The US Court of Appeals for the Fourth Circuit has ruled that damage caused by a watermain break that was concurrent with a flood is subject to a flood sublimit under an "anti-concurrent" causation clause in the property policy. The case is David S. Brown Enterprises. V. Affiliated FM. Ins. Co., No. 21-1051, 2022 U.S. App. LEXIS 439 (4th Cir. Jan. 6, 2022).
On July 30, 2016, Ellicott City, Maryland, experienced a "1,000-year rainfall," receiving four-and-a-half inches of rain in one hour, and more than six-and-a-half inches throughout the duration of the storm. The downpour caused rivers to flood and their contents to spill into the city. At that same time, an underground watermain downtown ruptured, spraying water skyward and adding to the overall water level.
Two buildings suffered damages from the water, as a result. David S. Brown Enterprises (DBS) sought coverage from Affiliated FM Insurance Co., which said the business was only entitled to $50,000 in coverage under its policy's flood sublimit.
DBS filed suit, arguing that the sublimit was not applicable, and it was entitled to $2 million in coverage, $1 million for each damaged building. The U.S. District Court ruled in favor of the insurer. This ruling was affirmed by a three-judge appeals court panel, which cited the coverage's anti-concurrent causation clause, which it said is common throughout the industry, and clarifies "an insurer's obligation when multiple causes (e.g., both floodwaters and high winds) contribute to the damage underlying a claim."
Damage caused by a watermain break that was concurrent with a flood is subject to a flood sublimit under an "anti-concurrent causation" clause in the property policy, said a federal appeals court Thursday, ruling in an insurer's favor in a coverage dispute.
"We find the analysis of the anti-concurrent causation clause In New York University persuasive," the Fourth Circuit said. "DSB alleges that a broken watermain damaged the Main Street properties, just as NYU claimed that faulty workmanship damaged its facilities. But the Policy contains an anti-concurrent causation clause. . . ."
"Because it happened concurrently with a flood, whatever water damage the water main break caused is flood damage for purposes of the Policy flood sublimit," the ruling said, in ruling the "plain language of the Policy caps DSB's recovery" and affirming the decision of the lower court.
Editor's Note: In this case, two causes appeared to have contributed to the one event, the foundations of the two buildings washing away. They amounted to one occurrence. The ruling cited the March 2019 ruling by the U.S. District Court in New York in New York University v. Factory Mutual Insurance Co., which held that a $40 million flood sublimit was applicable to damage caused by 2012's Superstorm Sandy.