted coverage by way. policy provisions just this insurance policies. exclusionary clauses of the Under See, Dorsen, e.g., Inc. v. Aetna Robert Koncilja v. Trini- proper a construction of Co., 495, Casualty F.Supp. 496 & Sur. 562 Co., ty Universal Insurance Colo.App. 35 Appleman, In also 5 J. (D.D.C.1983). See 27, I believe that the 3145, Law Practice 462- surance at poli- under the insurer should bear the loss (1970). Indeed, present case 63 third-party negligence cies if or some other initially interpreted policy court district dam nonexcluded risk caused the to break. encompass only flooding by provisions to Koncilja, leakage situa a causes and not to include “a from broken wa- natural (a artificially-impounded pipe peril explic- con the insured of an ter home tion itly policy) caused subsi- body escapes of tained (a ground the home peril dence of beneath Co., damage.” Royal Kane v. causes Ins. coverage). There excluded was there- 83CV603, (Dist. slip op. No. at 2-3 Lar Ct. inconsistency coverage. fore as To an Co., 28,1984) (Dressel, J.) (the imer Feb. dis inconsistency ap- of resolve this court trict court later reversed this since decision adopted peals the view that binding it viewed as the Colorado Court of decision Bartlett v. Continental Appeals determining whether loss is within [I]n Co., (Colo. Divide Insurance 697 P.2d 412 exception policy, an in a where there is a App.1984)). authorities, course, causes, These concurrency of of different the effi- view, compel do not us to take the cause —the one that sets same but cient others which they provide support motion —is cause to the loss is do for a conclusion attributed, though to be the other causes that the term “flood” as insur contained in it, operate follow and more immedi- Annot., See Di is ately producing disaster. Opinion vision as Evidence that Partic of Policy ular Clause is 30, Id. at 528 P.2d at 940-41 (quoting 6 G. Ambiguous, (1981) (exis 4 A.L.R. 4th 1253 Couch, Cyclopedia Insurance Law differing interpretations tence term of a (1930)). 1466 cause, The first the leak among jurisdictions or within is evidence from the water pipe, set motion the term). ambiguity of the cause, second the subsidence. Therefore the loss was sum, covered under the policy. I believe term as Koncilja, Colo.App. 30-31, ambigu contained in the P.2d at 940-41. I believe this to be Ferndale, ous. See 258, Colo.App. sound See Appleman, rule. supra (1970 (1974); Mateer v. Reliance Supp.). Moreover, & 1988 Co., this rule 643, (term is con- 247 Md. 233 A.2d 797 sistent with the majority view of a juris- latently ambiguous “flood” is when used dictions. See Villella v. Public Employees Ambiguous insurance policy). terms in Mut. Ins. 806, 106 Wash.2d 725 P.2d an insurance are to be construed (1986). Accordingly, I see no need Repub strongly against most the insurer. to overrule the settled Jernigan, law lic Ins. Co. v. majority does the See opinion. maj. op. (Colo.1988); Fidelity Reed v. U.S. Guar. see also 6; 685 n. note 176 Colo. 491 P.2d infra (1971). Therefore, I would hold that inun majority apparently concedes that breakage dation caused of a dam party third negligence, negligence such as 688 construction, the operation damage or since vandalism “cause” was design,

