Does an Insurance Policy Cover Only "Loss" or "Damage" to Property?
Property insurance policies are written in complex language. The fact that there are so many different interpretations and disputes about the language by some very bright people is probably enough evidence to prove that point. David Rossmiller wrote a post, Corban v. USAA: A few (more) words about anti-concurrent causation, which had me thinking about words used in an insurance policy and what a policy covers. He stated:
"The most important thing is the court realized the key thing to look for is to identify the "loss," because that is what the policy covers, not "damage." The Supreme Court also well understood that once loss has occurred and is covered, it can never become uncovered no matter what happens later." (emphasis added)
When considering a policy that covers "accidental physical risks of loss," I wonder what a "loss" would be if there were no "damage" that occurred with it. I cannot think of such a situation. Therefore, I do not think Rossmiller is right. When advocating for his insurance company clients, I am certain Rossmiller would argue that there must be "damage" for a "loss" to occur.
Indeed, this situation arises in many cases where adjusters determine whether "damage" is pre-existing (resulting from wear and tear) and not covered or caused by a non-excluded peril and covered. "Causes" of loss necessarily means "physical damage" in most property insurance policies, and this is what adjusters and courts should focus upon when considering coverage issues involving concurrent causation language. Property can be damaged by a sequence of causes.
For those who want a practical perspective about anticoncurrent clause situations, I suggest Concurrent Causation Analysis Applied by FC&S---Learning From an Insurance Industry Source. Additionally, as I noted in the comment I wrote for the Mississippi Law Journal and cited in Anticoncurrent Causation Clause Explained in Relation to Hurricane Losses, Rossmiller wrote excellent discussions of the topic for more academic types.
Anyone who purchases a policy with an anti-concurrent clause is foolish. Why would they purchase a policy that has a backdoor allowing the carrier to deny an otherwise covered loss, because of a concurrent event outside the control of the Insured? Foolish!
Why not purchase a policy without the back door?
Steve,
I understand what you are saying, but where can you find a property insurance policy in the United States without that clause?
I will bet your policy has it if you have an insurance policy and live in the US.
Watch what you call others, you may find you are no better.
Thanks for the comment because many people probably have the same opinion as you without realizing that those clauses are standard in the insurance industry. Some are better than others.
A couple of scenarios come to mind where a loss has occurred but NO physical loss to the insured property has been sustained.
Referring to the ISO Homeowners program the coverage for Civil Authority comes to mind where ALE costs would be paid even if there is no physical damage to the insured property.
Another situation may be a municipal water source which is contaminated and a coffee shop/restaurant is shut down because of it. The water is not insured (at least not before it’s run through the meter) yet there may be a Business Interruption claim as a result.
Howard,
Thanks for your comment. I think there is a "physical" damage or loss compnent to each.
The ISO business income form CP 00 30 04 02 promises to pay "for the actual loss of business income you sustain and necessary extra expense caused by action of civil authority that prohibits access to the described premises due to direct physical loss of or damage to property, other than at the described premises, caused by or resulting from any covered cause of loss." So, the form itself refers to "physical" damage or loss.
Under ISO homeowners forms for loss of use, those state that if "a civil authority prohibits you from use of the `residence premises' as a result of direct damage to neighboring premises by a Peril Insured Against, we cover the loss as provided in 1) additional living expense and 2) fair rental value above for no more than two weeks." Again, the "direct" damage is meant to be "physical" albeit to the neighbors policy.
Maybe there are some more examples, and I am happy I am not the only one pondering what Rossmiller meant.
Thanks.