AZ Fire Policies Might Cover Related Disasters

     SAN FRANCISCO (CN) – An insurer may have to cover an Arizona home destroyed by a post-wildfire mudslide and flooding even though the policy excluded water and earth movement damage, the 9th Circuit ruled Friday.
     The wildfire at issue occurred in 2011, according to the panel’s per curiam opinion. A month after it was put out, flooding and mudslides in the area destroyed plaintiff Magda Stankova’s house.
     Stankova’s policy with Metropolitan Property and Casualty Insurance Company covered direct loss caused by fire but excluded coverage for losses sustained by water and earth movement such as mudslides, the opinion said.
     But Stankova sought coverage for her home’s destruction, arguing that the fire – not the mudslide and flood – was “the actual and proximate cause” of her home’s destruction.
     A federal judge found for the insurer, but the 9th Circuit panel reversed the judgment.
     Arizona’s standard fire policy is based on New York’s, which states that loss by fire is not limited just to fire damage but includes all losses “which are directly, proximately, or immediately caused by a fire or combustion.”
     Therefore, there is a triable issue as to whether the fire directly destroyed Stankova’s loss in “an unbroken sequence and connection between” the wildfire and the destruction of the house, the panel found.
     “We know of no case that would allow Metropolitan to contract out of the standard fire policy’s purpose so as to exclude coverage for this type of direct loss from fire,” the opinion says.
     Randy Sassaman, Stankova’s attorney, said the total amount Metropolitan owes his client in coverage is about $716,000.
     Metropolitan’s counsel could not be reached for comment on Friday.
     The panel, which included Circuit Judges Mary Schroeder and N. Randy Smith and U.S. District Judge Sharon Gleason sitting by designation from Alaska, remanded the case for trial or further proceedings.

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