EDITOR'S NOTE

Concurrent causation is a term referring to two or more events acting at the same time or in sequence to cause a loss. The concept of concurrent causation exclusions in insurance policies began after a series of California court rulings found that even though an event, such as earthquake or flood, was clearly excluded from coverage, if another event, i.e. faulty design or maintenance, not excluded, could be found, coverage could be applied.

In order to restrict coverage to the intended perils, insurers included concurrent causation exclusions in their policies. However, while solving one problem, interpretation of the new language in some cases went so far as to deny coverage formerly offered under all risks policies.

While several courts have rescinded the concurrent causation doctrine, insurers have not, leaving the adjustment of certain losses up to the interpretation of those involved.

This article, by Adjusters International insurance expert, Paul O. Dudey, CPCU, reviews the history, application and future of the concurrent causation exclusions in most policies. We hope you will find this interesting and useful information in the adjustment of property losses.

In the early 20th century, property insurance was offered on an individual peril basis. There was fire insurance, to which was then added lightning because of the close relationship of the two perils.

Separately, an insurance buyer could also obtain wind and hail insurance, explosion (but separate boiler explosion coverage from separate underwriters), riot and civil commotion, damage by vehicles, damage by aircraft, vandalism and malicious damage insurance, and various other individual coverages. But selling these coverages separately led to “adverse selection,” as insurance buyers tend to be better underwriters

of their own exposures than insurance company underwriters could ever be, and would only buy those coverages for which they perceived a high potential exposure in relation to the cost.

Later, when underwriters began to offer the “extended coverage” endorsement to the fire and lightning policy, which provided most of the above perils (but not boiler explosion or vandalism and malicious mischief insurance) they found surprisingly that, because the element of adverse selection was minimized, they could price the extended coverage endorsement