SABELLA v. National Union Fire Insurance Company of Pittsburgh, Pennsylvania, a corp., Defendant and Respondent.* (1962)

The judgment roll is the record of this appeal.

Plaintiffs, husband and wife, bought a home from defendant Wisler, a contractor and experienced home builder, who had built it for sale to anyone willing and able to buy, and who had no contact with plaintiffs prior to the sale of the completed home. Wisler had purchased the land on which the home was built in 1954. The lot was substantially level and did not have the appearance on the surface of being filled land. Actually, the lot had been a pit of a quarry, and had been filled with tree cuttings and other loose wastes, over which dirt and rock had been shoved by bulldozer by Wisler's grantors. The earth had not been compacted, and the court found that it was unsuitable for use as a building site.

In 1955, Wisler, preparing to build, excavated to a depth of 18 to 24 inches in order to lodge foundation footings. The court found that, although a reasonably prudent person would not have been alerted to the existence of fill material from the appearance of the land at the surface, such person would have discovered, as a result of excavation, that the earth was not sufficiently compacted to support the intended building, and would have caused soil tests to be made before proceeding with the building; and that it was negligence on Wisler's part to fail to disclose the unsuitable nature of the ground and to fail to cause soil tests to be made.

The building was completed, and plaintiffs bought it September 16, 1956. The court found that it is the nature of the uncompacted fill such as that present in plaintiffs' property to settle, and that the uncompacted fill settled as the natural result of its own weight, the weight of plaintiffs' dwelling and the induction of waste water from a broken house lateral sewer; that the cause of said sewer pipe so breaking and leaking was either the settling and consolidation of the inadequately compacted fill material upon which it was placed, or the improper closure of certain joints therein, or a combination of both those causes, and leakage from said break in the sewer commenced not more than six months and not less than three months prior to May 1, 1959. The water infiltrated the land beneath the house and caused the uncompacted earth to settle and consolidate rapidly, and this in turn caused the foundations to sink unevenly, which produced uneven floors, cracked walls, jammed doors, and, in all, damages in amount $8,200.

Plaintiffs at all relevant times were holders of a ‘homeowners' policy of National Union Fire Insurance Company, which contains an ‘all physical loss' endorsement which insures against all physical loss, with certain exceptions, among which is this: ‘This endorsement does to insure against loss: (b) by termites * * * wear and tear, deterioration, * * * settling, cracking, shrinkage, or expansion of pavements, foundations, walls, floors or ceilings. * * *’

Judgment was awarded in favor of plaintiffs against the builder, Wisler, and against plaintiffs and in favor of defendant National Union Fire Insurance Company. Wisler appeals from the judgment against him, and plaintiffs appeal from the judgment in favor of the insurance company.

I. The cause of the Buyers Against the Builder

It is to be observed that there is no contention at this point that the builder actually knew of the condition of the land and thus was guilty of fraud by concealment of its character, as in Buist v. C. Dudley DeVeilbiss Corp., 182 Cal.App.2d 325, 6 Cal.Rptr. 259; nor is the case one wherein a contractor is sued for breach of contract to build, because the house was bought ready-built; nor is there any claim by plaintiffs of breach of warranty, because no express warranty was made, and plaintiffs do not rest their case upon any implied warranty, but on negligence only.

In our opinion, the builder is responsible for the damages, under the provisions of section 1714 of the Civil Code, which reads as follows: ‘Everyone is responsible, not only for the result of his willful acts, but also for an injury occasioned to another by his want of ordinary care or skill in the management of his property or person, except so far as the latter has, willfully or by want of ordinary care, brought the injury upon himself. The extent of liability in such cases is defined by the Title on Compensatory Relief.’

It is to be noted that the injury to be compensated is injury to another, and is not limited to injury to property which belongs to another than the negligent party at the time of the injury. There can be no doubt, under the unchallenged findings of fact, that defendant's negligence caused injury to ‘another,’ namely, to the very parties with whom defendant dealt. What, then, can be said against the application of the liability referred to in the statute?

