We have often discussed the importance of the type of insurance policy involved and the difference it makes from a coverage perspective. For example, the burden of proof is different between a named-peril policy and an all-risk policy. Knowing the difference is important, and knowing what your rights are under the policy you have purchased from your insurance carrier is imperative. So, if you have an all-risk policy, and you have an accidental loss that occurs during the policy period, do you have the burden as the policyholder to prove the exact cause of the loss?
Under an all-risk policy, the insurance carrier has a difficult burden to meet once the policyholder demonstrates a loss was sustained during the policy period. An essential purpose of all-risk insurance policies is to provide coverage when the exact cause of the loss cannot be established. “All risk insurance arose for the very purpose of protecting the insured in those cases where difficulties of logical explanation or some mystery surround the loss or damage to property.”1
In Simplexdiam, Inc. v. Brockbank,2 the New York Court stated:
Under an all risks policy an insured need not prove the cause of the loss and is not bound to go further and prove the exact nature of the accident or casualty which, in fact, occasioned the loss.
The insurance carrier has to prove that the loss is within the scope of policy exclusions that it seeks to enforce, otherwise the loss would be covered if the carrier cannot meet that burden.
We have seen cases where insurance carrier adjusters state the policyholder must tell them what the exact cause of loss is, even when there is an all-risk policy involved. That type of statement may be inaccurate and is a way to impose a more stringent standard upon the policyholder than what the insurance contract actually requires. This is an important point to note and keep in mind should an insurance carrier adjuster ask you for the precise cause of the loss. It is entirely possible that you may not be able to explain the precise and specific cause of loss, particularly early on in the claim process.
1 Formosa Plastics v. Sturge, 684 F. Supp. 359, 366 (S.D. N.Y. 1987).
2 Simplexdiam, Inc. v. Brockbank, 727 N.Y.S. 2d 64 (N.Y. App. Div. 1st Dept. 2001).