Court Upheld Insurance Claim Denial for Mudslide Damage
A California appellate court ruled an insurer correctly denied coverage for mudslide damage caused by inadequate wall construction.
Updated on Sept. 24, 2026 in Insurance
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The Second Appellate District affirmed a 2020 decision by First American Property & Casualty Insurance Company to deny a homeowner claim for mudslide damage. The ruling impacts how residents in Los Angeles evaluate potential coverage gaps related to construction defects.
Why it matters
The decision clarifies that insurers can deny claims when damage is linked to construction deemed inadequate, even if a formal city order was never issued. This highlights the importance for homeowners to verify that all residential structural projects, such as retaining walls, meet professional standards to avoid coverage exclusions.
An appellate court upheld the denial of a $386,000 damage claim resulting from a 2019 mudslide. The decision specifically focused on 15 feet of wall that remained unfinished at the time of the storm.
The players
First American Property & Casualty Insurance Company
An insurance provider that manages residential coverage and evaluates property damage claims based on policy exclusions.
Second Appellate District
The California court responsible for reviewing lower court rulings and setting precedents for insurance contract interpretations.
The details
The dispute involved a retaining wall in Sherman Oaks that was left with 15-foot gaps during construction, which allowed water to channel and pour into a neighboring property during a December 2019 rainstorm. First American Property & Casualty Insurance Company denied the resulting claim, citing excluded perils such as earth movement and inadequate construction. The court ruled that the incomplete wall section functioned improperly by definition, upholding the insurer's right to exclude the damage from the policy.
Timeline
Construction on the residence and retaining wall occurred in 2019.
A heavy rainstorm caused a mudslide in December 2019.
First American formally denied the insurance claim in July 2020.
The appellate court filed its opinion on August 27, 2026.
The court certified the opinion for publication on September 23, 2026.
Money Landscape
This decision fits within the ongoing cycle of California insurers tightening standards for residential risk coverage. It reinforces a long-standing legal trend that favors specific policy language exclusions for construction-related property damage.
Review your homeowners policy for specific exclusions regarding earth movement and workmanship quality. If you are planning home improvements, consult a professional to ensure all work meets local standards and ask your insurance representative if your current policy covers potential construction-related accidents.
The takeaway
This case illustrates that insurers may successfully deny claims when structural improvements are incomplete or fail to meet building standards. Speak with a qualified legal or insurance professional to understand how specific construction exclusions in your policy might affect your financial liability.
Further reading
Learn more about navigating Insurance coverage and policy disputes for homeowners.
Source note: This article includes information reported by Insurance Business.
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