Opinion
B331075
12-19-2024
JAMES GULLI et al., Plaintiffs and Appellants, v. STATE FARM GENERAL INSURANCE COMPANY, Defendant and Appellant.
Law Offices of Robert F. Schauer, Robert F. Schauer and Noah K. McCall, for Plaintiffs and Appellants. Pacific Law Partners, Matthew F. Batezel and Scharde C. Vallone, for Defendant and Respondent.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County, No. 19PSCV00610, Peter A. Hernandez, Judge.
Law Offices of Robert F. Schauer, Robert F. Schauer and Noah K. McCall, for Plaintiffs and Appellants.
Pacific Law Partners, Matthew F. Batezel and Scharde C. Vallone, for Defendant and Respondent.
MOOR, J.
Plaintiffs and appellants James and Jeanette Gulli (the Gullis) appeal from a judgment in favor of defendant and respondent State Farm General Insurance Company. The trial court granted summary judgment in favor of State Farm after concluding that the Gullis' property insurance policy (the Policy) excluded coverage for contamination, and the Gullis had failed to present any evidence that a covered peril, such as vandalism or third-party neglect, caused the loss. We reverse, finding the facts raise a material issue as to whether vandalism or third-party neglect were proximate causes of the loss, and the evidence falls short of establishing that contamination was the sole cause of loss.
FACTUAL AND PROCEDURAL BACKGROUND
A. Factual Background
The Gullis own a rental property in San Dimas, California (the Property) that was insured by State Farm. In 2007, the Gullis rented the Property to Dave and Daniele Fetters (the Fetters), a husband and wife, who lived there with their children. On February 5, 2019, the Gullis received a letter from the City of San Dimas that the sheriff and fire department had been to the Property, removed the children from the home, and declared the Property uninhabitable. The letter advised that the Property "should be considered unsafe for entry without personal protective measures in place and the contents considered hazardous materials that needs to be treated as such." The Gullis hired one company to board up the Property's windows and doors, and another to perform an environmental assessment of the Property.
On February 8, 2019, James reported the loss to State Farm. James claimed vandalism, stating his belief that the Fetters' autistic son had vandalized the property, but also stated he did not believe the son had acted intentionally. James also said that the city told him to board up the Property because it was toxic. State Farm advised that it covered vandalism (intentional damage), but not hard-living, wear, tear, deterioration, and defect. Photos from various inspections revealed deterioration of the physical condition of the Property, primarily consisting of physical damage to the surfaces of the Property, buildup of trash, rodent feces, and fecal contamination. The environmental assessment company recommended disposal of all contents as hazardous infectious waste and the removal of all areas contaminated with fecal matter, including structural components, such as cabinets, sinks, walls, and outlets. The damage was caused by the Fetters' autistic son. After the Property was declared uninhabitable, neighbors informed James that the Fetters' autistic son lived in the house while the rest of the family slept in their car in the driveway.
We refer to James Gulli by his first name to avoid confusion, with no disrespect intended.
A February 22, 2019 reservation of rights letter from State Farm acknowledged the claim and advised that the claimed losses might not be covered, identifying specific policy language. A State Farm representative explained to James that the loss was not covered as it did not meet the definition of vandalism.
State Farm denied the Gullis' claim on March 5, 2019. The denial letter explained that the Policy provided "limited coverage for damage due to fungus (mold) if the predominant, or most important, cause of a loss is covered under SECTION I of the policy," but continued that there was no coverage because "the predominant cause of loss, wear, tear, deterioration or latent defect, rot and repeated seepage or leakage of water, is excluded" under the terms of the Policy.
B. Relevant Policy Terms
At all relevant times, the Gullis' Policy insured the Property against "accidental direct physical loss" unless coverage was excluded. (Garvey v. State Farm Fire &Casualty Co. (1989) 48 Cal.3d 395, 399-400, 406-408 (Garvey) [property insurance covers all risks of loss unless an express limitation or exclusion applies]; see also, Vardanyan v. AMCO Ins. Co. (2015) 243 Cal.App.4th 779, 787 (Vardanyan).) The Policy language expressly addressed the circumstances under which coverage was excluded for vandalism, wear and tear, contamination, and neglect. The first three excluded causes of loss fell under the following language:
"1. We do not insure for loss to the property . . . either consisting of, or directly and immediately caused by, one or more of the following: "[¶] . . . [¶]
"g. vandalism and malicious mischief or breakage of glass and safety glazing materials if the dwelling has been vacant for more than 30 consecutive days immediately before the loss. A dwelling being constructed is not considered vacant;
"[¶] . . . [¶]
"i. wear, tear, marring, scratching, deterioration, inherent vice, latent defect and mechanical breakdown;
"j. rust, mold, or wet or dry rot;
"k. contamination; ...."
