The City of West Liberty owns and operates an electrical power plant. Employer’s Mutual Casualty Company (EMC) insured West Liberty's power plant with coverage effective from April 1, 2014, through April 1, 2015. The squirrel came into contact with a bare cable clamp that was energized with 7200 volts of electricity. This contact created a conductive path between the high voltage clamp and the grounded frame. Once this path was established, the air between the energized and grounded surfaces became ionized and arcing. The squirrel was killed at $ 213,524.76 worth of damage to West Liberty's transformer and other electrical equipment.
The case found its way to the Supreme Court of Iowa where the insured claimed it was covered by the arcing was caused by the electrocution of an unfortunate squirrel that turned into an electrical facility and died as a result of electrocution. The electrical arcing that facilitated the death of the squirrel resulted in serious damage to the facility. City of West Liberty, Iowa v. Employers Mutual Casualty Company no. 1
A squirrel found its way onto an electrical transformer owned by a municipality, triggering an electrical arc that killed the squirrel and caused substantial damage to the municipality's property. The municipality sought coverage under its all-risk insurance policy. The insurer denied coverage based on the policy's electrical-currents exclusion, which excludes “loss caused by arcing or by electrical currents other than lightning.” Disagreeing with this insurance policy, the municipality filed suit. The district court granted summary judgment to the insurer and the court of appeals affirmed.
West Liberty provided timely notice of a claim to EMC for the loss. EMC, however, denied coverage based on “Electrical Currents” exclusion in the policy. The policy excluded:
"We do not pay for loss or damage directly or indirectly by one or more of the following excluded causes or events. Such loss or damage is excluded regardless of other causes or events that contribute to or aggravate the loss, whether such causes or events act to produce the loss before, at the same time as, or after the excluded causes or events.  "We do not pay for loss or damage that is caused by or results from one or more of the following excluded causes or events:
Electrical Currents – “We” do not pay for loss caused by arcing or by electrical currents other than lightning. But if arcing or electrical currents other than lightning results in, we cover the loss or damage caused by that.
In its summary judgment memorandum, West Liberty argued a theory of concurrent causation and landed on efficient proximate cause than
The trial court granted EMC's motion for summary judgment and denied West Liberty's motion. The district court found that the only damages were the electrical arc, not the damage to West Liberty's property. The court thinks "The court cannot conclude that the" squirrel's actions "were a cause of the damages because the squirrel did not actually do anything to cause damages; it merely touched some things it should not have touched. The arc caused all of the damages. ”
Policy interpretation is always an issue for the court unless it is required to rely on extrinsic evidence or choose between reasonable inferences from extrinsic evidence. The plain meaning of the insurance contract generally prevails. The court will not be the words or phrases of the policy in order to find liability that the policy did not intend and the insured did not purchase
The "Electrical Currents" exclusion language is straightforward. If the loss is excluded, unless the arcing led to four. Because of the loss and the arcing did not lead to a four, West Liberty's claim to be foreclosed by the express terms of the policy.
West Liberty maintains that the squirrel was an efficient proximate cause of its loss. The efficient proximate cause doctrine can apply when two or more causes, at least one covered by an insurance policy and at least one excluded, contribute to a loss. It is generally understood that where the peril insured against other causes in motion which, in an unbroken sequence and connection between the act and final loss, results in the recovery being sought, the insured peril is regarded as the proximate.
The Supreme Court concluded that this is not a case of two independent one of which was covered and one excluded. The efficient proximate cause of doctrine is only applicable where the causes are independent. When the evidence shows the loss was actually caused by only a single cause, even if susceptible to various characterizations, the efficient proximate cause analysis does not apply.
The squirrel did not contribute to the $ 213,524.76 loss, ie, other than through the arcing. If the district court puts it, "The squirrel by itself did not cause any damage." Electrical arcing is always going to have some cause. Policy language excluding an event would be meaningless if an insured could avoid the exclusion simply by pointing out that the event itself had a cause.
An insured may not avoid a contractual exclusion merely by affixing an additional label or separate characterization to the act or event causing the loss
The efficient-proximate-cause doctrine applies only where two or more distinct actions, events, or forces combined to create the loss. In this case there are two independent causes of the plaintiffs' damages at play.
The electrical-currents exclusion has an express carve-out where "lightning" is the source of the electrical currents or arcing. In that event, the exclusion does not apply. But if an insured could always avoid the electrical-currents exclusion by arguing that something else was the efficient proximate cause of the electrical current or arcing, the lightning exception would seem unnecessary.
The decision of the court of appeals and the judgment of the district court was affirmed.
Although the arcing would not have occurred without intercession of the suicidal squirrel the damage was caused solely by the arcing. Since the exclusion was clear and unambiguous the exclusion must be enforced and the city recovers nothing. The argument that there were two competitor causes was imaginative, however, the city was unable to turn the squirrel into a cause of the damage because it could have been electrocuted, died, and but was no damage to the city's facility. .
© 2019 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for reading, and conveyed the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance, faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org
Mr. Zalma is the first recipient of the first annual claims magazine / ACE Legend Award.
About the last 51 years Barry Zalma has dedicated his life insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals
HOW TO BUY AN APPROPRIATE HOMEOWNERS POLICY AND SUCCESSFULLY MAKE A CLAIM TO THE INSURER
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Insurance is a contract between a person seeking insurance and an insurer. It is obtained by making contact with the insurer as a prospective insured seeking insurance. The homeowners policy is a specialized policy of insurance that protects the homeowner from certain risks of loss to the real and personal property of the home, the exposure of the insured faces to liability for a home employee. injury or property damage caused to third parties. The book explains how to buy homeowners policy and how to collect on any claim made to the homeowners insurer.
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