Concurrent Causation: An Adjuster's Dilemma


...despite having an earth movement exclusion because faulty installation of a drain by a third party, not excluded, was held to be a concurrent cause of the loss.

These rulings prompted the Insurance Services Office (ISO), the principal U.S. property/casualty advisory organization, to replace the term“all risks” in its standardized policy forms with “risk of direct physical loss.”Also, ISO drafted revised language excluding coverage for losses arising from various deficiencies in construction or maintenance work, among other things.

But California wasn’t done yet.

In 1989, that state’s supreme court, in Garvey v. State Farm, 4 held that appellate courts had misinterpreted the Safeco and Premier rulings. In Garvey, the justices ruled that when a loss can be attributed to two causes, one covered and one excluded, coverage exists only if the covered peril is the “efficient proximate cause” of the loss, i.e., the event that led most directly to the loss.

A year later State Farm prevailed again when another California court (in State Farm v. Von Der Lieth 5 ) ruled that despite evidence of third party negligence in a loss caused by earth movement, the earth movement — not the negligence —was the efficient proximate cause of the loss; coverage was denied because of the earth movement exclusion.

Complete Denials

After decades of legal wrangling and policy adjustments, the latest ACC provision in the ISO Causes of Loss—Special Form (CP 10 30 10 12) reads as follows:

We will not pay for loss or damage caused directly or indirectly by any of the following [exclusions listed below]. 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).

That wording certainly appears intended to forestall any coverage under a property policy for a loss to which an excluded peril has contributed in any way.

The impact of similar wording on policyholders was vividly described by Denver-based attorney Jonathan Bukowski of the Merlin Law Group in an October 2017 blog posting. 6 Commenting on a 2008 ruling regarding the collapse of a roof on a public building following a record snowfall, Bukowski noted that the jury determined that 90 percent of the damage resulted from the weight of the snow, an insured peril, and 10 percent from other circumstances, including those listed in an ACC exclusion. Nonetheless, the Colorado Court of Appeals denied coverage on the basis of an ACC exclusion.

“Under current Colorado law,” Bukowski wrote, “if the carrier has included anti-concurrent causation language and can point to some event in the chain of events that was excluded, the carrier can deny coverage for an otherwise covered loss.

These rulings prompted the Insurance Services Office (ISO), the principal U.S. property/ casualty advisory organization, to replace the term ‘all risks’ in its standardized policy forms with ‘risk of direct physical loss.’