Operation of the concurrent causation doctrine

An important issue

Amended policy provisions

Some ensuing losses covered

Concurrent causation and the ordinance or law exclusion

Which applies, concurrent causation or efficient proximate cause?

State Codification of Efficient Proximate Cause

Exclusionary language upheld

Concurrent causation and liability

What is Concurrent Causation and Efficient Proximate Cause?

Concurrent Causation and Efficient Proximate Cause are two separate doctrines that describe how coverage should be applied or not, depending on the perils involved in the loss. Efficient proximate cause states that when there are two causes of loss to an event, one excluded and one covered, if the proximate cause of the loss is the covered cause, then the loss will be covered. The efficient proximate cause must be the one that sets others in motion.

Concurrent causation is when two perils contribute concurrently to a property loss, one excluded and the other not; the effect of the exclusion tends to be voided in a policy covering on an open perils basis. For example, if a loss is determined to be caused jointly by flooding and faulty construction, and flooding is excluded while faulty construction is not specifically excluded, then the loss would be covered. Using the same example, but under the doctrine of efficient proximate cause, there would only be coverage if the nonexcluded peril–faulty construction–was determined to be the proximate cause of the loss.

Operation of the Concurrent Causation Doctrine

Concurrent causation is a legal doctrine developed primarily in California case law that affords coverage for a loss caused by two or more events, even when one of the causes is due to a common property policy exclusion, like earthquake or flooding.

An example of concurrent causation is when earth movement causes damage to an insured structure (a cause of loss that is typically excluded under a property policy), but the insured claims that the cause of loss was actually the result of a third party's negligence in bulldozing a slope above the dwelling, which is a nonexcluded peril and would thus be a covered peril under an open perils policy.

Several court cases illustrate the operation of the concurrent causation doctrine. One of the most well-known is Safeco Insurance Co. v. Guyton, 692 F.2d 551 (C.A. Cal. 1982). In this case, the homeowners policy excluded coverage for flood damage, but the homeowner claimed damage was caused by third-party negligence in maintaining flood control structures. The policy was an all risks policy, and third-party negligence was determined to be an insured peril. The court held that coverage is available since the insured peril was a concurrent proximate cause of the damage.

In Premier Ins. Co. v. Welch, 189 Cal. Rptr. 657 (Cal. App. 1983), the earth movement exclusion of an all risks homeowners policy did not serve to exclude landslide damage to the insured's house because faulty installation of a sewer line by a third party was held to be a covered, concurrent cause of loss. The faulty installation of the sewer caused damage to a subdrain designed to release subsurface waters. The court held that the proximate cause of the loss was damage to a drain, which set in motion the chain of events leading to damage to the dwelling.

Note that the prior cases have been overruled in part in subsequent cases, which will be discussed in the following section. Also note that since the time of these two cases, the homeowners policy language no longer promises to "insure against all risks of physical loss to the property described in Coverages A and B", found in ISO HO-3, 7-77 ed. The current insuring agreement found in special form HO 00 03 03 22 is "We insure against direct physical loss to property described in Coverages A and B. We do not insure, however, for loss…" and then goes on to list a series of exclusions.

An argument frequently used for coverage under the earlier forms was that by promising to insure against all risks, the policyholder was lulled into thinking that all and everything was covered, policy exclusions notwithstanding. The phrase “all risks” is now outdated in the industry and has been phased out in favor of “open perils”, which should reduce confusion among policyholders.

The Premier case was disapproved in 1986 by the same court in Garvey v. State. Farm Fire and Cas. Co., 201 Cal. App. 3d 1174 (1986). In the Premier case, the court held that there should be coverage because the damaged subdrain was a concurrent proximate cause of the loss.

However, in Garvey v. State Farm Fire and Cas. Co, the court reversed that ruling and stated that coverage should have only been awarded if the covered risk was independent of the excluded risk. The damaged subdrain was not independent of the excluded risk, but was dependent on the rainfall and resulting subsurface water for the loss to occur. The stipulated facts in the Garvey case established that the slide that damaged the dwelling would not have occurred even despite the rainfall if the drain had not been damaged.

The court determined they had erred in their previous decision and reversed the ruling. The case was later superseded in 1989 by the California Supreme Court, whose decision is discussed in the next section.

