Garvey v. State Farm Fire & Cas. Co., 48 Cal. 3d 395 (1989)
Garvey owned a home that was insured by State Farm Fire & Casualty. The State Farm policy provided coverage for “all risks of physical loss to the property covered” except as otherwise excluded or limited and excluded coverage for losses “caused by, resulting from, contributed to or aggravated by any earth movement, including but not limited to earthquake, volcanic eruption, landslide,
mud flow,” etc. Several years after purchasing the home, Garvey noticed that an addition built onto the original structure had begun to pull away. Garvey also discovered damage to a deck and garden wall.
Garvey submitted a claim to State Farm in August 1978 and received a letter
in October 1979 stating that State Farm believed the damage was not covered
but proposing to pay and then sue for declaratory relief and precluding
Garvey’s opportunity to seek bad faith damages. Rather than accept State
Farm’s offer, Garvey brought his own suit against State Farm, including claims
for coverage and bad faith.
Garvey argued that while earth movement may have been an excluded
peril, the loss was proximately caused by the room addition contractor’s negligence,
which was not expressly excluded, and that the loss should therefore be
covered under the “all-risk” portion of the policy.
The trial court agreed and ruled in favor of Garvey. The California Court
of Appeal reversed. Because the trial court had based its decision in part on
State Farm Mut. Auto. Ins. Co. v. Partridge, 10 Cal. 3d 94, 109 Cal. Rptr. 811
(1973), the California Supreme Court took the opportunity to differentiate
the analyses that should be employed in third-party cases from that which
applies in first-party cases.
In this case, the California Supreme Court made an opportunity to rein in
what it saw as misinterpretation and misapplication of its earlier holding in
Partridge. The court expressed concern that other courts had “allowed coverage
in first-party property damage cases under our holding in Partridge by
inappropriately using the Partridge concurrent causation approach as an
alternative to Sabella’s efficient proximate cause analysis.”