Unpublished Disposition, 902 F.2d 40 (9th Cir. 1987)

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U.S. Court of Appeals for the Ninth Circuit - 902 F.2d 40 (9th Cir. 1987)

Hugh RAPHAEL; Joanne Raphael, Plaintiffs-Appellants,v.STATE FARM FIRE AND CASUALTY COMPANY, Defendant-Appellee.

No. 88-6602.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 3, 1989.Decided May 7, 1990.

Before WILLIAM A. NORRIS, REINHARDT and TROTT, Circuit Judges.



The Raphaels seek damages from State Farm Fire and Casualty Company under their "all risks" property owner's insurance. They allege that damages were incurred as the result of their uphill neighbors' negligent discharge of pool water down the slope above their property. We affirm the district court's judgment that the Raphaels' claims are barred by the statute of limitations, or alternatively that coverage their injury is specifically excluded from coverage under the 1987 policy.


Dr. Hugh Raphael and Joanne Raphael ("the Raphaels") live at the base of a steep hillside. Their home is constructed on a wedge of fill placed on bedrock at the base of the hillside. They have several uphill neighbors: the Goldbergs, the Kaufmans, and the Wawees. In January 1980 all three neighbors discharged pool water down the slope towards the Raphaels' residence. This discharge of pool water combined with unusually heavy rains apparently caused a mudslide on February 16, 1980, which damaged the Raphaels' property.1 

The Raphaels filed a claim with State Farm Insurance Co. ("State Farm"), which State Farm initially denied orally. Later, after a complete investigation, State Farm again denied the claim. The Raphaels sued and settled with their upslope neighbors in November 1985.

In December 1986, the Raphaels noticed cracks in their walls and ceiling. When contractors, hired to repair and remodel the home, pulled back their carpeting, a 1/4 inch wide crack was observed in the foundation.

The Raphaels' expert concluded that saturating the fill in 1980 caused a gradual consolidation and downslope movement of the fill on which the house was constructed. The Raphaels filed a claim for damage with State Farm in May 1987, approximately six months after noticing the damage to the house.


The Raphaels filed this action on September 30, 1987 against State Farm in Los Angeles Superior Court. State Farm removed the case to the United States District Court for the Central District of California pursuant to 28 U.S.C. §§ 1332 and 1441.

The Raphaels' residence was insured by State Farm under various policies of "all risks" homeowners insurance between 1977 and November 1986. The terms of the policies in force over the years have varied. Most notably, in 1984, State Farm notified the Raphaels that:

We have changed your policy form to underscore that there are certain types of loss which are not covered.

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For instance, under no circumstances does this policy insure for loss involving ... earthquake (except by specific endorsement), or various other forms of earth movement or water damage.

The Raphaels framed their complaint as one seeking two separate losses: (1) damage from a mudslide that occurred in February 1980 and (2) damage from subsidence that was first observed in December 1986.

In moving for summary judgment, State Farm argued that coverage is governed by the insurance contract in force in 1986, which specifically excludes coverage for all earth movement. The Raphaels claimed in response that the policy in effect in 1980, when the saturation of the fill allegedly occurred, should control, pointing out that the language of the 1980 policy has been interpreted to cover earth movement caused by third parties. They argued that all their damages were a result of the 1980 negligent discharge of pool water, and that (1) the discovery rule should apply to toll the statute of limitations because the structural damage to their house could not have been foreseen; or (2) the change in their policy excluding such damages should be held void, allowing them to sue under the broader coverage of the 1980 policy.

The district court granted State Farm's motion for summary judgment. The court held that if the action was brought pursuant to the 1980 policy the injury was barred by the four year statute of limitations period, and in the alternative, that if the action was pursuant to the 1986 policy, coverage was expressly excluded by the terms of the agreement. The court held that the notice of reduction in their policy given to plaintiffs was clear, conspicuous, and legally adequate so that the broader coverage of the 1980 policy did not govern the resolution of the 1986 subsidence damage.

As the court stated:

The plaintiffs in this case, I believe, are in a legal quandary. They need to allege that the 1986 damage to their house "occurred" for insurance purposes in 1980 to gan [sic] coverage under that policy because the type of damage they sustained is expressly not covered under the 1986 policy then in effect. However, the plaintiffs must also allege that this damage which occurred in 1980 was not discovered until 1986, or else their claim is time barred since the policy provides that all claims must be made within 12 months of their occurrence, and the maximum applicable statute of limitations under California law is four years, notwithstanding the contractual one-year limitations period contained within the policy.

Both the 1980 policy and the 1986 policy exclude coverage for earth movement. However, only the 1986 policy excludes coverage for such damage even when other causes interacted with the earth movement to produce the damage.


