California Court of Appeal Confirms that Multiple Coverages in an Insurance Policy Generally Do Not Provide Extra Coverage for the Same Loss

A California court recently confirmed that insurance policies offering multiple coverages will not be interpreted as providing multiple sources of coverage for the same loss on the same property.  Instead, when multiple coverages are provided in a policy, they will be read as covering separate items unless clearly stated otherwise.

In Adamo v. Fire Ins. Exchange (— Cal.Rptr.3d —-, Cal.App. 4 Dist., September 24, 2013), wildfires in San Diego County damaged Guy Adamo’s 1,000-tree avocado grove and related equipment, including a 10,000-gallon water tank, irrigation system, culverts, two woodsheds, and landscaping.  Adamo’s home, located on the orchard property, suffered minor smoke damage.  Adamo filed a claim under his homeowner's insurance policy with Fire Insurance Exchange (“FIE”).  The policy contained categories of coverage:  Coverage A for his dwelling, which had a $531,000 total liability limit, and Coverage B for “Other Structures,” which had a $53,100 limit.  “Other Structures” under Coverage B excluded structures used for commercial or farming purposes.

Adamo explained to FIE’s adjuster that he sold the avocados from his grove.  After FIE investigated Adamo’s claim, FIE agreed to pay Adamo a total of $116,000 for damage to his home, woodsheds, landscaping, and culverts.  FIE then informed Adamo he had exhausted the policy’s available coverage for any remaining claims.  Adamo sought payment under the Coverage A provision for the water tank, irrigation system, and additional damage to the culverts.  FIE stated that the water tank was not attached to his home, and so was not covered under Coverage A.  FIE also denied his claim on the ground that the tank and irrigation systems fell under the Coverage B exclusion for structures used commercially.

Adamo sued FIE, arguing that Coverage A provided additional coverage for the water tank, irrigation system and culverts.  The trial court found in favor of FIE.

On appeal, the Fourth District Court of Appeal affirmed the trial court decision, agreeing that FIE did not owe Adamo additional coverage and that Coverage B was the only coverage available under the policy for Adamo’s water system.  The appellate court noted that the policy defined “other structures” under Coverage B as ones “separated from the dwelling by clear space.”  Under the plain language of the policy, the definition applied to the water system structures.  The court observed that a federal case interpreting the same policy language found it to be unambiguous and that structures connected by a water line to a house fell under Coverage B.

The appellate court rejected Adamo’s argument that even though Coverage B was exhausted, additional coverage was available under Coverage A.  The court stated that Adamo could not claim that both coverages applied “to the same loss suffered as to the same property.”  Rather, “insurance policies are to be read as a whole.  That means where multiple coverages are afforded, they are read as covering different, separate items.”

The court also rebuffed Adamo’s contention that another portion of the policy, subsection 1 of “Other Coverages” provided additional coverage.  The court found instead that the provision merely set Coverage B policy limits.


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