Insurance Coverage For Collapse: How Has It Changed and Why?

ADJUSTERSINTERNATIONAL.COM

ADJUSTING TODAY

...America v. Guyton, 692 F. 2d 551 (9th Cir. Cal.1982). In the Premier case, heavy rains (which appear to be an almost seasonal event in the state) contributed to a mudslide that resulted in the insured’s home sliding off its foundation on a hill into the ravine below. Investigation revealed that human error had caused damage to the house’s drainage system, resulting in inadequate drainage and that this was a contributing cause. The court, therefore, viewed the loss as having two causes: the landslide, and the damaged drain. Although the landslide was excluded by the policy (earthquake exclusion), loss caused by the damaged drain was not, and the court decided coverage in the homeowner’s favor.

In Safeco v. Guyton, loss from flooding caused by a negligently constructed flood control wall was held to be covered because one of the causes of loss — negligent construction of the flood control system — was not specifically excluded. This decision was rendered despite the fact that loss by flooding was clearly excluded.

Although the concurrent causation doctrine did not become a major factor in property insurance until the early 1980s, it was not a new concept. On the contrary, liability insurance adjusters had been working with joint tortfeasor liability for years. Whenever the independent acts of two or more individuals combine to cause a single accident, the wrongdoers (or tortfeasors) are said to be jointly and concurrently liable. The concept has also been applied to coastal hurricane losses where damage by wind and waves could be separated, the damage by wind being covered, and the wave damage being excluded by the water damage exclusion. In the early 1980s, when concurrent causation began to be applied to property insurance in a series of court decisions, insurers were compelled to respond.

Evolution of Coverage – Insurance Industry Response

One of the first steps insurers took was to eliminate the “all” from “all risks” in the property insurance insuring agreement in policies written on that basis. This, insurers believed, would avoid creating unreasonable expectations on the part of insureds that most every kind of loss was covered. Typical insurance language today covers “risks of direct physical loss, unless the loss is excluded ...,” a more realistic grant of coverage. Although insurance people still occasionally refer to “all risks” coverage, they are being encouraged to use the more neutral terms of “open perils” or “risks not excluded.”

Insurers then countered the concurrent causation issue by adding language that made it clear that there was no coverage for loss caused by any of the general exclusions identified in the policy, regardless of any other cause that contributed concurrently or in any sequence to the loss. The standard or general exclusions refer to ordinance or law, earth movement, water damage (including flood), and power failure, among others. The following represents Insurance Services Office (ISO) standard anti-concurrent causation language and appears as the lead-in paragraph under the heading of Section I Exclusions:

“Insurers then countered the concurrent causation issue by adding language that made it clear that there was no coverage for loss caused by any of the general exclusions identified in the policy, regardless of any other cause that contributed concurrently or in any sequence to the loss.”


RkJQdWJsaXNoZXIy NjIxNjMz