Concurrent Causation Analysis Applied by FC&S---Learning From an Insurance Industry Source
Insurance defense attorneys argue the exclusionary language of the anti-concurrent causation clause should be broadly interpreted because they have to get their insurance company clients “off the hook” for making wrong coverage interpretations. It is important for those attorneys representing policyholders to have a full library to combat these arguments. One such source is the FC&S publications. Those clever defense counsel are sometimes out of luck, despite their ingenious arguments, when insurance industry sources indicate that they are wrong.
One section I routinely read from the FC&S Bulletins are the Question and Answers posed to the editors from subscribers regarding loss situations with coverage questions. Two recent discussion regarding the “acts or decisions” and “governmental authority” exclusionary clauses help show how the anti-concurrent language should not be so broadly read in conjunction with other exclusions to prevent coverage.
The first question involved:
…the commercial property policy's exclusion 3.b., wherein losses "caused by or resulting from acts or decisions, including the failure to act or decide" are not covered.
The insurer is denying coverage for damage caused to an insured's apartment building when police forced entry into the building to apprehend a suspected criminal, causing some $5,000 damage to the structure.
We referred the insurer to the Q&A regarding seizure of property by governmental authority (see Coverage Applies to Property Damaged by Police Chasing Fugitive), at which time the company responded that exclusion 3.b. applies and no coverage would be afforded.
It occurs to us that this exclusion is being misused to reject coverage in this case, notwithstanding the "concurrent causation" issues.
The answer was quite to the point and demonstrated how important the lead in language is to a proper reading of most anti-concurrent clause situations:
…exclusion 3.b. is one of the concurrent causation exclusions. These exclusions are meant to avoid coverage when a previously unexcluded cause of loss (a bad decision) joins with an excluded cause of loss (flood) and the claimant is able to make the argument that it was the unexcluded (and therefore covered) cause of loss that led to the damage. Claimants did successfully make the argument in court that it was actually the negligence (a then unexcluded cause of loss) of the water authority in not opening a dam early enough that caused damage to insured property, and not the resulting flood (an excluded cause of loss). It was results such as this that prompted additions of the "concurrent causation" language.
The above would be an example of the acts or decisions exclusion at work. However, as is plainly clear from the lead-in language to the concurrent causation exclusions, if an excluded cause of loss (such as an act or decision) results in a covered cause of loss (which your insured's damage otherwise would be under the special causes of loss form) then coverage applies. Since there is no exclusion otherwise applicable, coverage is available in this situation. (emphasis added)
The governmental authority clause referred to in the question posed the following:
The insured is a health clinic covered under the commercial property open perils form. Recently, a man who was trying to evade capture by the police ran into the clinic and proceeded to take hostages. Eventually, he was forced to surrender by the police who used tear gas and gunfire. In the process of capturing the fugitive, damage was done to both the building and personal property of the health clinic.
The insurance company is denying coverage under exclusion B.1.c. of the CP 10 30 04 02 form. This exclusion avoids coverage for loss or damage caused directly or indirectly by "seizure or destruction of property by order of governmental authority….
The answer by the editors again indicated that exclusionary language should not be so over-broadly interpreted to avoid indemnity for the loss:
The exclusion of loss caused by order of governmental authority is not so broad as to exclude this type of loss. The aim is to exclude coverage for the intentional destruction of property by governmental authority because of some hazard that the property presents, such as when the government orders the destruction of vegetables that are infected with the Mediterranean fruit fly.
In the case you present, the destruction done by the police was incidental to the capture of the fugitive. Bullets that damaged equipment were intended to control the fugitive—they were not fired because the equipment posed any danger to people or property. One would not expect the police officer in charge to state that he or she ordered the destruction of property. For these reasons, the insured has coverage under the policy. A New Jersey court has held, however, that damage done to an apartment by the police in conducting a search warrant was properly excluded under the governmental authority exclusion.
Perhaps, if the New Jersey policyholder had done some homework and selected a policyholder counsel that invested in such resources as those published by the FC&S, the case might have been won.
Chip:
In addition to the importance of determining an initial cause, and the issue of "two concurrent causes," please share with your readers in Florida the extraordinary value in making an accurate "time-line" so that issues of concurrent losses can be accurately depicted for a Judge or jury.
This is imperative in our state where a Court may very well find that anti-concurrent causation language may be considered irrelevant when a covered cause of loss is the initial trigger for coverage:
EMPIRE INDEMNITY INSURANCE COMPANY v. WINSETT,2008 WL 919824,United States District Court, N.D. Florida
"There are two standards in Florida for determining
whether a claim is covered when damage is the result
of more than one cause. Palucci v. Liberty Mut.
Fire Ins. Co., 190 F.3d 1312, 1318 (M.D.Fla.2002).