An Important Issue 

An important issue posed by the concurrent causation doctrine is whether any contribution by a nonexcluded peril would cause a loss to be covered, or whether the nonexcluded cause of loss must be the primary factor leading to the loss.

In 1989, the California Supreme Court settled this question for the state in Garvey v. State Farm Fire & Casualty Co., 770 P.2d 704. In Garvey, the court held that California appellate courts had been misinterpreting the cases that first used the doctrine of concurrent causation.

The court said that in the case of an open perils policy, if a loss can be attributed to two causes, one of which is an excluded peril and one a nonexcluded peril, courts are to find coverage only if the nonexcluded peril is the efficient proximate cause of the loss, rather than when a nonexcluded peril is only concurrently involved in the loss. The efficient proximate cause of a loss does not need to be the one directly prior to the loss, but must be the action that, without which, the loss would probably not have occurred.

In Garvey, the homeowners sought coverage when their house addition began to pull away from the main dwelling. The question was whether a covered cause of loss—negligent construction—or whether the excluded cause of loss—earth movement—was the efficient proximate cause. If earth movement was the efficient proximate cause, then coverage would be denied, but if negligence was the efficient proximate cause, then there should be coverage. The court concluded that the question of causation is for a jury to decide and sent the case back to the trial court to resolve the question.

The events leading to the claim took place in 1977 and 1978, so the policies involved did not include the post-1983 lead-in language to the exclusions section that can be found today, which eliminates coverage for concurrent causation-type losses. More on the lead-in language will be discussed later.

In Howell v. State Farm Fire and Casualty Co., 267 Cal. Rptr. 708 (Cal. App. 1990), a California court of appeals adhered to the Garvey decision, even though the policy involved the post-1983 exclusionary language, and still applied the efficient proximate cause doctrine.

The property owner sought coverage under an all risk policy when a landslide damaged her home. She presented expert testimony that a fire, a covered cause of loss, had destroyed vegetation and denuded a slope above her home, causing it to cave after heavy rains and damage the property.

Even though there was exclusionary language in the contract, the court decided that an insurer cannot exclude coverage when an insured peril is the efficient proximate cause of a loss. They ruled that an insurer cannot contractually limit its liability in that manner under California law, and thus, the exclusions were not enforceable. The court remanded the case to a trial court for further proceedings consistent with the ruling.

A more recent case following the concurrent causation doctrine is Davidson Hotel Co. v. St. Paul Fire and Marine Ins. Co., 136 F.Supp.2d 901 (W.D. Tenn. 2001). The loss occurred when water leaked from a rusted water heater and caused an electrical disturbance that triggered the sprinkler system, causing extensive water damage. The insurer denied coverage, citing several exclusions: rust or corrosion, electrical disturbance, and water.

The court determined that Tennessee law followed the concurrent causation doctrine, meaning there should be coverage when the loss is predominantly caused by a nonexcluded peril, even if an excluded cause may have contributed to the loss or been part of a chain of events leading to the loss. The court found that the dripping water was a nonexcluded cause of loss, and since it was the proximate cause of the loss, it did not matter that the other excluded perils contributed to the loss. Summary judgment was granted to the insured.

Other states have had their own decisions on the efficient proximate cause rule. Utah's Supreme Court, in Alf v. State Farm Fire and Casualty Ins. Co., 850 P.2d 1272 (Utah 1993), stated that the efficient proximate cause rule should be followed, but only when the parties have not chosen freely to contract out of it (which modern insurance policy language generally does).

The Utah Supreme Court cited a Colorado Supreme Court decision, where the court held that the efficient proximate cause rule must yield to a well-settled principle of law: that courts will not rewrite a contract for the parties. They added that the Wyoming Supreme Court also supported the principle that a court should not seek a strained or unnatural interpretation of an insurance contract to find coverage for an insured.

Amended Policy Provisions

Concurrent causation disputes most often involve open perils forms, where the insured could argue that events such as negligence of a third party or faulty construction were insured perils because they were not specifically excluded. To combat this, ISO, in 1983, made revisions to the causes of loss forms, which were intended to avoid payment under the concurrent causation doctrine.

As mentioned earlier, one of the revisions was deleting any reference in the causes of loss forms that provided coverage for “all risks”. The term has been phased out of the insurance industry, and the deletion of it in policies has aided in avoiding confusion among insureds and not creating the expectation that the policy would cover all losses, even those that are specifically excluded. “Open perils” policies operate exactly as all-risks policies did, but without the potential confusion.

