I find it amazing in first-party property insurance that even after one has handled thousands of claims, new issues surface involving the same policy language dealt with over and over again. When such issues present themselves, the cynic may think: is the proponent of this argument clueless? The pessimist may wonder: have I missed something during this journey before? The optimist may think maybe this is just why we are involved in this exciting practice! That’s not too idealistic of an approach is it? You be the judge. With that said, I would like to elicit some feedback from those that follow this blog.
Suppose you have a named peril policy that reads:
[W]e cover direct physical loss or damage to covered property that results from any covered cause of loss
If a vandal breaks a pipe (vandalism is covered on the policy) and water damage results, would you say it is covered if the water damage does not meet a separate named peril? Here is what one Florida court has said:
A proper definition of ‘direct loss’ is loss proximately caused by the peril insured against, and the term ‘proximate cause’ as applied in insurance cases… [I]n a suit on a policy insuring for ‘direct loss’ caused by the named peril, a proper definition of proximate cause would be that cause which in a natural and continuous sequence unbroken by any new and intervening cause, produces a loss, and without which the loss would not have occurred.1
The Fisher Court held mold damage to personal property resulting from the named peril of a water discharge was covered. The Court stated:
It makes little sense to construe the policy so narrowly that the consequential mold damage from the discharge of water is not covered. To do so would require us to turn a blind eye to what common sense dictates. Had the insurer desired to exclude the damage for mold, it could easily have done so.
Don’t forget that while named peril policies provide more limited coverage than all risk policies, the interpretation still matters and the language chosen by the carrier in drafting the policy is meant to reach a common sense result. The interpretation should not be strained to restrict or limit coverage.
So with this information at hand, please comment on the coverage question presented above. It is always interesting to gain different perspectives on these questions.
1 Fisher v. Certain Interested Underwriters at Lloyds, 930 So.2d 756 (Fla. 4th DCA 2006) (quoting Fed. Ins. Co. v. Bock, 382 S.W.2d 305, 307 (Tex.Civ.App.1964).