This court reviews the district court's grant of summary judgment de novo, viewing the facts in a light most favorable to the losing party. Compton v. Ide, 732 F.2d 1429, 1434 (9th Cir. 1984). This court reviews the district court's interpretation of state law de novo. In re McLinn, 739 F.2d 1395, 1403 (9th Cir. 1984) (en banc).


* The Raphaels claim State Farm wrongfully denied their claim for damages arising out of the 1980 mudslide.1  While the Raphaels concede the policy then in effect expressly disclaimed coverage for earth movement, they correctly point out that the policy has been interpreted notwithstanding the disclaimer to include earth movement caused by third party negligence. See Sabella v. Wisler, 59 Cal. 2d 21, 30-34, 27 Cal. Rptr. 689, 694-97 (1963), 377 P.2d 889, 894-97 (1963). As noted earlier, the Raphaels allege that the neighbors' negligent downslope discharge of pool water was the cause of the mudslide.

The Ninth Circuit relies upon California law to determine if the Raphaels' claims are time barred. See Guaranty Trust Co. v. York, 326 U.S. 99, 107-10 (1945). Pursuant to California Civil Procedure Code sections 312 and 337, an action in contract must be brought within four years of the date that the cause of action accrues. Cal.Civ.Proc.Code Secs. 312, 337 (West 1982).2  Accrual ordinarily commences at the time of injury. See April Enters, Inc. v. KTTV, 147 Cal. App. 3d 805, ----, 195 Cal. Rptr. 421, 436 (1983). As noted in April Enterprises,

" [i]n ordinary tort and contract actions, the statute of limitations ... begins to run upon the occurrence of the last element essential to the cause of action." ... "The harshness of this rule has been ameliorated in some cases [however,] where it is manifestly unjust to deprive plaintiffs of a cause of action before they are aware that they have been injured."

Id. at ----, 195 Cal. Rptr. at 432 (quoting Neel v. Magana, Olney, Levy, Cathcart & Gelfand, 6 Cal. 3d 176, 187, 98 Cal. Rptr. 837, 491 P.2d 42 (1971); Leaf v. City of San Mateo, 104 Cal. App. 3d 398, 406, 163 Cal. Rptr. 711 (1980)) (quotations omitted).

A cause of action under the discovery rule accrues when the plaintiff "either (1) actually discovers his injury or (2) could have discovered his injury and its cause through the exercise of reasonable diligence." Id. While appellants' counsel attempts to frame this as two separate causes of action, one occurring in 1980, the second accruing with the discovery of the cracks in the foundation in 1986, we hold there is only one cause of action. Both claims arise from the 1980 negligence of the Raphaels' upslope neighbors.

Although the rule that a single tort gives rise to a single cause of action appears straightforward, some questions do arise concerning what constitutes a single tort. To analyze this question a tort must be divided into two components: tortious act and injury. In general, when a single act results in several distinct injuries, a single cause of action arises.

J. Friedenthal, M. Kane & A. Miller, Civil Procedure 632 (1985).

As to the 1980 mudslide, the Raphaels knew of the damage and its cause in time to sue. State Farm denied their claim in 1981. The denial of the claim in no way tolled the statute of limitations. As stated in Matsumoto v. Republic Ins. Co., 792 F.2d 869 (9th Cir. 1986):

denial of the ... claims was, at most, an incorrect interpretation of the terms of [the] contract. We are therefore bound by Neff v. New York Life Insurance Co., 30 Cal. 2d 165, 180 P.2d 900 (1947), wherein the California Supreme Court held that an insurer's disclaimer, even if 'made through fraud or mistake,' could not toll the statute of limitations. 30 Cal. 2d at 172, 180 P.2d at 905. Here, as in Neff, the insurer's denial of liability may have caused the insured not to pursue a cause of action, but this does not toll the statute of limitations.

792 F.2d at 872 (footnote omitted).

The Raphaels are, as the district court stated, "in a legal quandary." They knew in 1980 of the factual predicate for suit on the 1980 mudslide; however, they may not have then known they were covered for their losses under the 1980 insurance contract. The fact that they were not aware of the precise legal basis of their cause of action, however, is not enough to toll the statute of limitations. See Lawrence v. Western Mut. Ins. Co., 204 Cal. App. 3d 565, 251 Cal. Rptr. 319 (1988). Since earth movement coverage is excluded by the post-1984 policies, as we discuss later in this opinion, to succeed they must rely on the policy in effect at the time of the mudslide and allege that the subsequent damage to their house was caused by their neighbor's negligence in 1980. Contrary to their allegations of two distinct causes of action, they are only claiming that the complete extent of their damages was not known, and could not have been known in 1980. This is, essentially, irrelevant. It is the "occurrence of some ... cognizable event rather than knowledge of its legal significance that starts the running of the statute of limitations period." Id. Plaintiffs' inability to determine the extent of their damages does not toll the statute of limitations.

