The concurrent cause rule basically holds that if two or moreevents cause a loss, with one being excluded under the policy termsand the other(s) being covered, the policy should provide coveragefor the loss.

As discussed in Davidson Hotel Co. v. St. Paul Fire and MarineInsurance Co., 136 F. Supp. 2d 901 (2001), this ruleallows for coverage “where the loss is essentially caused by aninsured peril with the contribution of an excluded peril merely aspart of a chain of events leading to the loss.” The thinking behindthis ruling and other concurrent causation cases is that the causeof loss that is not excluded caused damage to the insured'sproperty in one way or another, so the property coverage form mustpay for the loss.

As a modification of the concurrent cause rule, some courtsdeveloped the efficient proximate cause rule. Couch onInsurance states that this rule permits recovery for a losscaused by both a covered cause of loss and an excluded cause ofloss if the covered cause was the efficient proximate cause of theloss. That is, the covered cause set the other causes in motionthat, in an unbroken sequence, produced the result for whichrecovery is sought. (Note that courts have not reached a consensuson the precise definition of efficient proximate cause, althoughmost jurisdictions do require an analysis of the events todetermine the nearness or proximity of the cause to theeffect.)

Another modification of the rule is the independent concurrentcausation theory. This theory involved two separate and distinct,but concurrent causes of loss, one covered and one excluded. Insuch situations, only the damage from the covered cause of loss iscovered by the policy. For example, a flood washes over a buildingand at the same time, a fire breaks out in an upstairs room. Thedamage from the flood is excluded under a standard commercialproperty form, but the fire is a covered cause of loss. So, thedamage to the upstairs room is covered.

The anti-causation clause

Never one to sit idly by and let the courts handle any and alldisputes over concurrent causation, the insurance industrydeveloped its answer to the issue: The anti-concurrent causationclause.

This clause, found in standard property policies, acts as anattempt to keep excluded causes of loss excluded so that even iftwo causes of loss occur simultaneously, the loss because of theexcluded cause of loss is not covered, regardless of thecircumstances. Most anti-concurrent causation clauses readsimilarly to this: “We will not pay for loss or damage causeddirectly or indirectly by any of the following. Such loss or damageis excluded regardless of any other cause or event that contributesconcurrently or in any sequel to the loss.”

This means that when any of the listed causes of loss occur(such as earth movement, flood, governmental action, war), anydamage that results from the listed causes of loss is excluded,even if a covered cause of loss (such as fire or wind) occurs atthe same time or in sequence. The anti-concurrent causation clausethus allows the insurer to deny coverage for a loss and, in effect,circumvent concurrent causation judicial holdings.

The anti-concurrent causation clause has gained nationalattention most recently because of hurricane damage. Many claimswere initially denied because of the clause, surprising andangering insureds, and leading to quite a few lawsuits. An exampleof this is Leonard v. Nationwide Mutual Insurance Co.,499 F.3d 419 (5th Cir. 2007). In this case, the insured's home wasdamaged by hurricane winds and storm surge. The water claim wasdenied by the insurer using the anti-concurrent causation clause,and the insured sued claiming the clause was ambiguous.

When the case went to the appeals court, that court found thatthe anti-concurrent clause was not ambiguous, that the water damageexclusion excluded damage from storm surge, and that there was nocoverage for any loss caused by water or storm surge, even if winddamage occurred with the water damage (although any damage thatcould be shown to be caused solely by wind would be covered).

Another example is the case of Cameron Parish School Board v. RSUI IndemnityCo., 620 F. Supp. 2d 772 (2008). Here, the school boardsued the insurer pursuant to a commercial property all risk policyfor severe flood damage caused by Hurricane Rita. The insurerrelied on the anti-concurrent causation clause in the policy todeny coverage. When the coverage dispute went to trial, the trialcourt took note of the Leonard ruling and decided that theanti-concurrent causation clause was enforceable.

The court ruled that anti-concurrent causation clauses denycoverage whenever an excluded peril and a covered peril combine todamage property. The clause was not ambiguous, was not precludedfrom operation by case law, statutory law or public policy, andprecluded coverage for flood damage since the clause expresslyexcluded such damage.

So, the anti-concurrent causation clause has become an essentialpart of property policies, upheld by court rulings and not rendereduseless by state laws or public policy. It is true that somepolicies today have exceptions to the anti-concurrent causationclause; for example, the ISO causes of loss — special form declaresthat if an excluded loss such as earth movement or water or nuclearhazard results in fire, the insurer will pay for the loss or damagecaused by that fire. However, anti-concurrent causation clausescontinue to stand as a plausible alternative to the expansive scopeof the concurrent causation rule.

David D. Thamann, JD, CPCU, ARM, is managing editor forFC&S, a sister publication of PropertyCasualty360.com. Emailhim at [email protected].

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