Facts
- Mount St. Helens erupted on May 18, 1980, producing conditions that generated large mudflows moving down the Toutle River valley.
- Approximately 10 hours after the eruption began, homeowners’ dwellings located roughly 20–25 miles away were destroyed by mudflow and related flooding.
- Each homeowner had a standard homeowners’ policy issued by either Public Employees Mutual Insurance Company (PEMCO) or Pennsylvania General Insurance Company (PGI).
- The policies contained exclusions for loss resulting directly or indirectly from “earth movement” and for “water damage,” including “flood,” but did not define “earth movement.”
- PEMCO previously used an exclusion that expressly referenced “volcanic eruption” and “mudflow,” but a later form omitted those specific terms while retaining the general “earth movement” exclusion.
- The insurers denied coverage, asserting the immediate physical causes were excluded perils (mudflow/landslide as “earth movement” and flooding as “water damage”).
- Trial courts granted summary judgment for the insurers; the homeowners appealed, and the cases were consolidated.
Issues
- Whether losses caused by a volcanic eruption–initiated chain of events culminating in mudflow and flooding are covered when the policy excludes “earth movement” and “flood” but does not clearly exclude volcanic eruption–caused mudflows.
- Whether the undefined “earth movement” exclusion unambiguously encompasses volcanic eruption–related mudflows, particularly given the insurer’s prior use of a form that specifically excluded “volcanic eruption” and “mudflow.”
- Whether, under Washington causation rules, coverage exists when a covered peril sets in motion an unbroken sequence leading to loss, even though later events in the sequence are excluded perils.
Decision
- The Washington Supreme Court reversed the summary judgments for the insurers.
- The court held the “earth movement” exclusion was ambiguous as applied to volcanic eruption–caused mudflows, especially in light of the deletion of specific exclusionary terms from earlier policy forms.
- Applying Washington’s efficient proximate cause doctrine, the court treated the volcanic eruption as the initiating cause that set in motion the sequence resulting in the loss.
- The court construed exclusionary ambiguity against the insurers and in favor of coverage and rejected the insurers’ reliance on the flood/water-damage exclusion to defeat coverage in this causal sequence.
- The cases were remanded for entry of judgment consistent with coverage for the insureds’ losses.
Legal Principles
- Exclusionary clauses are strictly construed against the insurer; if policy language is fairly susceptible to two reasonable constructions, the construction favoring the insured controls.
- When an insurer changes policy language by removing specific exclusions, the change may create ambiguity and support an insured’s reasonable understanding that the removed risks are no longer excluded.
- Under Washington’s efficient proximate cause doctrine, if a covered peril sets other causes in motion in an unbroken sequence producing the loss, coverage exists even if later events are excluded perils, unless the policy clearly and unambiguously provides otherwise.
- Broad, undefined terms such as “earth movement” may be ambiguous when applied to complex natural-disaster mechanisms (e.g., eruption-driven mudflows), requiring a coverage-favoring construction.
Conclusion
The court required coverage for Mount St. Helens mudflow-related losses because the undefined “earth movement” exclusion was ambiguous in context and, under efficient proximate cause principles, the volcanic eruption was the initiating covered peril that led to the destruction despite later excluded elements such as mudflow and flood.