Winslow E. Winans Eleanor C. Winans v. State Farm Fire and Casualty Company

When Winslow and Eleanor Winans found cracks and separations in the walls and ceiling of their house, they made a claim under their homeowners policy with State Farm Fire and Casualty Company. State Farm declined coverage on the ground that the contractor’s negligence in failing to remove loose soil from beneath the house during construction was only discovered by an expert after the damage had been caused, and was therefore a latent defect subject to the policy’s latent defect exclusion.

In a published opinion, the district court denied State Farm’s motion for summary judgment on the Winanses’ claims for breach of contract and bad faith. Winans v. State Farm Fire & Casualty Co., 743 F.Supp. 733 (S.D.Cal.1990). The district court distinguished Tzung v. State Farm Fire & Casualty Co., 873 F.2d 1338, 1342 (9th Cir.1989), where we said in an alternative holding that a latent defect is one that is not “readily discoverable” at the time the parties entered into the policy, on the footing that State Farm’s experts discovered the possibility of negligence by the contractor who built the Winanses’ house “after only a preliminary investigation.” Winans, 743 F.Supp. at 738 . The district…