[W]e generally now subscribe to the view that the period cannot run before plaintiff possesses a true cause of action, by which we mean that events have developed to a point where plaintiff is entitled to a legal remedy, not merely a symbolic judgment such as an award of nominal damages.

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We conclude although a right to recover nominal damages will not trigger the running of the period of limitation, the infliction of appreciable and actual harm, however uncertain in amount, will commence the statutory period. Under present authority, neither uncertainty as to the amount of damages nor difficulty in proving damages tolls the period of limitations.

Davies v. Krasna, 14 Cal. 3d 502, ----, 121 Cal. Rptr. 705, ----, 535 P.2d 1161, 1168-699 (1975).

Therefore, the district court was correct in determining that the statute of limitations bars both claims since the cause of action accrued in 1980 with the occurrence of the mudslide.


The Notification of Change in Coverage

In 1984 State Farm undertook to change the coverage of policies, such as the one held by the Raphaels, and eliminate all coverage for earth movement. The Raphaels suggest that the notification given to policyholders was not sufficient under Fields v. Blue Shield, 163 Cal. App. 3d 570, 209 Cal. Rptr. 781, 785 (1985) (broader coverage of previous policy remains in force unless adequate notice of change is given). To narrow the coverage, notice must be conspicuous, plain, and clear. 209 Cal. Rptr. at 786. Therefore, they argue, the broader pre-1984 policy coverage controls.

The district court found, as a matter of law, the notice given satisfied the insurer's obligation to give conspicuous, plain, and clear notice of the reduction in coverage. The Raphaels argue on appeal that the language in the notice is phrased in such a manner as to lead the reader to believe that nothing has been changed. This argument is not frivolous. A term or clause is conspicuous when it is so "written that a reasonable person against whom it is to operate ought to have noticed it." Black's Law Dictionary 280 (5th ed. 1979). The notice from State Farm in this case reads:

We have changed your policy form to underscore that there are certain types of losses which are not covered:

For instance, under no circumstances does this policy insure for loss involving ... earthquake ... or various other forms of earth movement or water damage ...".

(Emphasis added). The Raphaels argue that by using the word "underscore," State Farm intended in bad faith to lure those individuals with claims under the old policy into believing that coverage for their damage never existed. This is not implausible. The Fields rule requires insurers to inform policyholders of a change in their policy, not of their rights under a prior policy. Regardless of State Farm's reference to coverage under the previous policy, however, this notice contains a definitive statement that is conspicuous, plain, and clear to the effect that post-1984 policies would not cover the loss. Thus, the post-1984 contract excludes coverage for damages resulting from earth movement.


The Raphaels allege that both claims arose from the 1980 discharge of pool water by their uphill neighbors. There was observable damage from this discharge in 1980. They admit that their claim was denied in 1981. They chose not to litigate against State Farm within the statutory period of limitations. Now they seek coverage not only for the immediate damage from the 1980 mudslide, but also damages from that mudslide which they first observed in 1986. The Raphaels were on notice of their claim no later than 1981. It is true that they did not actually know the full extent of their damages in 1981, but they did have a claim at that time. The fact that the full amount of the damages was unknown does not toll the statute of limitations.

The 1986 subsidence damage is not covered by the post-1984 policies. The notice sent in 1984, that coverage was being changed, may not have informed the Raphaels that they had a claim under the old policy, but it clearly informed them that they would not be covered for earth movement after 1984. The district court's judgment is


Judge Reinhardt concurs in the result.


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Cir.Rule 36-3


The mudslide removed all the railroad ties and other drainage control devices, as well as the ground cover on the slope, broke through the chain link fence, flooded the pool and patio with mud and debris, and destroyed the cement dog run


The Raphaels argue that State Farm's decision was not final until April 6, 1981, when the decision to deny coverage was reaffirmed


The insurance contract in this case contained a one-year limitation on the filing of a lawsuit. This limited statute of limitations has been found reasonable. C & H Foods Co. v. Hartford Ins. Co., 163 Cal. App. 3d 1055, 1064, 211 Cal. Rptr. 765, ---- (1984). This, however, is irrelevant because if the discovery rule applies the action is timely under both statutes of limitations and if it does not apply it is barred even under the four-year statute. See Zurn Eng'rs v. Eagle Star Ins. Co., 61 Cal. App. 3d 493, 132 Cal. Rptr. 206 (1976) (inception of the loss is the same as accrual of action)