If a part of the building containing a latent defect fails in its function, by negligence of the builder, and that part is of such nature that failure would be reasonably certain to cause injury to person, the builder is responsible. Thus, in Hale v. Depaoli, 33 Cal.2d 228, 201 P.2d 1, 13 A.L.R.2d 183, where a defectively built porch railing gave way and precipitated a tenant who was leaning against it to the ground, the contractor was held liable, even though the owner had accepted the building, where the defect was latent; and in Dow v. Holly Manufacturing Co., 49 Cal.2d 720, 321 P.2d 736, where a general contractor was held liable for deaths caused by a negligently manufactured gas heater, the contractor having put out the heater as his own, having prepared plans and specifications for the building, and having failed to discover deficiencies which proper inspection would have disclosed. Following these two leading cases, the rule was extended to property damage in Stewart v. Cox, 55 Cal.2d 857, 13 Cal.Rptr. 521, 362 P.2d 345, wherein defendant, a subcontractor, who had negligently done repair work to plaintiffs' swimming pool, was held liable for damages to plaintiffs' house and yard and pool, although the work had been accepted by the general contractor and by plaintiffs.

In the case before us, there was not a situation of failure of a part of a building such as a railing, nor of an adjunct to the property such as a swimming pool, but a defect so substantial that the entire building subsided. If we were obliged to recognize this distinction as making a difference in the liability of the contractor, we should have no difficulty in determining that the foundation and footings, being negligently lodged, are parts of the house which, when deficient, may be found reasonably certain to cause damage to the rest of the building. Such distinction seems artificial and unnecessary, however, because if negligence in the construction at large causes damage to the structure, surely this is of as much legal effect as negligence in the construction and placement of a part.

We hold, therefore, that when a contractor who builds for sale to the public, constructs negligently, so that latent defects exist, as a proximate result of which the building in large part is damaged, he is liable in damages to the purchaser. We need not decide, as appellant argues we must if we do not reverse the judgment, that the contractor would be liable for every imaginable defect. The subject of liability of the contractor, following sale of the building or acceptance of his work, for negligence, is a developing one (see Stewart v. Cox, supra, at pp. 862–863, 13 Cal.Rptr. 521, 362 P.2d 345), and we are content to decide no more than what is before us.

II. The Cause of Plaintiffs as Policyholders Against the Insurance company

Plaintiffs held a homeowners insurance policy which contains an ‘all physical loss' endorsement which insures ‘against all risks of physical loss except as hereinafter excluded,’ and an excluded loss was one ‘by settling, cracking, shrinkage, or expansion of pavements, foundations, walls, floors or ceilings.’

Is There a Risk?

Defendant contends that the loss which occurred is not covered because it was not a ‘risk’ at all, in that the defective compaction of the soil was a builtin infirmity, so that it was inevitable that sinking of the building would occur, and there was not the fortuitous element present which is a necessary ingredient of risk. It is true, in general, that insurance is intended to cover risks and not certainties (Richards on Insurance, Vol. II, p. 710).

In this State, any contingent or unknown event, whether past or future, which may damnify a person having an insurable interest may be insured against (Ins.Code, § 250). We believe the subsidence of the building was an unknown event which could be and was insured against.

Defendants cite the case of Mellon v. Federal Insurance Co. (S.D.N.Y.) 14 F.2d 997, in which cracks in a steamship boiler were held not to be the result of risk; but in that case the court decided that there was no evidence of latent defect as distinguished from either misuse by excessively rapid firing or too high pressure. In the case before us, there is no question about the existence of latent defect.

Defendants also cite the case of Chute v. North River Insurance Co., 172 Minn. 12, 214 N.W. 473, 55 A.L.R. 938, in which a fire opal cracked because of an inherent sensitivity of that kind of jewel which causes a spontaneous breaking, and not because of external force, and in such a case it was held that there was not risk but loss on account of ‘proper vice’ of the article, like that which may cause wine to turn sour or fruit to rot. It is not a ‘proper vice’ of houses to subside as this one did. The vice was not in a house as such, as in the case of the opal, but in the negligence of the contractor. The fact that his negligence antedated the policy is not important. Defective wiring put into a building may cause a fire, and that inevitably, but the building owner, when purchasing a fire insurance policy, surely would expect such a fire to be considered a risk as, of course, it would be, even though it was sure to happen sooner or later. Moreover, there was an event which precipitated the subsidence, namely, leaking of the sewer pipe. Whether this would have happened within the term of the insurance policy was uncertain.

