Virginia Ward v. Safeco Insurance Company ( 2023 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
VIRGINIA WARD, No. 21-35757
Plaintiff-Appellant, D.C. No. 1:19-cv-
00133-SPW
v.
ORDER
SAFECO INSURANCE COMPANY CERTIFYING
OF AMERICA, QUESTIONS TO
THE SUPREME
Defendant-Appellee. COURT OF
MONTANA
Filed February 3, 2023
Before: Richard A. Paez and Bridget S. Bade, Circuit
Judges, and Haywood S. Gilliam, Jr., * District Judge.
*
The Honorable Haywood S. Gilliam, Jr., United States District Judge
for the Northern District of California, sitting by designation.
2 WARD V. SAFECO INSURANCE CO. OF AMERICA
SUMMARY **
Certification Order / Montana Law
The panel certified the following questions to the
Montana Supreme Court:
1) Whether an anti-concurrent cause
(“ACC”) clause in an insurance policy
applies to defeat insurance coverage
despite Montana’s recognition of the
efficient proximate cause (“EPC”)
doctrine; and
2) Whether the relevant language in the
general exclusions section on page 8 of
the insurance policy in this case is an
ACC clause that circumvents the
application of the EPC doctrine.
**
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
WARD V. SAFECO INSURANCE CO. OF AMERICA 3
ORDER
I. Questions Certified
Pursuant to Rule 15 of the Montana Rules of Appellate
Procedure, we respectfully request that the Supreme Court
of Montana decide the certified questions presented below.
The answers to these questions of state law will be
determinative of a central issue pending in this appeal, and
there is no controlling precedent in the decisions of the
Montana Supreme Court. See Mont. R. App. 15(3). We
acknowledge that, as the receiving court, the Montana
Supreme Court may reformulate the certified questions,
Mont. R. App. P. 15(6)(a)(iii), and we will accept the
decision of the Montana Supreme Court.
We respectfully certify the following questions to the
Montana Supreme Court:
1) Whether an anti-concurrent cause (“ACC”) clause in
an insurance policy applies to defeat insurance
coverage despite Montana’s recognition of the
efficient proximate cause (“EPC”) doctrine; and
2) Whether the relevant language in the general
exclusions section on page 8 of the Policy in this case
is an ACC clause that circumvents the application of
the EPC doctrine. 1
1
That language reads “We do not insure for loss caused by any of the
following [listed excluded perils]. Such loss is excluded regardless of
any other cause or event contributing concurrently or in any sequence to
the loss. These exclusions apply whether or not the loss event results in
widespread damage or affects a substantial area.”
4 WARD V. SAFECO INSURANCE CO. OF AMERICA
II. Statement of Facts
Appellant is Virginia Ward (“Ms. Ward”), the owner of
a rental house and property in Livingston, Montana
(“Property”). Ms. Ward purchased a Landlord Protection
Policy (“Policy”) from Safeco Insurance Company
(“Safeco”) to insure the Property. In 2017, a water main line
leading into the house broke, saturating the area around and
under the property with water. A few months later, soft spots
developed on the floor of the house. Investigation
determined that the soil under the foundation had contracted
as a result of the water damage, causing the foundation slab
to sag.
Safeco informed Ms. Ward that the damage to the
Property was not covered under the Policy based on its Earth
Movement and Water Damage exclusions, which are listed
as excluded perils in the Policy’s ACC clause. 2
The District Court granted summary judgment in favor
of Safeco, finding that 1) the ACC clause barred coverage,
2) the Policy was not illusory or ambiguous, and 3) Safeco
did not violate Montana’s Unfair Trade Practices Act when
it denied Ms. Ward coverage. Ms. Ward appealed.
III. The Need for Certification
Under Montana’s EPC doctrine, “where covered and
noncovered perils contribute to a loss, the peril that set in
motion the chain of events leading to the loss or the
predominating cause is deemed
the efficient proximate cause or legal cause of loss.” Kaul v.
State Farm Mut. Auto. Ins. Co., 2021 MT 67, ¶ 35, 403 Mont.
387, 482 P.3d 1196 (McKinnon, J., dissenting) (quotation
2
The ACC clause language is set out in footnote 1.
WARD V. SAFECO INSURANCE CO. OF AMERICA 5
omitted). See also Park Saddle Horse Co. v. Royal Indem.
Co., 261 P. 880, 884 (Mont. 1927) (stating that “[i]n
determining the cause of a loss for the purpose of fixing the
insurance liability, when concurring causes of the damage
appear, the proximate cause to which the loss is to be
attributed is the dominant, the efficient one that sets the other
causes in operation; and causes which are incidental are not
proximate, though they may be nearer in time and place to
the loss” (quotation omitted)).
In this case, Safeco argues that the ACC clause in the
Policy overrides the normal operation of the EPC doctrine,
such that there is no coverage where any excluded peril
caused the loss to any extent (even if a covered peril was the
efficient proximate cause of the loss). Ms. Ward, on the
other hand, contends that the EPC doctrine applies
notwithstanding the ACC clause in the Policy, such that
coverage exists if a covered peril is the efficient proximate
cause of the loss, even if other excluded perils also
contributed to the cause of the loss.