An exclusion for losses caused by neglect was listed under item number 2, which stated:
"2. We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events. We do not insure for such loss regardless of: (a) the cause of the excluded event; or (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss.
"[¶] . . . [¶]
"d. Neglect, meaning neglect of the insured to use all reasonable means to save and preserve property at and after the time of a loss, or when property is endangered by a Loss Insured."
C. Complaint and Court Proceedings
On July 3, 2019, the Gullis filed a complaint alleging breach of insurance contract and declaratory relief against State Farm and breach of lease against the Fetters. The Fetters did not file an appearance, and the Gullis ultimately obtained a default judgment against them.
1. Motion for summary judgment and supporting evidence
On May 4, 2022, State Farm filed a motion for summary judgment, arguing that the Gullis' claim was excluded from coverage because the predominant cause of the loss was contamination, any other causes were secondary and expressly excluded, and the Gullis failed to establish vandalism as a covered cause of loss, because they admitted their tenants' son lacked malicious intent. State Farm argued that the Gullis maintained that the parents had lost total control over their autistic and destructive son, who had no control and who did this damage.
The evidence supporting State Farm's argument that vandalism was not a cause of loss consisted of a single file claim note written by a State Farm representative, dated February 8, 2019, consisting of summary notes of a call with James. The file claim note indicates that James had been instructed by the city to board up the Property, and that child services took the children away and the parents left, and were possibly arrested. James had not heard from the tenants, but they had an autistic son who "is very destructive when he gets upset." Under the heading "Origin and cause of Loss and how confirmed," the State Farm representative wrote that James "believes tenants vandalized the home, but states he does not think it was intentional. [James] [s]tates their autistic son may have caused most of the dmgs."
2. The Gullis' opposition and supporting evidence
The Gullis' opposition to State Farm's summary judgment motion argued that the Policy covered their losses because the efficient proximate cause of the loss was vandalism and neglect, not contamination. Responding to State Farm's proffered undisputed material fact stating that James advised State Farm that he believed his tenants' autistic son had vandalized the Property, but that he did not think it was intentional, the Gullis objected that "statements about the autistic son's mental state are impermissible lay opinion, are not based on personal knowledge, and are speculative."
In addition, James submitted a declaration stating that he inspected the property and saw "a horrible scene of destruction and filth," including "numerous holes in the walls that appeared to have been smashed" and "[v]arious fixtures, toilets, sinks, cabinets, and lights [that] were broken or smashed." Feces had been smeared on some of the walls, and he later learned that the Fetters had "lost control of their autistic son and were sleeping in their car in the driveway to avoid the mess inside."
3. Trial court grants summary judgment, Gullis appeal final judgment
After hearing argument on State Farm's motion, the court took the matter under submission, and later issued a written ruling granting summary judgment in favor of State Farm. The trial court found that the sole cause of the Gullis' loss was contamination, which was excluded from coverage, and that neither vandalism nor neglect by the Fetters, both covered under the policy, were causes of loss. Final judgment was entered on June 12, 2023, and the Gullis filed a timely appeal.
DISCUSSION
A. Summary Judgment Standard of Review
A defendant may be entitled to summary judgment when "all the papers submitted show that there is no triable issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." (Code Civ. Proc., § 437c, subd. (c); Hampton v. County of San Diego (2015) 62 Cal.4th 340, 347 (Hampton).) To meet its initial burden, a defendant moving for summary judgment must show "one or more elements of the cause of action . . . cannot be established, or that there is a complete defense to the cause of action." (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850 (Aguilar).) If the defendant makes this showing, the burden shifts to plaintiff to produce admissible evidence showing a triable issue of material fact exists. (Code Civ. Proc., § 437c, subd. (p)(2); Aguilar, supra, at p. 850.)"' "The plaintiff . . . may not rely upon the mere allegations or denials of its pleadings . . . but, instead, shall set forth the specific facts showing that a triable issue of material fact exists ...." ([Code Civ. Proc., § 437c], subd. (o)(2); [citations].)' [Citations.]" (Andrews v. Foster Wheeler LLC (2006) 138 Cal.App.4th 96, 101, fn. omitted.)
