South Carolina Lawyer
SC Lawyer, January 2008, #1.
Anti-Concurrent Causation Clauses and Hurricane Relief: Was it Wind or Water?
South Carolina LawyerJanuary 2008
Anti-Concurrent Causation Clauses and Hurricane Relief: Was it Wind or Water?By Howard A. VanDine III and Erik T. NortonHurricane Katrina, declared the costliest hurricane in American history, destroyed approximately 275,000 homes, caused total economic losses in excess of $100 billion and has spawned more than 1.6 million insurance claims. James A. Knox Jr., Causation, The Flood Exclusion, and Katrina, 41 Tort Trial & Ins. Prac. L.J. 901, 905 (Spring 2006). While most of the property damage resulted from flooding rather than wind, only a small percentage of Hurricane Katrina property owners maintained flood coverage under the National Flood Insurance Program. Id. at 903, 905. Many property owners therefore have turned to their homeowner property insurance policies for relief. As a result, a debate between property owners and their insurers has surfaced over the impact of specific policy provisions.
Typically, homeowners and commercial property insurance policies insure against damage cause by wind or hail, including damage from rain entering through breaches in a dwelling caused by wind or hail. These policies generally contain both a water damage exclusion and an anti-concurrent causation clause (ACC clause). The water damage exclusion clause typically precludes recovery for water damage to a dwelling caused by "flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, whether or not driven by wind." The ACC clause routinely states: "We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in sequence to the loss." The ACC clause therefore denies coverage for damage caused concurrently by covered and non-covered perils. In the context of hurricanes, this means that damage caused concurrently by wind and flooding would not be covered.
This article first will discuss the effect of these provisions by summarizing the law in South Carolina as to wind and hail policies and the courts' treatment of instances where both a covered peril and an excluded peril contribute to a loss. Thereafter, this article will review recent case law from the Gulf Coast states addressing the enforceability of ACC clauses. Finally, the implications of this recent case law for South Carolina lawyers will be analyzed.
I. South Carolina law regarding ACC clauses
South Carolina courts follow the majority approach in determining whether coverage is triggered by a loss where both an excluded peril and a covered peril exist. This approach provides that "it is generally sufficient to prove the event insured against was the efficient cause of the loss, even though not the sole cause." King v. N. River Ins. Co., 278 S.C. 411, 413, 297 S.E.2d 637, 638 (1982). Applying this rule, South Carolina courts have held that, where there are two contributing perils, one covered and one excluded, if the covered peril was the efficient, proximate or predominant cause of the loss, then the loss is covered by the policy. Id. at 414, 297 S.E.2d at 638. See also Phenix Ins. Co. v. Charleston Bridge Co., 65 F. 628 (4th Cir. 1895); Beattie Bonded Warehouse Co. v. General Accident Fire & Life Assurance Corp., 315 F. Supp. 996, 1001 (D.C.S.C. 1970).
Whether an insured bears the burden of establishing the portion of the damage caused by the covered peril under the proximate cause doctrine is less clear, however. That is, once an insured demonstrates the covered peril is the predominate cause of the loss, may an insured recover for the entire loss or must the insured segregate the loss caused by the covered peril in order to recover for that portion of the damage? In South Carolina that question remains open. Compare Hanover Fire Ins. Co. v. Ivey, 250 F.2d 110, 111 (4th Cir. 1957) (suggesting plaintiff must segregate losses), with King, 278 S.C. at 413, 297 S.E.2d at 638 (suggesting plaintiff does not have to segregate losses).
South Carolina courts also have not squarely addressed the question of whether an ACC clause effectively circumvents the efficient proximate cause doctrine....