On Feb. 19, 2005, during a season of hundred-year rains, plaintiffs Lars Roulund and Lisa Roulund, owners of a home atop an 80-foot slope on Morningside Drive in the Bluebird Canyon area of Laguna Beach, found that a large section of the slope beneath the left side of the Roulunds’ home failed. The Roulunds were previously aware of the home’s history of stability issues at the time of purchase in 2002 and knew that they would need to undertake repairs to stabilize the slope. They then purchased homeowner’s insurance with Pacific Specialty Insurance Co in 2003. During the rainy season in 2005, the slope beneath the left side of the Roulunds’ home failed. Emergency drilling contractors worked to stabilize the slope, but a few days after the initial slide, a second failure occurred beneath the right side of the home. Mr. Roulund subsequently reported the loss as a sewer backup to Pacific Specialty on Feb. 22, 2005. An independent appraiser hired by the insurance carrier inspected the property and did not find any damage to the interior of the home, and Mr. Roulund also reported that there was no damage to his home other than the dislodgement of a footing. As part of its investigation into the cause of the loss, Pacific Specialty accepted the Roulunds’ geotechnical engineer’s report, which identified the causes of the slope failure as being due to extremely heavy rainfall, a pipe break/sewer malfunction and undermining of the hillside caused by the original construction of the slope. As a result, the insurance carrier determined that all of the causes of loss identified by the Roulunds’ geotechnical engineer were excluded under the policy, and that the policy did not provide coverage for damage or repairs made to the land, including repairs made to stabilize the land underneath the dwelling. Following the denial of the claim, in December 2005, the Roulunds’ filed a lawsuit against Pacific Speciality for breach of contract and bad faith. The Roulunds’ next door neighbor, Frank Summers, was also initially named in the suit. The Roulunds claimed that Summers was negligent for the damage due to his failure to maintain the slope. Summers subsequently filed a cross-complaint against the plaintiffs for the same. However, Pacific Specialty, as the Roulunds’ insurer, represented them in the cross-complaint and settled the case prior to trial. In 2007, Pacific Specialty moved for summary judgment based on its coverage position. In opposition, the Roulunds’ asserted a new theory that hidden decay in a sewer pipe caused a portion of the home to collapse and thus, was covered under the “Additional Coverages — Collapse” portion of the insurance policy. However, the trial court rejected the new theory and granted Pacific Specialty’s motion for summary judgment in its entirety. The Roulunds then appealed, and the Court of Appeal reversed the decision, finding that the Roulunds’ submission of expert declarations created a triable issue of fact as to whether hidden decay in a sewer pipe was the efficient proximate cause of the loss. Thus, the matter was remanded back to the Superior Court for trial on this issue. After the remand, the Roulunds withdrew the experts that had submitted declarations in support of their opposition to Pacific Specialty’s motion for summary judgment and designated a slew of new experts. At trial, the Roulunds’ counsel contended the predominant cause of the loss was hidden decay in the sewer pipe, which caused a portion of the home and surrounding deck to collapse. Pacific Specialty claimed that extremely heavy rainfall was the predominant cause of the loss and questioned whether the sewer pipe was leaking prior to the landslide event. Defense counsel noted that the plaintiffs relied on photographs of the pipe as proof of its condition, but that plaintiffs’ counsel did not call the plumber who repaired the sewer pipe to testify to its condition., The Roulunds initially sought recovery of over a $1 million in damages for the repairs to the slope and house. This number, however, was significantly reduced after the trial court, in a bifurcated phase of the trial, determined that Pacific Specialty’s policy did not provide coverage for damage or repairs made to land, including repairs made to stabilize land underneath the dwelling. Prior to trial, the Roulunds also alleged from the incident. They claimed Pacific Specialty’s denial of their claim caused their marriage to fail and their house to be lost in foreclosure, as well as caused their business and personal income to suffer significant losses. In addition, they claimed they suffered various physical ailments that required medical treatment and hospitalization. Although advanced during the litigation, many of these claims were withdrawn at the time of trial and not pressed. At trial, the Roulunds advanced claims of general emotional distress; however, Mrs. Roulund’s claim was disposed of by way of Pacific Specialty’s motion for non-suit. Thus, the plaintiffs asked the jury to award $1 million in total damages, including $500,000 for Mr. Roulund’s emotional distress, approximately $150,000 for the repairs to their home, and $350,000 for attorney fees. The plaintiffs also sought recovery of punitive damages.