Another revision was the introductory language that was added to the Exclusions section in homeowner policies, which is more clearly aimed at avoiding liability for concurrent causation type losses. The language states that the listed losses are excluded “regardless of any other cause or event contributing concurrently or in any sequence to the loss.” The language is identical to what can be found on the most recent (2022) ISO homeowners forms and the basic, broad, and special causes of loss forms of the ISO commercial property program.

The excluded causes of loss listed under this section and affected by this language are: ordinance or law; earth movement; water; power failure; neglect; war; nuclear hazard; intentional loss; and governmental action. For these exclusions, coverage is not provided, no matter what other cause of loss may precede and bring about these excluded causes.

As an example, an insured building and retaining wall may be partially destroyed by a fire. An hour later, the earth behind the retaining wall slides down the hill and destroys the building. Although fire is a covered peril and the proximate cause of the loss, the ensuing damage caused by the earth movement is not covered if the concurrent causation lead-in language is read literally.

A major exception to the exclusion is if earth movement or water results in direct loss by fire, explosion, or theft; those losses are covered.

Some Ensuing Losses Covered

The 1984 homeowners forms added a second group of exclusions to the section I exclusions, but this group allowed for coverage for ensuing loss. The prefacing language stated, "We do not insure for loss to property described in Coverages A and B caused by any of the following. However, any ensuing loss to property described in Coverages A and B not excluded or excepted in the policy is covered. This group excludes coverage for loss caused by weather conditions (but only if the weather conditions contribute to one of the excluded causes of loss, such as earth movement), acts or decisions, and faulty, inadequate, or defective planning, construction, maintenance, and so forth. But if a loss not otherwise excluded results from one of these, that ensuing loss is covered.”

The 2022 homeowner program forms have nearly identical language. Under this group of exclusions, if a chimney cleaner inadequately cleaned the chimney and a fire ensued, the resulting fire loss would be covered. The faulty and inadequate workmanship of the chimney cleaner would not be covered. However, if the negligent act of an individual resulted in a flood, there would be no coverage. The lead-in language in this section only covers ensuing loss not precluded by any other provision on the policy. Fire is a covered peril, but flood is not.

The exclusions for losses caused by acts or decisions, including failure to act, by any person or group, as well as those caused by faulty, inadequate, or defective planning, design, materials, or maintenance, have precluded coverage for certain claims. Claims involving an excluded peril that might once have succeeded under the theory that third-party negligence was a concurrent covered peril have been successfully denied due to the addition of these new exclusions

In Fu-Kong Tzung v. State Farm Fire and Casualty Co., 873 F.2d 1338 (9th Cal. 1989), the insured's apartment building cracked and settled due to negligence in the building’s design and construction. A federal court of appeals held that the provisions for faulty workmanship and inherent defects specifically and unambiguously excluded losses caused by third-party negligence.

The policy specifically excluded inherent or latent defects and faulty materials or workmanship. Had those exclusions not been included, coverage may have been afforded under the idea that they were a concurrent covered peril.

Concurrent Causation and the Ordinance or Law Exclusion

The ordinance or law exclusion pertaining to concurrent causation has been the topic of a few court cases. Although the losses involved differ, the basic principle behind the cases is similar. In each case, a covered peril caused extensive damage to the insured structures, which were then ordered to be demolished by city officials. The insurers attempted to deny coverage based on the ordinance and law exclusion and the exclusionary lead-in language eliminating coverage where an excluded peril is involved concurrently or in any sequence in the loss. However, in the following cases, the courts found the exclusion inapplicable.

In Digravina v. Merchants Mutual Ins. Co., 1991 WL 90737 (S.D. N.Y. May 23, 1991), a heavy rain and windstorm caused a portion of the insured building's roof to collapse. An engineer's report stated that the collapse of the roof was imminent and that the building should be condemned. The report further stated that if the roof were to collapse, there was a real danger that the masonry sidewalls could explode outward with great force. The report said that it did not appear to be economically feasible to attempt to repair the roof and walls of the building, and that the building should be razed. The town notified the insured that the building was an unsafe structure and ordered the demolition of the building.