We review de novo the trial court's grant of summary judgment. (Hampton, supra, 62 Cal.4th at p. 347; Hartford Casualty Ins. Co. v. Swift Distribution, Inc. (2014) 59 Cal.4th 277, 286.) We take the facts from the record that was before the trial court and consider all the evidence set forth in the moving and opposing papers except that to which objections were made and sustained. (Code Civ. Proc., § 437c, subd. (c); Hampton, supra, 62 Cal.4th at p. 347.) "We construe the moving party's evidence strictly, and the non-moving party's evidence liberally, in determining whether there is a triable issue." (Alex R. Thomas &Co. v. Mutual Service Casualty Ins. Co. (2002) 98 Cal.App.4th 66, 72; Yanowitz v. L'Oreal USA, Inc. (2005) 36 Cal.4th 1028, 1037 ["We liberally construe the evidence in support of the party opposing summary judgment and resolve doubts concerning the evidence in favor of that party"].)~
B. Property Insurer's Burden of Proof
"As a leading treatise explains, 'The fundamental principle of a property insurance contract is to indemnify the owner against loss; that is to place the owner in the same position in which he or she would have been had no accident occurred.' (10A Couch on Insurance (3d ed. 2005) § 148:1.)" (Another Planet Entertainment, LLC v. Vigilant Ins. Co. (2024) 15 Cal.5th 1106, 1122 (Another Planet).)" 'Property insurance . . . is an agreement, a contract, in which the insurer agrees to indemnify the insured in the event that the insured property suffers a covered loss. Coverage, in turn, is commonly provided by reference to causation, e.g., "loss caused by . . ." certain enumerated perils.'" (Garvey, supra, 48 Cal.3d at p. 406.) Alternatively, an" 'open peril'" or" 'all-risk'" policy "provides coverage for all losses not expressly excluded by the policy." (Julian v. Hartford Underwriters Ins. Co. (2005) 35 Cal.4th 747, 751, fn. 2 (Julian), citing Garvey, supra, 48 Cal.3d at p. 406.)
" '[I]n an action upon an all-risks policy . . . the insured does not have to prove that the peril proximately causing his loss was covered by the policy. This is because the policy covers all risks save for those risks specifically excluded by the policy. The insurer, though, since it is denying liability upon the policy, must prove the policy's noncoverage of the insured's loss-that is, that the insured's loss was proximately caused by a peril specifically excluded from the coverage of the policy.'" (Vardanyan v. AMCO Ins. Co. (2015) 243 Cal.App.4th 779, 796-97 (Vardanyan)). In order for a defendant insurer to shift the burden to a plaintiff suing for breach of an all-risks policy, it is not sufficient to show that the damage could fall within one particular excluded cause. Rather, in the context of a coverage dispute involving an all-risks property insurance policy, summary judgment is proper only "if all of the alleged causes of the loss are excluded under the policy." (Brodkin v. State Farm Fire &Casualty Co. (1989) 217 Cal.App.3d 210, 217 [emphasis added].)
C. The Parties' Arguments
The Gullis acknowledge that contamination was one of several perils that caused their loss, but contend State Farm did not meet its burden on summary judgment to show it was the sole cause of loss. More specifically, the Gullis argue that the evidence presented by State Farm did not preclude that the Fetters' son committed vandalism, a covered cause of loss, and that a jury must decide whether vandalism or contamination was the efficient proximate cause of their damages. In addition, the Gullis contend that third-party neglect was another possible covered cause.
The doctrine of efficient proximate cause is discussed in more detail later in this opinion, but it is "the preferred method for resolving first party insurance disputes involving losses caused by multiple risks or perils, at least one of which is covered by insurance and one of which is not." (Julian, supra, 35 Cal.4th at p. 753.)
