"Under Washington law," said the Washington Supreme Court in a recent decision, coverage under the efficient proximate cause doctrine works like this:
- A covered peril sets in motion a causal chain.
- The last link of the causal chain is an uncovered peril.
- It does not make any difference if events within the causal chain, taking place after the causal, covered peril sets the chain in motion, are themselves excluded by the policy even if they are causes-in-fact of the loss at issue.
All this is explained in Seattle Tunnel Ptrs. v. Great Lakes Reins. (UK) PLC, ___ P.3d ___, ¶ 33, 2022 WL 4241893, ¶ 33, at *8 (Wash. Sept. 15, 2022). See generally Dennis J. Wall, Efficient Proximate Cause Doctrine, § 7:3 in JOHN K. DiMUGNO, STEVEN PLITT, and DENNIS J. WALL, CATASTROPHE CLAIMS / INSURANCE COVERAGE FOR DISASTERS (Thomson Reuters May 2022 Ed.).
The case in which this was explained is a coverage case which grew out of a major construction project in Seattle. The project involved a tunnel and a "tunnel boring machine" or "TBM." The machine broke down, the project stopped, and insurance claims and litigation ensued.
The policy at issue is a builder's all-risk policy with a "Machinery Breakdown Exclusion" or "MBE." The issue came down to a relatively narrow question: Were the design defects which caused the TBM to break down a covered peril or perils, so that there was coverage under the efficient proximate cause doctrine, or was the design defect excluded by the policy's MBE? (Washington, D.C. does not have an exclusive franchise for acronyms, apparently. Acronyms are used everywhere including in Washington State.)
As the Washington Supreme Court put it, the efficient proximate cause doctrine could apply only if the initial event, here, the design defects at issue, were a covered peril under the builder's all-risk policy at issue:
This would first require a finding that the Policy covers damage for design defects and that those design defects caused damage to the TBM. Under those circumstances, the efficient proximate cause rule might provide coverage for the last link in the causal chain, even if it Is an excluded peril (i.e., the machinery breakdown).
Seattle Tunnel Partners, 2022 WL 4241893, ¶ 33, at *8.
That ruling was foreclosed by an earlier ruling at all levels of this case. The trial court granted summary judgment that design defects were an excluded peril, the Court of Appeals affirmed the trial court, and the Supreme Court affirmed the Court of Appeals. Seattle Tunnel Partners, 2022 WL 4241893, ¶ 4, at *1.
And so a long story made short is that the causal event was not covered, so the efficient proximate cause doctrine did not apply.
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