The insurance policy contained the standard ISO anticoncurrent causation exclusionary lead-in language, excluding loss caused by certain perils (including loss caused by enforcement of any ordinance or law), regardless of any other cause contributing concurrently or in any sequence to the loss.

The insured made a claim for the entire $430,000 cost of replacement of the structure. The insurance company moved for a summary judgment limiting its payment to $94,000, representing the cash value of the repair or replacement of that portion of the building roof damaged by the partial collapse. The insureds argued that the damage caused by the storm was so significant that the only practical course of action was to raze the entire structure.

The court awarded the entire $430,000 to the insureds. The court held that it was the storm, and not the town's subsequent action, that caused the constructive total loss of the building and the need for demolition. An independent engineer concluded that the building must be razed before the town even issued its demolition order.

The court stated that the insurer could only defend the enforcement of the exclusion if the loss was occasioned by the excluded cause. They determined that it was the storm damage, not the condemnation and the demolition order, that caused the constructive total loss of the building. They reasoned that even without the town ordinance or regulation, the building was still unsafe and would have been a total loss. In this ruling, the court essentially followed the efficient proximate cause doctrine and denied the exclusionary lead-in language of the policy.

In another case dealing with this topic, Norfolk & Dedham Mutual Fire Ins. Co. v. DeMarta, 799 F. Supp. 33 (E.D. Penn. 1993), the court came to a similar conclusion. The insured's claim for loss of their house when it was demolished by the city was covered by a homeowners policy because the loss was determined to be caused by collapse due to hidden decay, which was a covered peril.

The city’s building inspector stated that the decay and deterioration of the foundation caused the collapse. The court stated the defendant’s policy unambiguously covered losses due to hidden decay. The court determined that the ordinance or law exclusion was inapplicable because the city’s demolition of the house did not cause the loss and did not contribute to it–the house was demolished only after it had partially collapsed.

Though these cases may have found coverage where exclusionary language was included, that is not always the case, and many times the exclusionary language is upheld. More on that will be discussed later.

Which Applies, Concurrent Causation or Efficient Proximate Cause?

There is often confusion over the doctrine of concurrent causation and the doctrine of efficient proximate cause, and they are often thought to be interchangeable theories of recovery. While they are not the same, they can sometimes entwine within the same loss.

The efficient proximate cause rule allows recovery for a loss caused by a combination of a covered and an excluded risk only if the covered risk was the efficient proximate cause of the loss. So if the covered risk set the other causes in motion, which in an unbroken sequence produced the damage for which recovery is sought, that would be covered under an efficient proximate cause doctrine.

The concurrent causation rule, on the other hand, takes the approach that coverage should be allowed whenever two or more causes contribute to the loss, and at least one of the causes is an included risk under the policy.

Florida is one jurisdiction that adheres to the concurrent cause doctrine. In Paulucci v. Liberty Mutual Fire Ins. Co., 190 F.Supp.2d 1312 (M.D. Fla. 2002) the roof of the insured's two-story structure, which he used for storage, collapsed during a tropical storm. The insured claimed the weight of water on the roof of the 1920s building caused it to collapse, while the insurer argued that the building was so deteriorated that wet and dry rot caused the collapse.

The court said the concurrent causation doctrine and the efficient proximate cause doctrine are not mutually exclusive, but rather that the concurrent causation doctrine applies when multiple causes are independent, and the efficient proximate cause doctrine applies when the perils are dependent. The court continued that it was not persuaded or bound by the California Supreme Court's reasoning in Garvey, and that they found the concurrent causation doctrine is the prevailing standard in Florida. This collapse part of the loss was remanded for jury action to determine its cause.

On the other hand, Oklahoma follows the efficient proximate cause doctrine. In Kelly v. Farmers Insurance Co., 281 F.Supp.2d 1290 (W.D. Okla. 2003), the court applied the doctrine to find coverage when a covered water loss resulted in extensive mold damage. The policy excluded coverage for loss consisting of or caused directly or indirectly by mold. The court followed Oklahoma law, which held that if the proximate cause of the loss was covered, the entire loss was covered. Further, the exclusion did not expressly and specifically exclude coverage when one or more covered causes contributed to the mold-related loss.

