Under the "efficient proximate cause" rule, if the initial event causing a loss is a covered peril, an insurance policy must provide coverage even if a subsequent event in the chain, which also may have caused the loss, is excluded under the policy. In Washington, courts had only applied the efficient proximate cause rule in the first-party property context.
On April 27, 2017, however, the Washington Supreme Court issued an opinion holding that the efficient proximate cause rule applies equally in the third-party liability context. The court’s ruling drastically narrows the applicability of the pollution exclusion. The court further held that the insurance company acted in bad faith by failing to consider the efficient proximate cause rule when it denied coverage based on the pollution exclusion. The case is Xia v. ProBuilders Specialty Insurance Co. RRG, 188 Wn. 2d 171 (2017).