What’s Your Shoe Size? One Size Won’t Fit All Feet: Class Actions, Insurance, And Topography

Chris Wilkinson and his son, Kai, filled their truck with emergency supplies and radio equipment. They are members of the Montecito Emergency Response and Recovery Action Group known as MERRAG. It was January 8. KEYT had warned of heavy rainfall.

As a third-generation Montecitoan who has lived in the same Glen Oaks home since 1963, Chris knew that winter rains could trigger debris flows in the wake of the Thomas fire. He has hiked in the San Ysidro Mountains all his life and understood that Montecito’s picturesque topography of mountains, hills, streams, and creeks could feed destructive mudslides.

Even though the mandatory evacuation orders had focused on uphill residents close to the fire zone, Chris worried that his neighborhood – farther downslope and close to San Ysidro Creek – was more at risk.

Chris and Kai stayed up all night. The debris flow happened around 4 am, when the mud mixed with giant boulders, outlined by the orange and purple tint of a house fire burning in background, rolled into Glen Oaks. Instead of running away, Chris and Kai went into the street to check on neighbors, screaming their names into the air.

Chris knew which homes got wiped out, because he saw the same homes get hit by mudslides when he was a kid in 1969. In the following weeks, Chris used his knowledge of the local geography to guide the brave first responders who came from around the country. When emergency vehicles couldn’t get into Glen Oaks, Chris took them to a back entrance that only local residents could know and he helped them find trails that he knew like the back of his hands.

“We need to show them where to go. No one knows the property as well as the property owner,” Chris told me last week. He is my next-door neighbor. Neighbors have to take the lead and show the way.

Chris’s message resonated with me, especially as I watched throngs of outside legal experts descend, touting mass torts or class-action litigation as the legal panacea that could solve all our problems. It’s too early for this. Even most of us who still have homes aren’t yet back. We are still in shock over the loss of our neighbors’ lives and the destruction in our otherwise idyllic community.

As the heartbreak sinks in, it is important to soberly reflect on a proper strategy for you and your family and not be moved by impulse. Slow down and take a deep breath. Yes, our community will come together, but it will happen on its own initiative, not under pressure from outside forces.

In addition to landslide cases, I have prosecuted and defended around 50 class actions over the last 30 years. Class action may not be the solution Montecito needs. As the late justice Antonin Scalia said in the case of Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), the class action is “an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.”

To justify a departure from that rule, all class members must “possess the same interest and suffer the same injury.” This is the threshold “commonality” requirement that all class actions must meet before having to surmount too many additional obstacles to discuss here. In Dukes, the United States Supreme Court interpreted “commonality” to mean that the claims of each class member must rest upon a single common contention, the truth or falsity of which will drive a class-wide resolution of claims.

Can Montecitoans’ rights be lumped together into a pot of undifferentiated claims? Unlikely. Yes, we all live in Montecito, but the commonality probably stops there. California law presumes that real property is unique. Lewis v. Superior Court (1994) 30 Cal.App.4th 1850, 1876; California Civil Code section 3387. This is especially true in Montecito. We don’t live in tract homes or condominium units made from the same mold. The topography and geology of each Montecito home is different.

Each property is unique with regard to where it sits in relation to a complex web of hills, creeks, culverts, and roads. Your case will be different from that of your upstream, downstream, upslope, or downslope neighbor. This defeats what the courts call class certification. In fact, there is a serious potential for conflict of interest, since your attorney may need to point out differences in geography that are disadvantageous to your neighbor.

That’s not all. Each Montecito resident or business may have different combinations of claims for negligence, nuisance, trespass, inverse condemnation, construction defect, and dangerous condition of public property (that’s the term for government negligence). Some people have personal injury and wrongful death claims. Businesses also have lost income claims and residents (including me) have loss of use claims.

There is a diversity of defendants, such as government agencies, utility companies, insurance companies, construction companies, upstream property owners, and contractors. The claims and defendants form a matrix containing complex interactions and an explosive mix of conflicts of interest difficult to cram into a class action or other forms of collective litigation.

Collective litigation is designed for consumer cases, not real property cases. The residents of Montecito are nothing like the class of consumers who all bought a Volkswagen containing the same rigged diesel engine or consumers injured on a large scale by defective drugs or products made by a single manufacturer. 

Don’t worry about being left out if you don’t jump on the bandwagon. You don’t need to sign up with a lawyer to be part of a class action. If a court finds that a class meets the commonality and other requirements, then all people similarly situated are automatically included in the class. Even after a class is certified by a court, you will have the opportunity to “opt out” of the class to pursue your individual claims on your own.

My advice is to call your insurer first. There may be potential for coverage where, on first glance, your loss appears excluded. Standard homeowner’s insurance does not cover damage by a landslide or mudslide, which is considered “earth movement” and explicitly excluded from most policies. (Insurance for landslide liability claims is another story.) Mudflows, which are more liquid in nature than a mudslide, are typically not covered because they fall under the same provision that excludes floods.

However, under California law where a covered peril (fire) and an excluded peril (landslide, mudslide/flow) occur in a sequence of events to cause a loss, an insurance policy covers the loss if the covered danger was the “efficient proximate cause” of damage. In a case that dates back almost 30 years, the California Court of Appeals addressed the issue of efficient proximate cause where heavy rain on a slope, which was barren of vegetation because of a fire, caused a landslide that destroyed the policyholder’s property. Howell v. State Farm Fire & Casualty (1990) 218 Cal.App.3d 1446. The court determined it was for a jury to decide if the fire, and not the excluded peril of earth movement, was the efficient proximate cause of the loss.

Recently, the 9th Circuit Court of Appeals, citing Howell, reached a similar result. In Stankova v. Metropolitan Property & Casualty Insurance Co., 788 F.3d 1012 (9th Cir. 2015), the Stankovas sued their insurer, who had denied coverage after flooding and mudslides in the area destroyed their home one month after a wildfire destroyed the vegetation on a nearby hillside. The court relied on the evidence that mudslides had not occurred on the property before the wildfire despite heavy rains; that deforestation and erosion can lead to mudslides; and that the rainfall that led to the mudslide was not unusually heavy. The court let the case go to the jury.

Howell and Stankova, combined with the science of mudslides, can allow policyholders to find coverage under their insurance policy. Litigation might not be necessary – unless your insurer denies coverage. (Again, that’s another story.)

There is a time to heal and a time to litigate. Now is the time to heal. Take your time to carefully investigate your path to recovery, while being aware of the statutes of limitations. Before you decide to take your claims to court, understand that the wheels of justice move slowly, and in many cases you can count on at least a couple years of litigation. Please don’t sign up with the first lawyer who shows up at your house, because once you execute that engagement agreement, the lawyer owns a part of you;  the lawyer would have a lien on any recovery that you might get down the line, even if you fire him or her.

And be wary of one-size-fits-all solutions. Remember what Chris Wilkinson says: “Each hill is different. Each creek is different. Each house has its own geographic history.” Whether tackling disaster relief or litigation strategy, we should not take a sledgehammer approach from 30,000 feet up in the sky, treating Montecito residents as an undifferentiated mass. Your property is different from your neighbor’s property. It’s better to come back down to Earth and use a scalpel to repair your damages with precision and finesse. Your home deserves this – it’s simply too important and too valuable.

This is the second in a series of articles. You can read my first article on private property rights and inverse condemnation in last week’s issue of Montecito Journal. Next week: Insights into surface flow of water and mud.