State Codification of Efficient Proximate Cause

Only two states, California and North Dakota, have codified the efficient proximate cause into statute. Cal Ins Code §530 states that an insurer is liable for a loss where a peril insured against was the proximate cause of loss, even when a peril not included in the contract was a remote cause. The insurer is not liable for a loss where the insured peril was only a remote cause.

Cal Ins Code §535 states that if loss results from a combination of perils that includes landslide, mudslide, mudflow, or debris flow, coverage is afforded if an insured peril was the efficient proximate cause of the loss or damage. Coverage is to be provided under the same terms and conditions as it would under the insured peril.

N.D. Cent. Code §26.1-32-01 states that an insurer is liable for a loss proximately caused by a peril insured against, even if a peril not contemplated by the insurance contract may have been a remote cause of the loss. The insurer is not liable for a loss where the insured peril was only a remote cause. The efficient proximate cause doctrine applies only if separate, distinct, and totally unrelated causes contribute to the loss.

This, of course, does not mean efficient proximate cause is only applicable in these two states, just that they have codified the terms. As we have seen, states may still rule in favor of the efficient proximate cause or against it, depending on the specific facts of the case.

Exclusionary Language Upheld

Despite the theory of recovery having advanced, most jurisdictions will uphold policy language unless it specifically conflicts with state law. In State Farm Fire and Casualty Co. v. Bongen, 925 P.2d 1042 (Alas. 1996), the court reversed the decision of a lower court and determined there was no coverage when a mudslide damaged the insured’s home, resulting partially from the cutting of trees above the insured's residence. The insured argued that public policy should not allow an insurer to circumvent the efficient proximate cause rule. But the court said the exclusionary language was clear and unambiguous, and the denial was upheld. The court held that parties can contract out of the efficient proximate cause doctrine without violating public policy.

Concurrent Causation and Liability

Although we commonly think of concurrent causation or efficient proximate cause in terms of property coverage, these theories are often applied to liability situations as well. But in these situations, particularly when an exclusion such as the motor vehicle exclusion in a homeowners policy is involved, attempting to find coverage simply by including negligence as a cause of loss in the complaint will not be sufficient to trigger coverage.

For example, in Mailhiot v. Nationwide Mutual Fire Ins. Co., 740 A.2d 360 (Vt. 1999), the plaintiffs alleged that their son's injuries were the result of the Wymans' negligence in supervising their son. The son drove an ATV with the plaintiffs' son as a passenger when he lost control and crashed, causing the passenger severe injuries. The court ruled that the allegedly negligent supervision was inseparable from the excluded activity of operating the ATV off insured premises, and therefore the concurrent causation doctrine did not apply.

However, in Cawthon v. State Farm Fire & Casualty Co., 965 F.Supp. 1262 (W.D. Mo. 1997), the court awarded coverage under a homeowners policy under the doctrine of concurrent causation, when a helper was killed while helping the insured remove a tree. The insured attached a rope to the tree and his truck; a tree limb was dislodged and struck the helper.

The court said the predominant cause of the helper's death was the insured’s negligent plan to remove the tree and failing to clear the area. The homeowner policy’s exclusion for bodily injury or property damage arising out of the ownership, maintenance, or use of a motor vehicle owned or operated by the insured did not apply. The motor vehicle was not the proximate cause of the death, but it was concurrent with the insured’s negligence.

Insurers have attempted to limit their exposure through language excluding coverage for liability "arising out of" a certain activity, such as ownership, maintenance, or use of an excluded motor vehicle. However, in jurisdictions applying the concurrent causation doctrine, coverage applies whether the activity causing the loss can be attributed to an excluded vehicle or to another nonexcluded cause.

In Estate of Pennington v. Wolfe, 262 F.Supp. 2d 1254 (D. Kan. 2003), the defendant, Wolfe, was driving a pickup truck when a piece of farm equipment fell. The plaintiff hit the equipment, veered into oncoming traffic, and two passengers were killed. The Wolfes' auto policy paid its limits, and the estate brought suit to recover under the farmowners policy.

Even though the farm policy has a motor vehicle exclusion, the court held that failing to remove the equipment from the highway and warn others were negligent actions independent of the operation of a motor vehicle. Applying the doctrine of concurrent causation under Tennessee law served to give coverage. The court agreed that the loss was proximately caused by the concurrence of both vehicle-related and nonvehicle-related negligent acts, and that the motor vehicle exclusion cannot preclude coverage for nonvehicle-related acts.