Unpublished Disposition, 931 F.2d 59 (9th Cir. 1990)

MEMORANDUM^* 

PROCEDURAL AND FACTUAL BACKGROUND

Burke has a homeowner policy with Liberty Mutual that has been in force since June, 1980. In August, 1981, Burke discovered water ponding in the back yard of the house. She admits that the problem was serious enough to cause her to look at her policy to find if there was coverage. She determined no coverage existed and did not contact Liberty Mutual. In 1982, Burke noticed a collection of water in the rear portion of the garage and a crack that had developed in the garage floor. She also noticed the garage slanted toward the rear of house and was out of level. In October, 1987, Burke discovered the development of troughs in her living room floor. She contacted an engineer who conducted a survey and determined that the house was undergoing progressive damage due to earth settlement. Burke contacted her attorney who subsequently filed a claim with Liberty Mutual in January, 1988.

The policy contained the standard one year suit provision dating back to 1909: "No suit or action on this policy for the recovery of any claim shall be sustainable in any court of law or equity unless all the requirements of this policy shall have been complied with, and unless commenced within twelve months next after inception of the loss." See CAL.INS.CODE Sec. 2071 (West 1972).

The district court granted summary judgment to Liberty Mutual on the basis that Burke's action was not timely filed.

DISCUSSION

At the time of the district court decision, the most recent pronouncement of the appellate courts of California on the question of when the twelve month period commenced was Prudential-LMI v. Superior Court, 224 Cal. App. 3d 389, 260 Cal. Rptr. 85 (1989). The delayed discovery rule announced in that case was that the one year suit provision begins to run when damage to property is sufficient to put a reasonable person on notice of the possibility of property loss. The district court relied upon this statement of California law when it granted summary judgment to Liberty Mutual.

On November 1, 1990, the Supreme Court of California issued its opinion on review of Prudential-LMI at 51 Cal. 3d 674, 798 P.2d 1230, 274 Cal. Rptr. 387 (Cal.1990). The California Supreme Court rejected the trigger announced by the Court of Appeal and stated the delayed discovery rule as follows:

The insured's suit on the policy will be deemed timely if it is filed within one year after "inception of the loss," defined as that point in time when appreciable damage occurs and is or should be known to the insured, such that a reasonable insured would be aware that his notification duty under the policy has been triggered.

Id. at 1238.

As this court said in Plyler v. Wheaton Van Lines, 640 F.2d 1091, 1093 (9th Cir. 1981), " [w]e owe deference ... to state court decisions which alter existing law ... and we will follow appropriate precedent even if it is announced after the district court has ruled." (Citing Vandenbark v. Owens-Illinois Glass Co., 311 U.S. 538 (1941). It is appropriate, in cases such as this, to remand so that the district court may again address the case in light of the new state law decision. Premier Communications v. Fuentes, 880 F.2d 1096, 1103 (9th Cir. 1989).

Therefore, we vacate the judgment of the district court and remand for reconsideration in light of the decision of the Supreme Court of California in Prudential-LMI Commercial Ins. v. Superior Court, 51 Cal. 3d 674, 798 P.2d 1230, 274 Cal. Rptr. 387 (Cal.1990). In thus remanding, we do not intend to restrict the ability of the district court to consider other matters, such as whether or not the language in the 1980-83 policies was carried forward to the time of Burke's claim, if it chooses to do so.

VACATED and REMANDED.