State Farm does not dispute that the Policy here was an all-risks policy. Rather, it contends that because the Gullis did not provide evidence that the Fetters' son acted with malicious intent, they failed to raise a genuine issue of material fact that vandalism was a cause of loss. Citing to Ong v. Fire Ins. Exchange (2015) 235 Cal.App.4th 901 (Ong), State Farm contends that the definition of vandalism requires a showing of malice, that the person who damaged the property harbored ill-will or an intent to injure. Relying on James' comment, reflected in the State Farm representative's notes -- i.e., that that James did not believe the son acted intentionally -- State Farm contends that the acts here did not constitute vandalism. Similarly, State Farm argues that the Gullis have not provided any evidence to support their argument that third party neglect was a covered cause of loss. Even assuming the son's acts constituted vandalism, State Farm argues that summary judgment was warranted because the trial court correctly identified contamination as the efficient proximate cause of loss and the sole cause of loss, with vandalism and neglect being mere "recharacterizations" of a single cause. (See, e.g., Brown v. MidCentury Ins. Co. (2013) 215 Cal.App.4th 841, 855-856; Penn-America Ins. Co. v. Mike's Tailoring (2005) 125 Cal.App.4th 884, 891-892.)
D. State Farm Failed to Preclude Vandalism as a Cause of Loss
State Farm incorrectly argues in its brief that once it met an initial burden to show that contamination was an excluded cause of loss, the burden shifted to the Gullis to raise a genuine issue of material fact establishing coverage. As noted above, in the context of an all-risks policy, it was State Farm's burden to show that no covered cause of loss, including vandalism, applied to the Gullis' claim. As explained below, we conclude that neither State Farm's legal argument, based on Ong, nor its factual argument, based on James' statement about the Fetters' son's state of mind, have merit. State Farm fails to show that vandalism is not a covered cause of loss.
In Ong, plaintiff owned a home that had been vacant for some time, and an unauthorized person, likely a transient, started a fire on the kitchen floor. The insurer's claims adjuster described the fire as a warming fire that got out of hand and was an "[u]nintentional incendiary." The forensic evidence suggested that the transient kicked the already burning firewood outside in an attempt to stop the spread of the fire. The insurance company denied coverage under an exclusion for vandalism or malicious mischief in circumstances where the dwelling had been vacant for more than 30 consecutive days at the time of the damage. (Ong, 235 Cal.App.4th at pp. 904-905.) Plaintiff sued the insurance company for breach of contract, and the trial court granted the insurer's motion for summary judgment, relying on the definition of "malice in law" established in criminal arson cases and reasoning that the unauthorized person intentionally set the fire, creating" 'an obvious hazard to the dwelling without justification, excuse or mitigating circumstances.'" (Id. at p. 906.) A divided appellate court reversed, the majority finding that the trial court erred in relying solely on the meaning of malice in the legal sense (malice in law). The Ong majority explained that undefined terms in insurance contracts must be interpreted in their ordinary and popular sense, and malice, when so used, involves ill-will. (Id. at 910 ["the reasonable interpretation of 'vandalism' as used in the policy exclusion means malicious destruction or defacement where there is malice in fact or actual ill will or intent to injure"].) Given the undisputed facts that the fire was started as a warming fire, and that it appeared the person setting it had tried to prevent it from spreading, the Ong court concluded that the policy exclusion for vandalism did not apply, and that the trial court had incorrectly granted summary judgment in favor of the insurer. (Id. at pp. 910-911.)
Although the policy language at issue in Ong is nearly identical to the language at issue in the instant case, the interests of the insurer and insured in Ong were precisely the opposite of State Farm and the Gullis here. In Ong, because the property had been vacant for more than 30 days, the insurer took the position that the damage was the result of vandalism, an excluded peril. In the current case, State Farm argues the damage was not the result of vandalism, a covered peril because it is an exception to broader exclusion for vandalism in a vacant property.
