The Efficient Proximate Cause Doctrine Saves a Claim

By Barry Zalma on April 30, 2026

When Abalone Died As a Result of Multiple Causes The Efficient Proximate Cause Requires Payment

Post number 5345

See the video at https://rumble.com/v797ca4-the-efficient-proximate-cause-doctrine-saves-a-claim.html and at https://youtu.be/hVI0Pu-KQqc

In American Abalone Farms, LLC v. Star Insurance Company et al., H052643, California Court of Appeals, Sixth District (April 27, 2026) the Court of Appeals dealt with an insurance coverage issue that required application of the efficient proximate cause doctrine.

FACTS

American Abalone Farms, LLC (“American Abalone”) operates an aquaculture farm in Santa Cruz County, California, raising abalone in tanks. In August 2020, the CZU Lightning Complex Fires led to a prolonged power outage and road closures near the farm. As a result, the farm’s water pumps failed, causing the death of most of the abalone stock.

American Abalone sought compensation for this loss under its agricultural business insurance policy with Star Insurance Company (“Star Insurance”), which was issued in November 2019 and covered various categories of property, including livestock (the abalone).

The schedule for this coverage lists “stock,” which Star Insurance acknowledges to be the abalone, with a limit of $1,000,000. In addition, the farm products coverage defines the term loss to mean “death or destruction” of livestock and other animals caused by a covered cause of loss.

EXCLUSIONS

Star Insurance is generally not responsible for losses caused by the failure of power or other utility service unless that failure caused a covered peril.

LAW

The dispute centers on the interpretation of the insurance policy, specifically the coverage for “direct physical loss to Covered Property” caused by a “Covered Cause of Loss,” and the applicability of policy exclusions. The case also implicates the “efficient proximate cause” doctrine, which determines coverage based on the most significant cause of loss.

ANALYSIS AND DISCUSSION

American Abalone sued Star Insurance and its parent, AmeriTrust Group, Inc., claiming breach of contract, bad faith, and other related claims.

The appellate court agreed with American Abalone, finding that there were indeed triable issues of fact concerning both policy coverage and the enforceability of the exclusion claimed by Star Insurance.

American Abalone raised a persuasive objection to the trial court’s summary judgment ruling.

Is undisputed that there was physical loss or damage. American Abalone’s first separate statement, Star Insurance admitted that it was “[u]ndisputed that the abalone died because the roads and the power was turned off” during the fires.

The abalone that died were “Covered Property.”

The abalone deaths were caused by a covered peril. American Abalone’s stock was subject to “basic” causes of loss, which applies to specific perils. The first of these perils is “Fire or Lightning.” Star Insurance admitted in response to American Abalone’s second separate statement that this peril includes wildfires such as the CZU Lightning Complex Fires. Star Insurance likewise acknowledged that American Abalone’s stock died as a result of the electrical outages caused by the fires and thus were a result of the fire.

Star Insurance does not dispute that the abalone are a covered product, that fire is a covered peril, or that the abalone deaths were caused by the CZU Lightning Complex Fires.

The efficient proximate cause doctrine, which is incorporated into the Insurance Code, deals with losses caused by multiple risks or perils, at least one of which is covered by insurance and one of which is not. Although a loss was immediately caused by another event, it was indirectly caused by fire, which was a covered peril under the relevant insurance policy. In addition, while the rainfalls in Howell presumably would have occurred whether or not there was a prior fire, the shutoff and the road closure here occurred only because of the CZU Lightning Complex Fires. The CZU Lightning Complex Fires were even more clearly the efficient proximate cause in this case.

CONCLUSION

The Court of Appeal reversed the trial court’s summary judgment. The case was remanded with instructions to reinstate American Abalone’s claims against Star Insurance for breach of contract and declaratory relief, allowing the case to proceed on the merits regarding coverage and the applicability of policy exclusions.

ZALMA OPINION

The efficient cause doctrine is necessary to help avoid confusion or lack of payment of an honest claim where there are multiple causes of loss. The Abalone were killed by multiple acts some of which were excluded and some, like fire, were not. The Court found a covered cause of loss, fire, to be the efficient proximate cause of the loss and gave the insured the right to collect on its policy for the loss of its “stock” the Abalone that died when the fire stopped the power to the facility and the wildfire closed the road to the farm so nothing could be done to protect the Abalone.

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