Verne Pedro | Property Insurance Coverage Law Blog | April 24, 2019
In the 1950’s farce The Great Rupert (aka A Christmas Wish), starring Jimmy Durante, a mischievous dancing sideshow squirrel accidentally discovers and misdirects a miser’s cache of cash to an impoverished family living next door through a hole in the roof. Silly movie plot? Perhaps … but having seen this film several times, I can attest that Rupert’s antics set humorous events in motion.
Not to be outdone by Rupert, a squirrel’s plight is central to the coverage dispute in a recent Iowa Supreme Court decision.1 In 2014, a squirrel climbed onto an outdoor electrical transformer at the insured city’s power plant. While still touching a grounded steel frame that supported an electrical cable, the squirrel came into contact with a bare cable clamp that was “live” with 7200 volts. The contact created a conductive path between the high voltage clamp and the grounded frame, which triggered an electrical arc. The arcing killed the squirrel and caused $213,524.76 worth of damage to the transformer and other electrical equipment.
The City of West Liberty sought coverage under an all risks insurance policy. The insurer denied coverage based on an exclusion in the policy, which excluded coverage for “loss caused by arcing or by electrical currents other than lightning.” The city then sued the insurer in an Iowa state court for a declaratory judgment of coverage and damages. The parties filed cross motions for summary judgment. The city argued the damage claim was covered because the squirrel – not the arcing – was the efficient proximate cause of the loss.2 According to the city, it was irrelevant whether the policy excluded arcing.
The district court disagreed and granted summary judgment to the insurer, finding the sole cause of the damage was the electrical arc, noting the squirrel did no damage to the insured’s property such as gnawing on a power line or digging for nuts in a dangerous area. The court stated:
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. Had the squirrel done what it had done, and the arc not occurred, there would be no damages. Because there are not two different damage-causing events, the Court need not engage in an efficient proximate cause analysis. If an efficient proximate cause analysis was appropriate, the Court would find that the arcing was the dominant cause.3
On appeal, the Iowa Supreme Court affirmed the court below, finding the loss was caused by arcing even though the squirrel triggered the arcing. In its analysis, the court observed this is not a case of two independent causes, one of which is covered and one excluded:
The squirrel did not independently contribute to the loss … Rather, the squirrel was inextricably tied to the arcing and was the immediate reason why the arcing happened.4
If you would like more information about property damage claims stemming from overlapping independent events, there are several excellent archived posts by my colleagues discussing efficient proximate cause issues or call us with any questions you might have.
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1 City of West Liberty v. Employers Mutual Cas. Co., 922 N.W.2d 876 (Iowa Feb. 1, 2019).
2 In insurance law it is generally understood that where the peril insured against sets other causes in motion which, in an unbroken sequence and connection between the act and final loss, produces the result for which recovery is sought, the insured peril is regarded as the proximate cause of the entire loss. Id. at 880.
3 Id. at 878.
4 Id. at 880-81.