in the dam, by poli- risk” the direct or immediate cause of the water the “all the is covered However, damage. 494 at Accord majority Id. P.2d 431-32. in the cies this case. Co., Beauty Supplies, Inc. v. Hanover Ins. inconsisten- that there is no also concludes (Mo.Ct.App.1975); 526 S.W.2d 75 Franklin coverage “expressly is sub- cy because that Ins. Packaging Co. Union in- language to the of the exclusions ject California 188, Co., N.J.Super. (App. 408 448 171 A.2d op. at policy.” Maj. in cluded the Div.1979). treating the approach This has the effect damage leading up to the of the events proper I is also believe that this the single as a petitioners’ place of business analysis Third Koncilja. method of under by implicitly saying party that third cause party negligence re or some other source negligence policy covered under the but sulting breakage of the dam one was party negligence if not the third causes petitioners’ the to the cause of flooding. approach misappre- this I believe place “flooding” the was of business and underlying Koncilja. the hends rationale However, pre another cause. because the There was than one “cause” of the more cipitating cause of the failure of the dam damage in case. There petitioners’ this flooding, policy set in motion the the should negligence design, party was third coverage, if the be construed favor operation or of the Lawn Lake construction precipitating not cause is itself excluded or that resulted in Dam some other cause coverage. Koncilja, 35 Colo. See dam, the failure of the and there was 30-31, App. P.2d at 940-41.1 at 528 put or in mo- “flood” which was “caused” Moreover, analysis this is consistent with the by precipitating the cause of break- tion majority applied jurisdic the rule the age of the dam. tions both a covered risk and an when Exchange, In Hatley v. Truck Insurance risk claimed excluded contribute to the 606, 494 P.2d 426 vandals 261 Or. Employees loss. v. Public See Villella place flooding plaintiffs’ 806, of the Mut. 106 P.2d Wash.2d by (1986). “[Wjhere was covered the business. Vandalism an insured risk “flood,” resulting operation policy but itself into a chain of causa sets step may sur- “surface water” or “water below the tion in which the last have been risk, ground” excepted excepted face of excluded from an not was risk will (citing coverage. Oregon Supreme recovery.” Apple did Court defeat Id. 5 J. hold, man, majority appar- case not as the in this Insurance Law and Practice § Anderson, would, (1970); 18 ently that the vandalism that caused at 311 R. on Couch 74:711, (2d flooding 1020-22 rev. ed. was not covered Rather, analysis very 1983)). Villella, using Washington Su preme poli determined that held Koncilja, similar that Court that homeowner’s plaintiffs’ cy provision excluding “any there were two causes of from, by, resulting this loss caused contributed and that Koncilja, concluding majority exclusionary has overrules least one court held that clause 1. The moving designed cause’ rule should language specifically applica- ‘“efficient to avoid case where exclusion includes not in a analysis pre- proximate tion of a cause will not enlarging qualifying words of causation." analysis inquiry clude such an since is based However, op. Maj. at 685 n. 6. conclusion part public policy attempts concerns on over moving efficient overlooks the fact perils losses with certain exclude connected ap proximate have been cause cause rules regardless importance perils of these qualifying plied regularly and en even when Hirschmann, causing loss. Ins. Co. v. Safeco See, present. larging words of causation tire (clause (1988) Wash.App. Villella, e.g., 106 Wash.2d excluding perils occurring "whether alone listed from, ("caused by, resulting contributed any sequence peril” a covered held with Ariston, aggravated by"); N.J.Super. to or 472, inquiry). preclude proximate cause (“caused (Law Div.1986) by, A.2d Thus, majority’s conclusion that aggravated contributed to or wrongly on lan- decided based N.J.Super. by”); Royal Ins. Stone v. supported by guage the case at issue not well (App.Div.1986) ("directly or indi 511 A.2d 717 law. Moreover, risk). rectly” excluded Stone, P.C., French, Joseph French earthquake, land C. aggravated ... to or slide, mudflow, sinking, rising or Boulder, earth Haynes, David M. for Brines. preclude coverage for shifting” would Hill, Anstine, Anstine and Arthur H. Jef- negligent damage to a house Richards, Denver, frey Royal for J. Co. building result work of a contractor which drainage shifting. and soil improper ed in 958-59, Villella, If P.2d at 964. ORDER OF COURT

alleged proximate cause of the was the briefs, Upon consideration of the drainage system, negligently constructed exclusionary clause record submitted the above cause and the “earth movement coverage.” Id. at 964 counsel, would not exclude arguments by being oral and now (emphasis original). Ariston See also sufficiently premises, advised Forbes, v. Catering Supply Airline Co. IT IS DAY ORDERED that the THIS (Law A.2d 1278 N.J.Super. Writ of Certiorari is on the DISCHARGED Div.1986) (efficient proximate rule cause Royal Compa of Kane v. basis applies provide (Colo.1989). ny, 768 P.2d 678 despite from frost heaves warehouse exclusion if efficient “earth movement” defect); design or construction

cause was Hirschmann, 52 Wash. Ins. Co. v.

Safeco App. (1988) (“all-risk” policy provides coverage for

homeowners damage despite “earth move

landslide proximate

ment” exclusion cause rain).

of loss wind and above, I

For the reasons set forth would

reverse the order of the district court

granting summary judgment and re- would proceedings. for further

mand the case MULLARKEY, JJ., ERICKSON Colorado, The PEOPLE of the State of join in this dissent.

Plaintiff-Appellant, v. FAGERHOLM,

Gary Defendant-Appellee. No. 86SA455. Stanley and Suzanne BRINES, Petitioners, Colorado, Supreme Court of En Banc. COMPANY OF ROYAL INSURANCE Feb. 1989. AMERICA, corporation, an Illinois Rehearing on Denial of As Modified Respondent. Feb. 1989. No. 87SC423. Colorado, Supreme Court

En Banc. 17, 1989.

Jan.

Rehearing Denied Feb.

Case Details

Case Name: Kane v. Royal Insurance Co. of America

Court Name: Supreme Court of Colorado

Date Published: Jan 17, 1989

Citation: 768 P.2d 678

Docket Number: 87SC341

Court Abbreviation: Colo.