The standard to apply hinges on whether the causes
are dependent or independent from each other.
Id.“Causes are independent when they are unrelated
such as an earthquake and a lightning strike, or a
windstorm and wood rot.”Id. at 19.“Causes are dependent
when one peril instigates or sets in motion
the other, such as an earthquake which breaks a gas
main that starts a fire.”Id.
If the causes are dependent on each other, then the
efficient proximate cause doctrine applies. Id. The
efficient proximate cause is the cause that instigates
or sets the other causes in motion. Hartford Accident
and Indem. Co. v. Phelps, 294 So.2d 362, 364
(Fla. 1st Dist.Ct.App.1974). If the efficient proximate
cause of damage is a covered cause, then the
claim for damages will be covered. Palucci, 190
F.Supp.2d at 1318. If the efficient proximate cause
is not covered, then the claim for damages is not
covered even if the contributing causes are covered.
Id.
If the causes are independent of each other, then the
concurrent cause doctrine applies. Id. Under the
concurrent cause doctrine, coverage is provided so
long as one cause is covered, even if other causes
are not covered. Wallach v. Rosenberg, 527 So.2d
1386, 1387 (Fla.3d Dist.Ct.App.1988).
The Empire policy contains an anti-concurrent-
cause provision, which is enforceable in Florida.
Palucci, 190 F.Supp.2d at 1319. Thus, if the
failure to install a vapor barrier and the mold are independent causes of the renters' damages, then the
concurrent cause doctrine would apply. Coverage,
however, would be precluded under Empire's anticoncurrent-
cause provision.
Conversely, if the failure to install a vapor barrier
and the mold are dependent upon each other, then
the efficient proximate cause doctrine applies. Coverage
would be available if the failure to install the
vapor barrier instigated or set in motion the mold
growth, leading to the renters' damages. This is
what the renters allege happened. Therefore, despite
the mold exclusion, the renters' damages are
covered under Empire's policy because the negligent
failure to install a vapor barrier is a covered
construction defect that is the efficient proximate
cause of the renters' damages.
*5 Despite Empire's argument, the anti-con-
current-cause provision does not preclude coverage.
This is because the failure to install a vapor barrier
is a covered cause that led to the mold. Fayad v.
Clarendon Nat'l Ins. Co., 899 So.2d 1082, 1087-88
(Fla.2005). Empire's policy contains no “lead-in”
provision so as to exclude from coverage damage
for mold when the cause of the mold is a covered
event. Id. Furthermore, contrary to Empire's argument,
applying principles of efficient proximate
cause does not render its mold exclusion meaningless.
C.f. Arawak Aviation v. Indem. Ins. Co. of N.
Amer. 285 F.3d 954, 957 (11th Cir.2002) (declining
to apply efficient proximate cause doctrine where
the efficient cause is always antecedent to the damage's
direct cause). Mold has many causes aside
from construction defects, especially in humid climates
like Florida.
Because the allegations of the renters' complaint set
forth facts that potentially bring a claim within the
scope of Empire's policy coverage, Empire has a
duty to defend. Baron Oil Co. v. Nationwide Mut.
Fire Ins. Co., 470 So.2d 810, 813 (Fla. 1st
Dist.Ct.App.1985). The duty to defend extends to
all claims in the renters' complaint, even those
claims that are not covered. Tropical Park Inc. v.
United States Fidelity & Guar. Co., 357 So.2d 253,
256 (Fla.3d Dist.Ct.App.1978) (“Where the complaint
contains allegations partially within and partially
outside the scope of coverage, the insurance
carrier has a duty to defend the entire suit.”). Therefore,
it is unnecessary to address the intentional acts
exclusion or the issue of whether the other claims
in the renters' complaint constitute an occurrence.
Based on the foregoing, Empire's motion for summary
judgment will be denied. Defendants' motion
for summary judgment will be granted."
***
Despite Empire's argument, the anti-con-
current-cause provision does not preclude coverage.
This is because the failure to install a vapor barrier
is a covered cause that led to the mold. Fayad v.
Clarendon Nat'l Ins. Co., 899 So.2d 1082, 1087-88
(Fla.2005). Empire's policy contains no “lead-in”
provision so as to exclude from coverage damage
for mold when the cause of the mold is a covered
event. Id. Furthermore, contrary to Empire's argument,
applying principles of efficient proximate
cause does not render its mold exclusion meaningless.
C.f. Arawak Aviation v. Indem. Ins. Co. of N.
Amer. 285 F.3d 954, 957 (11th Cir.2002) (declining
to apply efficient proximate cause doctrine where
the efficient cause is always antecedent to the damage's
direct cause). Mold has many causes aside
from construction defects, especially in humid climates
like Florida."
(**Note that the duty to defend casts a wider net than the duty to indemnify.**)
Thanks!