We are not persuaded by State Farm's argument that the interpretation of "vandalism" in Ong provides a basis for affirming the trial court's grant of summary judgment here. First, we disagree with the majority opinion in Ong because it only examined whether the acts in question satisfied one aspect of the ordinary and popular meaning of the term "vandalism," that of malicious destruction. However, "vandalism" is defined as "willful or malicious destruction or defacement of public or private property." (Merriam-Webster.com Dictionary <https://www.merriam-webster.com/dictionary/vandalism> [as of Dec. 16, 2024], archived at <https://perma.cc/8HYM-HQDP >, italics added.) The majority opinion in Ong acknowledged that its analysis was limited to the question of malice, and it did not consider whether there had been vandalism in the sense of" 'willful' destruction of property." (Ong, supra, 235 Cal.App.4th at p. 908, fn. 7.) As the dissent pointed out, "Vandalism thus need not be malicious, as long as it is willful. In this context, 'willful' means 'done deliberately' and is synonymous with 'intentional.' (Merriam-Webster Dict. Online <http://www.merriam-webster.com/dictionary/willful> [as of Apr. 3, 2015].)" (Ong, at p. 912 (dis. opn. of Rothschild, J.).) Given this limitation on the meaning of vandalism as used by the Ong majority, we reject State Farm's argument that the Gullis needed to show that the Fetters' son harbored ill-will or an intent to injure.
Ong is distinguishable from the case before us for a second significant reason. Although the policy language in the case before us is nearly identical to that considered Ong, the Gullis argue coverage exists because they fall under an exception to the exclusion. In contrast, the Ong court narrowly construed a policy exclusion, in light of Supreme Court decisions stating that "policy exclusions are strictly construed (MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635, 648), but exceptions to exclusions are broadly construed in favor of the insured (Aydin Corp. v. First State Ins. Co. (1998) 18 Cal.4th 1183, 1193)." (Ong, supra, 235 Cal.App.4th at p. 908.) Here, we are tasked with giving a broad construction in favor of coverage, which supports giving full consideration to all aspects of the definition of vandalism, including not only malicious, but also merely willful or intentional acts.
The policy language in Ong excluded "Vandalism or Malicious Mischief, breakage of glass and safety glazing materials if the dwelling has been vacant for more than 30 consecutive days just before the loss." (Ong, supra, 235 Cal.App.4th at p. 526, fn. & italics omitted.) The Gullis' policy excluded "vandalism and malicious mischief or breakage of glass and safety glazing materials if the dwelling has been vacant for more than 30 consecutive days immediately before the loss."
Our interpretation of the vandalism provision in the Policy finds support in other cases. A federal district court examined the "usual meaning" of the term vandalism in United States Fire Insurance Company v. Greater Missoula Family YMCA (2020 D. Mont.) 454 F.Supp.3d 978, 982 (Greater Missoula Family YMCA). In a case where a YMCA employee's habitual methamphetamine use at a day care center caused drug contamination at the property, the court reasoned that acts taken in intentional disregard for the property rights of others were sufficient to satisfy the malicious or deliberative component of vandalism. (Ibid.) The district court explained:" 'Vandalism' is commonly understood as the deliberate destruction of or damage to property. Black's Law Dictionary 1692 (9th ed. 2009); Merriam Webster's Collegiate Dictionary 1306 (10th ed. 1997) (defining 'vandalism' as the 'willful or malicious destruction or defacement of public or private property'). While the parties largely agree on this definition, U.S. Fire argues that the term requires a specific intent to destroy and that the damage resulting from the YMCA employee's methamphetamine use was neither intended nor reasonably expected. While YMCA agrees that vandalism must be malicious or willful to some degree, it argues that the intentional disregard of another's property interest satisfies the intent requirement. [¶] The parties rely primarily on three cases, which involve damages caused by a residential tenant from the distillation of moonshine, Livaditis v. Am. Cas. Co., 117 Ga.App. 297, 160 S.E.2d 449 (1968); a covert marijuana grow operation, Bowers v. Farmers Ins. Exch., 99 Wash.App. 41, 991 P.2d 734 (2000); and a methamphetamine laboratory, Graff v. Allstate Ins. Co., 113 Wash.App. 799, 54 P.3d 1266 (2002). In all three cases, smoke, fumes, and vapors from the unlawful activity left a residue that was ultimately characterized as contamination. The courts determined, however, that the malicious or deliberative component of vandalism is met when an individual acts with intentional disregard for the property rights of others. See also Louisville &Jefferson Cty. Metro. Sewer Dist. v. Travelers Ins. Co., 753 F.2d 533, 536 (6th Cir. 1985) (explaining that 'malice may be presumed from the unlawful act itself,' especially if it is evident that the act will result in property damage). Consistent with that conclusion, the employee's habitual use of methamphetamine inside the YMCA satisfies the ordinary meaning of vandalism." (Greater Missoula Family YMCA, supra, 454 F.Supp.3d at p. 982.) Although State Farm tries to distinguish the Greater Missoula Family YMCA by arguing that the methamphetamine user pled guilty to criminal conduct, we find the court's reasoning persuasive. Accordingly, we reject State Farm's legal contention that to show the Fetters' son committed "vandalism" within the meaning of the Policy, the Gullis were required to produce evidence that he destroyed the property with "a desire to cause harm."
