As Dan Ballard discussed in the first installment of this series, the Northeast recently experienced a powerful nor’easter that brought heavy rain, damaging winds, and coastal flooding from the Mid-Atlantic through New England. The storm may be only the beginning of an unusually wet winter for the Northeast. As many of us have heard by now, NOAA predicts the strongest El Niño since the1950s this winter. NOAA’s current outlook estimates warmer and wetter-than-normal conditions along the Atlantic Coast from the Mid-Atlantic into New England. For those of us in the Northeast who weathered last winter’s record-breaking cold, “warmer than usual” sounds like a welcome change. This change, however, can still bring coastal storms, heavy rain, high winds, and flooding. For property owners in Maryland and Massachusetts, that combination makes the distinction between covered wind damage and excluded flood damage, as well as the effect of anti-concurrent causation clauses, especially important this year.
Most homeowners and commercial property policies cover at least some forms of wind damage but generally exclude flood, surface water, storm surge, and similar water damage. When covered and excluded causes combine, courts have traditionally looked to the “efficient proximate cause” of the loss. The “efficient proximate cause” means the predominant cause that set the chain of events in motion. For example, if covered wind damage creates an opening in a building and water later enters through that opening, the policyholder may argue that wind was the efficient proximate cause of the resulting damage and is therefore covered.
Anti-concurrent causation language is the insurance industry’s answer to efficient proximate cause and is intended to displace that analysis. Rather than asking which cause predominated, the clause provides that a loss is excluded when a listed excluded peril contributed to the damage, regardless of whether it acted concurrently with a covered cause or appeared anywhere in the sequence of events. When a Policy contains an ACC clause, an insurer may – and often will – argue that the entire loss is excluded if flood or another excluded peril contributed to the damage. Understandably, policyholders and their advocates are not big fans of ACCs.
Maryland law expressly allows ACC clauses in homeowner policies. In 2013, Maryland Code, Insurance Section 19-215 was enacted to require that an insurer issuing a policy with an ACC clause provide an annual notice to the insured. The statute seems to recognize that: 1. Anticoncurrent causation clauses can significantly limit coverage that appears to exist elsewhere in the policy, and 2. They are very confusing. However, the Maryland District Court found in 2019 that an insurer’s failure to comply with the notice requirement does not void the provision, meaning the statute lacks any real teeth. 1
Perhaps the easiest way to grasp the effect ACCs can have on Maryland homeowners is by looking at how Maryland courts have interpreted them. In Bao v. Liberty Mutual Fire Insurance Company, a strong wind and rainstorm struck the Baltimore area, and a substantial amount of water entered the insured’s basement through a damaged glass door. 2 The insured’s public adjuster found that a windblown object had damaged the door, while the insurer argued it had been damaged by accumulated water outside the door.
When the issue was brought before the court, it determined that it didn’t matter which explanation was correct. The parties agreed that at least some rainwater had collected at the bottom of the basement stairwell before entering the home, constituting excluded “surface water.” Because the exclusion applied to water damage “regardless of any other cause or event contributing concurrently or in any sequence of loss,” the court found the ACC exclusion applied to all the damage because the surface water had contributed to the loss, regardless of whether wind also contributed to or was its main cause.
Massachusetts courts have taken a similar approach. In Boazova v. Safety Insurance Company, the Massachusetts Supreme Judicial Court stated that an ACC provision “entirely bars insurance coverage where a claimed loss is caused by a combination of covered and excluded perils.” 3 Applying the ACC clause, the court found no coverage where excluded surface water contributed to deterioration inside the insured’s home, even though the insured had coverage for hidden seepage. 4
While these decisions are not particularly policyholder-friendly, they do not give an insurer license to label all storm damage “flood” and deny the entire claim. The insurer must still establish that an excluded peril caused or contributed to the particular damage at issue. Separate roof, siding, window, tree-impact, or structural damage caused solely by wind does not become flood damage merely because flooding also occurred elsewhere on the property. If an insurer relies on an ACC clause, its analysis should identify the excluded peril, the particular damage allegedly caused by it, and the evidence connecting the two. The clause changes the causation analysis, but it does not eliminate the insurer’s burden to prove that the exclusion applies.
Along with Chip Merlin, Javier Delgado, and a new addition to the Northeast team, I will be attending the NYPAA Annual Conference this week. Please come say hello. I promise we do not have to spend the entire evening discussing anti-concurrent causation clauses (unless you want to). See you all there!
1 Jackson v. Stand. Fire Ins. Co., 406 F. Supp. 3d 480, 489 (D. Md. 2019).
2 Bao v. Liberty Mut. Fire Ins. Co., 535 F. Supp. 2d 532 (D. Md. 2008).
3 Boazova v. Safety Ins. Co., 968 N.E.2d 385 (Mass. 2012).
4 See also Surabian Realty Co., Inc. v. NGM Ins. Co., 971 N.E.2d 268 (Mass. 2012).
