Liability in Negligence Cases Widened : Litigation: The state’s highest court rules that insurers must pay up when government officials or others are liable in natural disasters.

In a rare defeat for insurers, the California Supreme Court ruled Monday that homeowners who suffer damages in landslides or other events excluded from their policies can still collect insurance claims based on negligence by government officials, developers or others.

The justices unanimously overturned a 1990 state Court of Appeal decision rejecting a claim by a resident of Big Rock Mesa in Malibu who cited negligence by the state and Los Angeles County, among others, as the cause of damages to his home in a 1983 landslide.

Although more than 200 other residents of the area have already reached settlements, insurance industry attorneys said the ruling could have a wide effect, inviting more such suits and in turn raising the possibility of higher premiums for homeowner property insurance.

“Practically everyone in California faces the risk of some kind of earthslide damage,” said Pamela E. Dunn, attorney for the Alliance of American Insurers. “This decision could have far-reaching impact.”

In the case before the court, Eric Von Der Lieth brought suit against State Farm Fire & Casualty Co., seeking payment of a $231,000 claim for damage from the landslide. Von Der Lieth’s “all-risk” policy excluded coverage for “earth movement” but did not specifically bar claims for negligence.

Von Der Lieth cited as causes of the slide the state’s removal of part of a nearby mountain slope in 1933 to construct the Pacific Coast Highway, a developer’s failure to protect against landslides and the county’s approval of the project and failure to protect against rising ground water.

A Los Angeles County Superior Court jury held that such negligence was the cause of the landslide and said State Farm was liable for the damage to Von Der Lieth’s home. The appeal panel reversed, saying the cause was earth movement--an excluded risk under the homeowner’s policy. Even if there were negligence, the panel said, that claim was barred because it was “too remote” a cause to be covered in the policy.

The high court, in an opinion by Chief Justice Malcolm M. Lucas, concluded that the jury could properly find negligence as the predominant cause of the landslide. “If third-party negligence is not excluded under such a policy, it is a covered peril,” Lucas wrote.

Kenneth R. Chiate Jr., an attorney for Von Der Lieth, praised the ruling, acknowledging that insurers usually have been on the winning side before the Lucas court. “This restores my belief that the Supreme Court, notwithstanding its conservative bent, still can do justice,” Chiate said.

Ellis J. Horvitz, attorney for State Farm, said the industry faced several options in the wake of the ruling--one of which would be to see whether additional risks implicated under the decision required an increase in premiums.