Court Affirmed Insurer Denial of Homeowners Claim
A California appeals court upheld the decision to deny coverage for damages following a 2019 mudslide in Sherman Oaks.
Updated on Sept. 24, 2026 in Insurance
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The Second Appellate District affirmed a trial court decision on August 27, 2026, backing First American Property & Casualty Insurance Company in its denial of a claim for a damaged residence. The dispute stemmed from a December 2019 rainstorm that caused a mudslide in Sherman Oaks.
Why it matters
The case clarifies how insurers can apply exclusions for inadequate construction when building projects are left incomplete. The ruling underscores the contractual weight of policy language regarding earth movement and water damage.
The dispute involved a retaining wall with a 15-foot gap, contributing to property damage estimated at $386,000. The court relied on dictionary definitions of inadequate to determine that the incomplete structure functioned as an excluded peril.
The players
First American Property & Casualty Insurance Company
This is a private insurance provider that successfully argued for the exclusion of coverage based on policy terms.
Second Appellate District
This is a California state court that reviewed the lower court ruling and affirmed the insurer's denial.
The details
During a December 2019 rainstorm, water channeled along an unfinished section of a retaining wall and triggered a mudslide that rendered a neighboring Sherman Oaks home uninhabitable. The insurer cited earth movement, water, third-party negligence, and inadequate construction as grounds for the July 2020 claim denial.
Timeline
2019: A construction company built a residence and retaining wall.
December 2019: A rainstorm triggered a mudslide into a neighboring property.
July 2020: First American Property & Casualty Insurance Company denied the claim.
August 27, 2026: An appellate court filed an opinion affirming the denial.
September 23, 2026: The court certified the opinion for publication.
Market Dynamics
This ruling follows the established pattern of how California courts interpret insurance policy exclusions during litigation. It highlights the long-term trend of strict judicial adherence to contractual language in residential property insurance disputes.
Homeowners should be aware that insurance policies often exclude damage linked to incomplete or inadequate construction work. This decision reinforces the importance of verifying that all home improvements are completed to code to maintain full coverage.
The takeaway
Property owners should ensure that all construction projects are fully completed to avoid potential gaps in insurance protection. Reviewing specific policy definitions for excluded perils can help prevent surprises when filing claims for property damage.
Further reading
Learn more about coverage standards in the Los Angeles Insurance section.
Source note: This article includes information reported by Insurance Business.
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