Greater Missoula Family YMCA involved competing summary judgment motions brought by an insurance company and its insured, over whether the policy terms covered damage caused by an employee's habitual methamphetamine use in the daycare area of the insured's property. (454 F.Supp.3d at pp. 980-981.) The applicable insurance policy barred coverage for the discharge or dispersal of pollutants or contaminants unless the discharge or dispersal was the result of specified causes of loss, including smoke and vandalism. (Id. at pp. 981982.) The court found that the pollution/contamination exclusion applied, but because the contamination was caused by vandalism, an exception to the exclusion, the losses were insured. (Id. at p. 982.)
Although the decisions of "lower federal courts may be instructive to the extent we find their analysis persuasive, they are neither binding nor controlling on matters of state law." (T.H. v. Novartis Pharmaceuticals Corp. (2017) 4 Cal.5th 145, 175 .)
Turning to the factual record, the Gullis contend the trial court erred in concluding that State Farm eliminated vandalism as a possible covered cause of loss based on a lack of evidence that the Fetters' son acted "on purpose" and that at most the factual record might show the Fetters "failed to keep the Property in good condition." We agree with the Gullis, and are not persuaded by State Farm's contention that the evidence presented at summary judgment is lacking in terms of showing that the son's acts were intentional, to bring them within the definition of vandalism.
In support of its summary judgment motion, State Farm presented as an undisputed material fact that photos and reports from the city and two companies hired by James "documented the deterioration of the physical condition of the Property, primarily related to the fecal contamination of nearly all interior surfaces throughout the Property, as well as the presence of rodent feces, the buildup of trash, and physical damage to the surfaces of the Property." Significantly, State Farm concedes that "[t]he damage was caused by the Fetters' autistic son." This evidence alone provides sufficient support for a finding of vandalism. (Evid. Code, § 665 ["A person is presumed to intend the ordinary consequences of his voluntary act"].) The only contrary evidence relating to the son's intent that State Farm submitted in connection with its motion was the notes of its claim representative from February 8, 2019 stating that, in substance, James indicated that he "believes tenants vandalized the home, but states he does not think it was intentional." We note that under the lease agreement, only the parents were "tenants," not the autistic son. In its statement of undisputed facts, State Farm characterized James' statement to the claim representative as follows: "that he believed his tenants' autistic son had vandalized the Property, but that he did not think it was intentional." The Gullis did not dispute this characterization of James's comment. Rather, in their opposition, the Gullis objected to the representative's notes, arguing that James's "statements about the autistic son's mental state are impermissible lay opinion, are not based on personal knowledge, and are speculative." Those objections, which do not appear to have been ruled on by the trial court, appear well founded. Even if the notes were admitted and considered, however, they do not have the import that State Farm attributes to them. At most, the notes reflect a statement of James' own belief, and viewed in context (i.e., the first call made to State Farm to report a loss due to vandalism by an insured who had no access to the Fetters' son), the notes are not particularly probative of the son's state of mind. On these facts, we conclude that State Farm did not meet its burden to show that vandalism was not a cause of loss, and consequently that contamination was the sole cause of loss.
E. The Efficient Proximate Cause of Loss Presents a Disputed Issue of Material Fact
Based on the undisputed evidence and James's additional declaration, there remains a material factual issue as to whether contamination (excluded), vandalism (covered), or third-party neglect (possibly covered) was the efficient proximate cause of loss.
