Washington Rejects Insurers’ Clever Attempts to Draft Around the Efficient Proximate Cause Rule

The Washington Supreme Court recently issued a new decision that restricts insurance companies with regard to their longstanding attempts to exclude pollution-related losses and draft around Washington’s “efficient proximate cause” rule.

Xia v. Probuilders Specialty Ins. Co., et al.

In Xia v. Probuilders Specialty Ins. Co., et al., plaintiff Xia became sick from carbon monoxide exposure almost immediately after purchasing a new home in the Issaquah Highlands.  A service technician from Puget Sound Energy inspected the home and determined that an exhaust vent attached to the hot water heater in Xia’s home was improperly installed, causing carbon monoxide to discharge directly into the basement.

Xia sued the builder alleging the improper installation of the exhaust vent was negligent, but the builder’s insurer denied any duty to defend the builder based on the Absolute Pollution Exclusion in the builder’s insurance policy.  Xia and the builder entered into a settlement agreement stipulating to damages of $2 million and the builder assigned to Xia all of its rights, privileges, claims, and causes of action against the insurer for its failure to defend.  Xia filed suit against the insurer alleging breach of contract, bad faith, and violations of the Consumer Protection Act and Insurance Fair Conduct Act, as well as a declaratory judgment regarding insurance coverage.

The insurer relied on the broad language of the Absolute Pollution exclusion, which applied to bodily injury caused by, resulting, from, or attributable to the release, escape, or exposure to pollutants, regardless of the cause of the pollution.  Further, the exclusion stated it applied regardless of the cause of pollution, whether any other cause of the injury acted in any sequence with the pollution, and whether the injury would otherwise be covered by the insurance policy.

The last part of the exclusion – which stated the exclusion would apply regardless of whether the injury would otherwise be covered by the insurance policy – directly conflicts with Washington’s “efficient proximate cause” rule under these facts.  The efficient proximate cause rule mandates coverage for a loss when two or more perils combine in sequence to cause a loss and a covered peril is the predominant or efficient cause of the loss.  In other words, coverage exists where a covered peril, such as contractor negligence, sets into motion a chain of events including otherwise excluded perils, such as pollution.


In Xia, it was clear from the face of the complaint that the contractor’s negligence in improperly installing the exhaust vent caused a normally nonpolluting appliance to discharge toxic levels of carbon monoxide fumes.  Thus, negligence, not pollution, was the first event in the causal chain and the efficient proximate cause of the loss.  The Court boldly explained that it has “repeatedly rejected attempts by insurers to draft language into the exclusion that expressly circumvents the [efficient proximate cause] rule” and reiterated that “the exclusion cannot eviscerate a covered occurrence merely because an uncovered peril appeared later in the causal chain.”

Although the Court agreed that the carbon monoxide was a pollutant and the insurer correctly applied the language of its pollution exclusion, it held the insurer breached its duty to defend in bad faith by ignoring the alleged negligence that was clearly the efficient proximate cause of the resulting loss.

Message to Insurers

This is a significant decision in Washington insurance law because it sends a clear message to insurers: consumers cannot be denied coverage for losses they pay valuable premiums to insure against.  The efficient proximate cause rule is a product of public policy designed to protect insureds, and it is only getting stronger.

If you or your business have questions about the topics discussed in this post, or general questions about your insurance protections, please contact Michelle Kierce or any of the qualified insurance coverage attorneys at MPBA.