Anti-Concurrent Causation Clauses

Origins of ACC Clauses

ACC clauses were developed to contractually exclude coverage under an all-risk policy if one or more of several enumerated causes played any role in the loss, even if otherwise covered causes also contributed to the loss. The evolution of the clause is explained below:

In the 1980s courts seeking to resolve coverage issues in favor of the insured created the “concurrent causation doctrine.” Simply stated, the doctrine means that an insurer is obligated to pay for damages resulting from a combination of covered and excluded perils if the efficient proximate cause is a covered peril. To avoid the application of the concurrent causation doctrine, many insurers now include an “anti-concurrent causation” preface to a policy's exclusions section. The Insurance Services Organization's anti concurrent causation preface states that any loss is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

Recent Developments in Property Insurance Law, 33 Tort & Ins. L.J. 659 (Winter, 1998).

Today, variations of ACC clauses are commonly contained in all-risk policies.

Policy Wording

First-party property policies generally require that the loss be caused by a covered peril, and some form of ACC clause is contained in nearly every policy to address coverage for a loss involving more than one cause. The clause is usually inserted into the preamble to a group of exclusions that is designed to combat the misapplication of the concurrent cause doctrine from tort law to a first party property policy. IRMI Glossary of Insurance and Risk Management Terms, www.irmi.com. An example of the most common type of wording is set forth below:

B. EXCLUSIONS:

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

A less common variation of the typical wording is set forth below:

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:

[Listed Exclusions].

The interpretation of ACC clauses by the courts is dependent upon the specific policy wording, the pertinent facts, general principles of contract interpretation, the venue of the lawsuit, and most importantly, the particular state's approach to causation.

Causation Principles

Generally, in proving a loss that is insured under a contract of insurance, the insured has the burden of demonstrating that the loss or damage to the insured property was caused by a peril covered under the insurance contract. If the insured sustains this burden, the burden then shifts to the insurer to demonstrate that the claimed losses are otherwise excluded from coverage. See Montefiore Med. Ctr. v. Am. Protection Ins. Co., 226 F. Supp. 2d 470, 477 (S.D.N.Y. 2002); and University of Cincinnati v. Arkwright Mut. Ins. Co., 1993 U.S. Dist. LEXIS 17126 (S.D. Ohio Aug. 16, 1993). In the absence of ACC clauses, courts will resolve multiple peril issues by applying one of two judicially created doctrines, i.e., the efficient proximate doctrine or the concurrent causation doctrine.

The majority of jurisdictions apply the traditional standard of property insurance law, which has been known as the “proximate, moving, or efficient cause standard.” See R. Dennis Withers, Proximate Cause and Multiple Causation in First-Party Insurance Cases, 20 Forum 256 (Jan. 1985). Under the efficient proximate cause doctrine, where a covered peril and an excluded peril combine to cause a loss, coverage is afforded only if the covered peril was the predominant cause of loss. There is no coverage if the predominant cause is an excluded peril. Concurrent Causation Versus Efficient Proximate Cause in First-Party Property Insurance Coverage Issues, Tort Trial & Insurance Practice Section, Winter 2007. See also “Efficient Proximate Causation” in the Context of Property Insurance Claims, 65 Def. Couns. J. 400 (July 1998).

In contrast, a minority of jurisdictions apply the concurrent causation doctrine, where coverage is afforded if two or more causes contribute to the insured's loss, and at least one of them is a covered peril and contributes in a meaningful way to the insured's damages, even if an excluded peril is the predominant cause of the loss. Most courts ignore only remote causes of loss. See Concurrent Causation Versus Efficient Proximate Cause in First-Party Property Insurance Coverage Issues, Tort Trial & Insurance Practice Section, Winter 2007. See also Paulucci v. Liberty Mut. Fire Ins. Co., 190 F. Supp. 2d 1312, 1319 (M.D. Fla. 2002) (“The concurrent cause doctrine applies when multiple causes are independent ' Causes are independent when they are unrelated such as an earthquake and a lightning strike, or a windstorm and wood rot.”)

While interpreting a policy of insurance is a question of law for a court to decide, causation is generally a factual issue for the fact-finder. See Eichacker v. Paul Revere Life Ins. Co., 354 F.3d 1142, 1147 (9th Cir. 2004); and Mosaic Law Congregation v. Amco Ins. Co., 2007 U.S. Dist. LEXIS 17261 at *4 (E.D. Cal. Mar. 9, 2007). ACC clauses are intended to remove the causation issue from the courts. The language of the ACC clause means that “where a loss results from multiple contributing causes, coverage is excluded if the insurer can demonstrate that any of the concurrent or contributing causes are excluded by the policy.” ABI Asset Corp. v. Twin City Fire Ins. Co., 1997 U.S. Dist. LEXIS 18265, *4 (S.D.N.Y. Nov. 18, 1997). See also Toumayan v. State Farm Gen. Ins. Co., 970 S.W.2d 822 (Mo. Ct. App. 1998) (construing earth movement exclusion and rejecting application of the efficient proximate cause doctrine in view of the unambiguous ACC clause).