Besides, the Supreme Court of this State, by implication at least, has disposed of this point. In the case of Prickett v. Royal Ins. Co. Ltd., 56 Cal.2d 234, 14 Cal.Prtr. 675, 363 P.2d 907, which was decided subsequently to the judgment in the case before us, there was an all risk policy which excluded loss by normal settling, and there had been a sudden and extensive subsidence. The case is discussed below with reference to the interpretation of the term ‘settling’; but with relation to the company's contention that there was no risk, but an inevitability, of loss, we note that the two cases cited above, Mellon v. Federal Insurance Co. and Chute v. North River Insurance Co., were relied upon in the insurance company's brief in the Prickett case, and that the point was argued as forcibly as it is here. The Supreme Court did not mention this point, but could not have considered it to be good because it reversed the judgment which had been given in favor of the insurance company.

In the Prickett case, the earth fill was as bad, or worse, than that in our case, and the Court observed that it had been testified by an expert, a soil engineer, evidently without contradiction, that it was inevitable that some sinking would occur. In fact, the sinking in that case was more drastic and more precipitate, for the house sank literally overnight a distance of 5 to 7 inches on one side and 12 inches on another. In the Prickett case, there was no such incident as the infiltration of water from a pipe. There, as here, the latent defect had been present at all times since the building of the house.

It seems that the point covered under this subheading was the chief reason for the trial court's judgment in favor of the insurance company in the case before us, because it was the only point covered in the trial brief, and because of the prominence given to the court's finding that it is in the nature of uncompacted fills, such as that on which plaintiffs' dwelling was constructed, to settle

Was the Subsidence of the Building Subject to Exclusion by ‘Settling’?

In the Prickett case, the policy excluded loss occasioned by ‘normal settling.’ It is contended by the insurance company in the case before us that the adjective normal creates a distinction between that case and this one. It is true that the court in the Prickett case found significance in the word ‘normal,’ but this does not necessarily imply that the court would have found otherwise had the word been omitted. The word ‘normal’ being present in the policy, the court did not have to decide what the result would have been had it been omitted.

We are of the opinion that the word ‘settling,’ when it is not defined in the policy, refers not to any and all subsidence, but only to that subsidence which would reasonably be expected of a building of the character of that which is insured, on land of the general nature of that in the area. Our reasoning is this : The word ‘settling’ (or ‘settlement’) is not defined in the policy. It would have been possible for the insurer to have described ‘settling’ as including abnormal subsidence, but the insurer did not do so. Nor does the word ‘settling’ have a judicial interpretation, so far as we can find. It is not to be found in Words and Phrases. We do not find it, and it has not been pointed out to us, in the usual encyclopedias of law. If, then, we turn to the dictionaries, we find the following: ‘To descend, sink down, lower. To sink down gradually, by or as by its own weight. Of a structure: to sink downwards from its proper level’ (Oxford Universal Dictionary, 1955 Ed.); ‘the gradual sinking of a structure, whether by the yielding of the ground under the foundation, or by the compression of the joints or the material’ (Webster's New International Dictionary, 3rd Ed.). It is to be observed that there is an element of gradualness contained in the word.

Bearing in mind the rule “that provisos and exceptions must be strictly construed against the insurer, who is bound to use such language as to make the conditions, specifications, and provisions thereof clear to the ordinary mind, and, in case it fails to do so any ambiguity or reasonable doubt must be resolved in favor of the assured.” (Prickett v. Royal Ins. Co. Ltd., supra, 56 Cal.2d at p. 237, 14 Cal.Rptr. at p. 677, 363 P.2d at p. 909), and that ‘any uncertainties in insurance policies, whether as to peril unsured aginst, the amount of liability, or the person or persons insured, will be resolved against the insurer and in favor of imposing liability’. (Continental Casualty Co. v. Zurich Ins. Co., 57 A.C. 1, 6, 17 Cal.Rptr. 12, 15, 366 P.2d 455, 458), we conclude that the word ‘settling’ has the meaning we have given above.

In the conclusions of law, the trial court recited: ‘3. That the cause of loss and damage to plaintiffs' dwelling is excluded by the terms of the policy of insurance issued by defendant NATIONAL, in that the proximate cause of said loss was settling.’ We take it that the court understood that ‘settling’ covered any degree of subsidence of the earth. In a specific finding, the court determined that the flow of water caused the earth ‘to settle and consolidate with rapidity.’ We believe the court must now be directed to determine the case in the light of our interpretation of the policy.

Accordingly, the judgment of plaintiffs against defendant Wisler is affirmed, and the judgment in favor of defendant National Union Fire Insurance Company and against plaintiffs is reversed with directions to proceed in accordance with this opinion.

DEVINE, Justice.

DRAPER, P. J., and SALSMAN, J., concur.