Update on Superstorm Sandy and the Inevitable Issues with Concurrent Causation.

• Author: Rosenberg, David J.

THIS paper incorporates and updates previous analysis undertaken on November 20, 2012, in the aftermath of Superstorm Sandy (Sandy). It focuses on concurrent causation and anti-concurrent causation clauses focused on the states of New York, New Jersey and Pennsylvania.

A number of different anti-concurrent causation clauses are in use today. These clauses intend, among other things, to be a response to most jurisdictions where, in instances of concurrent causation, (i.e. where multiple factors independently cause a loss, one of which is covered and the other is not) oftentimes the insurance policy must respond even for the uncovered loss. One of the more commonly used anti-concurrent clauses is found in ISO Causes of Loss-Special Form (CP 10 30 04 02), which specifically excludes coverage for loss or wdamage: We will not pay for loss or damage caused directly or indirectly by any of the following... [lists a number of factors]. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. (Emphasis added). In general terms, in jurisdictions that follow a concurrent cause analysis, coverage is allowed whenever two or more causes contribute to a risk and at least one of them is covered under the policy. On the other hand, in jurisdictions that employ the doctrine of efficient proximate cause to determine if there is coverage for a loss, the leading or predominant cause of loss will determine coverage. Inserting anti-concurrent causation language into a policy seeks to redress the issue of broadened coverage. An overview of key cases since Sandy reveals that New Jersey, New York and Pennsylvania still allow for anti-concurrent causation language in insurance policies, albeit subject to a high level of judicial scrutiny. Any ambiguity is interpreted against the insurer and in favor of the insured.

1. Case Law Analysis

   1. New Jersey

      1. Concurrent Causes of Damages

         New Jersey courts have generally considered questions evaluating multiple or concurrent causes of damages in the context of first-party claims against insurers for coverage. (1) In New Jersey, first-party coverage decisions generally yield two applicable rules. In situations in which multiple events occur sequentially in a chain of causation to produce a loss, New Jersey has adopted the approach known as "Appleman's Rule" pursuant to which the loss is covered if a covered cause starts or ends the sequence of events leading to the loss. (2)

         On the other hand, if the fact finder cannot partition the damages between covered and uncovered losses, New Jersey appellate courts have rejected claims for coverage largely because the burden of proof is on the insured to demonstrate a covered loss. (3)

      2. Anti-Concurrent Clauses

         In New Jersey, the anti-concurrent clause in an insurance policy must be clear and unambiguous. In Petrick v. State Farm Fire and Casualty Company, (4) Plaintiffs William and Tanja Petrick submitted claims for damage to their home and personal property arising from a Nor'easter storm on November 10, 2005, to their insurer, State Farm. Water infiltrated the home, causing water damage to the interior of the structure and contents and subsequently the development of a severe mold condition that impaired the building's structural integrity. At the time of the storm, a homeowner policy issued by State Farm providing coverage for accidental direct physical loss to the property was in effect. The policy, however, contained a "Fungus (Including Mold) Exclusion Endorsement" with an exclusion pertaining only to wet or dry rot. However, the endorsement also modified the language of Section 1--Losses Not Insured so that it read:

         We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events. We do not insure for such loss regardless of: (a) the cause of the excluded event; or (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss; or (d) whether the event occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these: g. Fungus, including: *** (2) any remediation of fungus from covered property or to repair, restore or replace that property; *** Nonetheless, limited coverage for damage caused by fungus was restored by a coverage endorsement entitled "Fungus (Including Mold) Limited Coverage Endorsement" which provided:

         Remediation of Fungus. a. If fungus is the result of a covered cause of loss other than fire or lightening, we will pay for: *** (2) any remediation of fungus, including the cost or expense to: (a) remove the fungus from the covered property or to repair, restore or replace that property. The policy's Declaration Page disclosed "Fungus (Including Mold) Limited Coverage" in the amount of $50,000.

         The Petricks made a property claim under the policy, and State Farm, following an inspection of the premises, paid the policy limits of $50,000, pursuant to the Fungus Limited Coverage Endorsement, in addition to living expenses for the Petricks while work was being performed on the home. In August 2006, upon the completion of the home repairs, the Petricks retained an engineering firm to perform an inspection of the home. In an engineering report dated August 29, 2006, the inspectors opined, "[s]torm water remediation was not performed in a timely manner and as a result mold formed and attacked finish materials and underlying timber structural members." Apparently, mold remediation had been performed two times, effectively removing most of the surface mold...