Third party negligence is a covered risk when an all-risk policy does not expressly exclude such a risk. (Garvey, supra, 48 Cal.3d at p. 408; Von Der Lieth, supra, at p. 1127.) We decline to determine whether third-party neglect is covered or expressly excluded by the terms of the Policy.
When a loss is caused by a combination of covered and specifically excluded risks, the loss is covered if the covered risk was the "efficient proximate cause of the loss." (State Farm Fire &Casualty Co. v. Von Der Lieth (1991) 54 Cal.3d 1123, 1131 (Von Der Lieth), citing Garvey, supra, 48 Cal.3d at p. 402.) "[T]he question of what caused the loss is generally a question of fact." Von Der Lieth, at p. 1132; see also Garvey, at pp. 412-413 [question of whether loss was caused by negligence or earth movement was for the jury to decide].) Under an "all-risk" property insurance policy, it is the "efficient proximate cause," i.e., the "predominant" cause of the loss, that determines coverage. (Garvey, supra, 48 Cal.3d at p. 402.) In other words, "[i]n determining whether a loss is within an exception in a policy, where there is a concurrence of different causes, the efficient cause[,] the one that sets others in motion[,] is the cause to which the loss is to be attributed, though the other causes may follow it, and operate more immediately in producing the disaster." (Sabella v. Wisler (1963) 59 Cal.2d 21, 31-32 (internal citation and quotation marks omitted). "By focusing the causal inquiry on the most important cause of a loss, the efficient proximate cause doctrine creates a 'workable rule of coverage that provides a fair result within the reasonable expectations of both the insured and the insurer.'" (Julian, supra, 35 Cal.4th at p. 754 (quoting Garvey, 48 Cal.3d at 404). Pursuant to the efficient proximate cause doctrine, "reasonable insureds consider themselves insured against losses proximately caused by perils covered under a first party insurance policy, regardless of contrary language employed in connection with excluded perils." (Julian, 35 Cal.4th at 756.)
We are unpersuaded by State Farm's argument that contamination was the sole cause of loss because it was the reason the property was declared unsafe and ultimately torn down. The company James hired to assess the damage prepared an Environmental Site Assessment Report. The company observed extensive water damage and/or visible fecal contamination on walls and flooring throughout the interior of residence; the presence of trash and rubbish inside the residence, significant damage sustained by some of the wall surfaces in the residence, extensive contamination of the bathroom components with what appeared to be fecal matter, extensive damage to carpet in the carpeted areas of the residence, and a preponderance of fecal contamination of the interior surfaces and contents of the residence. State Farm does not dispute that the Fetters' autistic son caused the physical damage.
However, after the property was declared uninhabitable, James learned from neighbors that the family had been sleeping in their vehicles for the past couple of months. A summary of a February 13, 2023 phone call between James and State Farm stated that James had spoken to the company doing the inspection, and was told they would test for biohazard and it would take two weeks to test. "He explained that both bathroom tub is full of has feces. The house is unhabitable. The tenants were sleeping in their car instead of the home because the damage is so extensive." Notes from the same call also stated "The house will likely need to be gutted. The house can not be enterred [sic] into without wearing biohazard protection. Presumably, the damage was created by an autistic Adult who lived in the home with the tenants who are his parents." This information, considered together with James's stated belief that the family's autistic son had vandalized the property, was enough to raise the prospect that the efficient proximate cause of the loss-consisting of the extensive damage to the interior surfaces of the residence, including the walls and carpet, as well as substantial fecal contamination-was the tenants' son's vandalism and the tenants' neglect in failing to address the damage before it spiraled out of control.
