Concurrent Causation: An Adjuster's Dilemma

ADJUSTERSINTERNATIONAL.COM

In an earlier edition of Adjusting Today (replaced by this edition), the late Paul Dudey explained that the concept of concurrent causation arose as insurers in the early 20th century combined monoline policies for individual perils (fire, wind, etc.) into multi-peril policies.

As Dudey explained, single-peril policies lent themselves to adverse selection, as insureds would tend to buy policies only for those perils they were most directly exposed to. Sales of multi-peril policies would ultimately provide a better spread of risk.

The progression to multi-peril policies started with the addition of lightning coverage to fire insurance and continued with the development of “extended coverage” endorsements for damage due to wind, hail, riot/civil commotion and other perils. Later, coverage for vandalism and other perils was added in “broad perils” endorsements.

The progression culminated with the development of “all risks” property coverage that insured the policyholder for damage by any cause of loss not specifically excluded.

Given the exclusions and limitations in “all risk” policies, that phrase became problematic for insurers, who now refer to such policies as offering “open perils” or “special perils” coverage. Although offering broad coverage, open perils policies have several major exclusions, notably for damage caused by earth movement, earthquakes, flood and accidents within machinery.

California Precedents

Controversy over coverage for losses arising concurrently from covered and excluded causes of loss dates from two California court rulings from the early 1980s.

Concurrent causation issues are vexing for adjusters because a rigorous and conscientious investigation of a claim can uncover causes that eliminate an insured’s recovery for damage that under other circumstances would have been covered.


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