Prudential-LMI Com. Insurance v. Superior Court

In Prudential-LMI Com. Insurance v. Superior Court (1990) 51 Cal. 3d 674, the Supreme Court concluded that the term "inception of the loss" should be "defined as that point in time when appreciable damage occurs and is or should be known to the insured, such that a reasonable insured would be aware that his notification duty under the policy has been triggered." (Prudential-LMI, supra, 51 Cal. 3d at p. 678.) In Prudential-LMI Com. Insurance v. Superior Court (1990), the Supreme Court considered how to define the phrase "inception of the loss" for purposes of triggering section 2071 when the physical event causing the loss occurs some time before any damage is discovered by the insured. (Prudential-LMI, at p. 684.) According to the court, "inception of the loss" is "that point in time when appreciable damage occurs and is or should be known to the insured, such that a reasonable insured would be aware that his notification duty under the policy has been triggered." (Id. at p. 687.) The court, therefore, held " 'inception of the loss' should be determined by reference to reasonable discovery of the loss and not necessarily turn on the occurrence of the physical event causing the loss." (Id. at p. 686.) "To take advantage of the benefits of a delayed discovery rule, however, the insured is required to be diligent in the face of discovered facts. The more substantial or unusual the nature of the damage discovered by the insured (e.g., the greater its deviation from what a reasonable person would consider normal wear and tear), the greater the insured's duty to notify his insurer of the loss promptly and diligently. " (Prudential-LMI, supra, 51 Cal. 3d at p. 687.) Although "the date of inception of the loss will, in many cases be an issue of fact for the jury to decide, when . . . the evidence supports only one conclusion, summary judgment may be appropriate." (Id. at p. 699; see also id. at p. 687.) In Prudential-LMI the court specifically held " 'inception of the loss' should be determined by reference to reasonable discovery of loss and not necessarily turn on the occurrence of the physical event causing the loss." (Prudential-LMI, supra, 51 Cal. 3d at p. 686, ) The court's opinion makes plain its definition of "inception of the loss" is based on the standard form language in section 2071, which is incorporated into all fire insurance policies: "California law supports the application of the following delayed discovery rule for purposes of the accrual of a cause of action under section 2071." (Prudential-LMI, at p. 686, ) The delayed discovery rule of Prudential-LMI, therefore, applies regardless of the nature or severity of the physical event causing the loss.