Our analysis is consistent with Dallah &Dallah, Inc. v. State Farm Gen. Ins. Co. (C.D.Cal. July 24, 2023, Case No. 5:21-cv-01348-JWH-SHK) 2023 U.S.Dist.LEXIS 217970 (Dallah), an unpublished federal case cited in the Gullis' briefing, which we find to be instructive and persuasive. In Dallah, a landlord who was insured under a State Farm "all-risk" policy that excluded vandalism only if the property was vacant for at least 30 days (id. at *1-2) filed a claim when the property was red-tagged after the tenant used the garage as a methamphetamine conversion lab and the Sheriff found liquid methamphetamine on the property (id. at *2). After State Farm declined to pay for the costs of "testing, cleaning, and decontamination' of the property," (id. at *3), the policyholder filed suit for breach of contract on the theory that her losses were incurred due to vandalism and malicious mischief, which were not excluded under the policy. (Id. at *3-4.) Analyzing causation within the efficient proximate cause framework, the district court reasoned that "while methamphetamine contamination undoubtedly caused damage to the Property, if the operation of a methamphetamine lab by [the tenant] amounted to vandalism, then the 'efficient proximate cause' analysis would indicate that the vandalism caused the damage. Looking to Sabella [v. Wisler (1963) 59 Cal.2d 21, 3132] and instances of both covered and excluded causes resulting in damage to an insured, [the tenant's] vandalism set in motion the methamphetamine contamination of the Property. Alternatively, there is at least a genuine dispute of fact regarding whether contamination was the sole cause of damage to the Property." (Dallah, at *11-12, fn. omitted.) Here too, we find State Farm's efforts to distinguish the reasoning in Dallah unconvincing.
"Although not binding, unpublished federal district court cases are citable as persuasive authority." (Aleman v. Airtouch Cellular (2012) 209 Cal.App.4th 556, 576, fn. 8.)
State Farm also contends that the efficient proximate cause doctrine does not apply here because the damage was not caused by two distinct perils, but by a single cause subject to different characterizations. It is a correct statement of law that the "efficient proximate cause doctrine applies only when two or more conceptually distinct perils combine to cause a loss." (Roberts v. Assurance Co. of America (2008) 163 Cal.App.4th 1398, 1409; see also Chadwick [v. Fire Ins. Exchange (1993)] 17 Cal.App.4th [1112], 1117; Pieper v. Commercial Underwriters Ins. Co. (1997) 59 Cal.App.4th 1008, 1020 [efficient proximate cause does not apply when the damage has a single cause, albeit one susceptible to various characterizations].) Stated differently, "the perils must be such that 'they could each, under some circumstances, have occurred independently of the other and caused damage.' ([Finn v. Continental Ins. Co. (1990) 218 Cal.App.3d 69], italics added.) But it is not necessary that those two or more perils did in fact occur independently to cause the loss for which coverage is sought. Indeed, the Supreme Court explained in Garvey that [Insurance Code] section 530 and the efficient proximate cause doctrine applies 'whenever there exists a causal or dependent relationship between covered and excluded perils.' (Garvey, supra, 48 Cal.3d at p. 404, italics added.)" (De Bruyn v. Superior Court (2008) 158 Cal.App.4th 1213, 1223.)
Because vandalism, third party neglect, and contamination could have occurred independently of each other to cause the property damage here, we reject State Farm's argument that they were merely different ways of characterizing the same cause of loss.
DISPOSITION
The judgment is reversed, and the trial court's grant of summary judgment is reversed. The matter is remanded with directions to the trial court to enter an order denying State Farm General Insurance Company's motion for summary judgment. Costs on appeal are awarded to plaintiffs James and Jeanette Gulli.
I CONCUR: KIM (D.), J.
BAKER, Acting P. J., Concurring
I agree the trial court's grant of summary judgment for State Farm General Insurance Company (State Farm) must be reversed. I arrive at that conclusion for a somewhat different reason, however. State Farm attempted to carry its burden to show it is undisputed that Dave and Daniele Fetters's son did not purposely damage the property by pointing to notes of a telephone conversation between James Gulli and a State Farm representative. According to those notes, Gulli stated he "believes tenants vandalized the home, but states he does not think it was intentional. States their autistic son may have caused most of the d[amages]." Assuming the notes precisely recount Gulli's statement, the statement still distinguishes between the tenants (who are the Fetters alone) and their son- and expresses no belief that the son did not act intentionally or maliciously. Gulli's statement therefore does not suffice to carry State Farm's summary judgment burden on this issue (Sangster v. Paetkau (1998) 68 Cal.App.4th 151, 162-163), and for the reasons stated by the majority in discussing efficient proximate cause, a remand for trial is required.