The Montana Supreme Court has held that parties to an
insurance contract are free to agree to exclusions that are not
statutorily prohibited. See Stutzman v. Safeco Ins. Co. of
Am.945 P.2d 32, 37 (Mont. 1997) (“[T]here is no statutory
mandate for underinsured motorist coverage in Montana . . .
[t]herefore, the parties may freely contract to produce
exclusions or limitations on underinsured motorist
coverage.”). Safeco argues that Montana’s legislature has
not declared that Montana’s public policy prohibits insurers
from contracting around efficient proximate cause, and
contends that Montana’s insurance code does not prohibit
insurers from contracting around the EPC doctrine.
6 WARD V. SAFECO INSURANCE CO. OF AMERICA
In interpreting the law of states with an EPC doctrine,
some courts have found that parties are free to contract
around its application. See, e.g., TNT Speed & Sport Ctr.,
Inc. v. Am. States Ins. Co., 114 F.3d 731, 733 (8th Cir. 1997)
(affirming district court’s decision based on conclusion that
“the most analogous and more persuasive cases from other
states recognize that parties may contract out of application
of the efficient proximate cause doctrine”). But other courts
have held that parties may not do so. See, e.g., Safeco Ins.
Co. of Am. v. Hirschmann, 773 P.2d 413, 416 (Wash. 1989)
(explaining that Washington’s efficient proximate cause rule
“may not be circumvented” by exclusionary clause
language). Relatedly, in some instances, these courts seem
to suggest that exclusionary language similar to the wording
in the Policy does not preclude application of the EPC
doctrine. See, e.g., id. at 416-17 (stating that “whenever the
term ‘cause’ appears in an exclusionary clause it must be
read as ‘efficient proximate cause,’” such that “[w]hen an
insured risk sets into operation a chain of causation in which
the last step may be an excluded risk, the exclusion will not
defeat recovery”). The Montana courts have not addressed
these two issues.
The issues described in the certified questions appear to
be recurring issues of law that implicate important public
policy concerns under Montana law. See, e.g., Oltz v. Safeco
Ins. Co. of Am., 306 F. Supp. 3d 1243, 1257 (D. Mont. 2018)
(holding that “Montana law does not prohibit anti-
concurrent causes clauses,” but reasoning that “an anti-
concurrent cause clause may not exclude the efficient
proximate cause of the loss”); see also Kremen v. Cohen, 325
F.3d 1035, 1037 (9th Cir. 2003) (“The certification
procedure is reserved for state law questions that present
significant issues, including those with important public
WARD V. SAFECO INSURANCE CO. OF AMERICA 7
policy ramifications, and that have not yet been resolved by
the state courts.”).
Resolution of the certified questions will be
determinative of a key issue in the pending appeal. If parties
are not allowed to contract around the EPC doctrine, or if the
ACC language in the Policy does not effectively do so, the
central basis for the district court’s reasoning in granting
summary judgment in Safeco’s favor would be eliminated.
On the other hand, if parties are allowed to contract around
the EPC doctrine using the language in the Policy, the only
issues remaining in the case would be whether the relevant
parts of the Policy are ambiguous or illusory, and whether
Safeco violated the Unfair Trade Practices Act when it
denied Ms. Ward coverage. In sum, the certified questions
could determine the outcome of this appeal, and implicate
significant public policy questions that have not been
addressed by the Montana courts.
IV. Counsel
The names and addresses of counsel for the parties, as
required by Mont. R. App. P. 15(6)(a)(iv), are as follows:
Attorneys for Virginia Ward: Rex Palmer and
Lincoln Palmer, Attorneys Inc., P.C., 301 W Spruce
Missoula, MT 59802.
Attorneys for Safeco Insurance Company of
America: John E. Bohyer, Bohyer, Erickson,
Beaudette & Tranel, P.C., P.O. Box 7729, 283 Front
Street, Missoula, MT 59807 and Brooke B. Murphy,
MurphyMyers PLLC, 27 N. 27th Street, Ste. 21A,
P.O. Box 1619, Billings, MT 59103.
8 WARD V. SAFECO INSURANCE CO. OF AMERICA
V. Accompanying Materials
The Clerk shall forward a certified copy of this
certification order, under official seal, to the Montana
Supreme Court. The Clerk is also ordered to transmit to the
Montana Supreme Court a copy of the Excerpts of Record
filed in this appeal and, if requested by the Montana
Supreme Court, provide all or part of the district court record
not included in the Excerpts of Record. Mont. R. App. P.
15(5). The Clerk is further directed to forward a copy of the
briefs filed by the parties.
Submission of this appeal for decision is vacated and
deferred pending the Montana Supreme Court’s final
response to this certification order. The Clerk is directed to
administratively close this docket, pending further order.
The parties shall notify the Clerk of this court within
fourteen days of the Montana Supreme Court’s acceptance
or rejection of certification, and again, if certification is
accepted, within fourteen days of the Montana Supreme
Court’s issuance of a decision.
QUESTIONS CERTIFIED; PROCEEDINGS
STAYED.