Nonetheless, causation is a difficult issue for courts even when policies contain ACC clauses, and ACC clauses have not been uniformly interpreted by the courts because states use different approaches to causation. The Enigma of Causation in Insurance Contract Interpretation., IRMI, January 2003 (“The law is comprised of doctrines that are incompatible, vary from jurisdiction to jurisdiction, and lend themselves to 'logic chopping.'”). See also Garden State Indem. Co. v. Miller & Pincus, 340 N.J. Super. 148 (App. Div. 2001).

Courts Have Generally Enforced ACC Clauses

Courts in the vast majority of U.S. states have ruled that insurers may contract out of the concurrent causation and efficient proximate cause doctrines if the policy wording is clear and unambiguous, and have upheld ACC clauses. See Assurance Co. of America, Inc. v. Jay-Mar, Inc., 38 F. Supp. 2d 349 (D.N.J. 1999) (citing to majority rule); and Preferred Mut. Ins. Co. v. Meggison, 53 F. Supp. 2d 139 (D. Mass. 1999) (citing to the majority rule). See also Special Causation Problems in First-Party Property Insurance, The Federation of Defense and Corporate Counsel (2007).

Set forth in the Table'below are the states where courts have enforced ACC clauses. Please note that the highest court in the state may not have addressed ACC clauses, and, for some states, the issue has only been addressed by a federal court.

While the vast majority of states uphold this preface, California, North Dakota, Washington, and West Virginia have refused to enforce ACC clauses in exclusions by case law, statute or both, where the excluded peril is the efficient proximate cause of the loss.

CA: CAL. INS. CODE ” 530, 532, Garvey v. State Farm Fire & Cas. Co. , 770 P.2d 704 (Cal. 1989), and Howell v. State Farm Fire & Casualty Co. , 218 Cal. App. 3d 1446 (Cal. App. 1st Dist. 1990)

ND: N.D. CENT. CODE ” 26.1-32-01, 26.1-32-03, and W. Nat'l Mut. Ins. Co. v. Univ. of N.D. , 643 N.W.2d 4 (N.D. 2003)

WA: Safeco Ins. Co. v. Hirschmann , 773 P.2d 413 (Wash. 1989)

WV: Murray v. State Farm Fire & Cas. Co. , 509 S.E.2d 1 (W. Va. 1998) and Tastee Treats, Inc. v. United States Fid. & Guar. Co. , 2008 U.S. Dist. LEXIS 55727 (S.D. W. Va. July 21, 2008)

There is another line of cases where courts acknowledge the enforceability of ACC clauses, but refuse to apply them where they are construed to conflict with other policy provisions. For example, in Association of Apartment Owners of Imperial Plaza v. Fireman's Fund Insurance Co., 939 F. Supp. 2d 1059 (D. Haw. 2013), the policy contained an exception to a pollution exclusion which provided “but, if the same is the direct result of a covered cause of loss, we do insure direct physical loss or damage to covered property caused by the actual contact of the covered property with the pollutants.” The court ruled that the plain language of the exception allowed coverage for pollution caused by a covered cause of loss and prevailed over the ACC clause in the policy. See also La Louisiane Bakery Co., Ltd. v. Lafayette Ins. Co., 61 So.3d 17, 29 (La. App. 5 Cir. 2011) (finding “discrepancy between the 'Utility Service Exclusion' contained in the ACC part of the contract and the 'Power Services Extension' contained in the 'Coverage Extensions' part of the contract [to be a] conflict creating ambiguity”); and Spece v. Erie Ins. Group, 850 A.2d 679 (Pa. Super. Ct. 2004) (finding sump-pump exclusion ambiguous because it conflicted with the policy's coverage for “loss caused by a power interruption occurring on the residence premises,” and thus reasoning that the policy's ACC clause was irrelevant).

In another noteworthy case, the U.S. Court of Appeals for the Ninth Circuit recently ruled that the ACC clause is inconsistent with the standard fire policy. In Stankova v. Metro. Prop. & Cas. Ins. Co., 788 F.3d 1012 (9th Cir. Ariz. 2015), the homeowner's attached garage was damaged as a result of a massive wildfire, but the fire did not reach the house. The wildfire destroyed vegetation on a nearby hillside, and almost a month later, the house was destroyed by a mudslide. The insurer paid for the damage to the garage, but denied coverage for damage to the house based upon the water damage and earth movement exclusions. The Arizona District Court granted summary judgment in favor of the insurer on the basis that the damage to the house was caused by the excluded perils, and could not, as a matter of law, be directly caused by fire, as required under Arizona law. The Ninth Circuit reversed, and ruled that the ACC clause in a homeowner's policy is “inconsistent with Arizona's standard fire policy, which insures against all direct loss by fire,” notwithstanding that Arizona courts have upheld the validity of ACC clauses. (Emphasis added.) The Ninth Circuit also ruled that there was a triable issue as to whether the insured's damage was caused by fire or the excluded perils. It is somewhat surprising that the Ninth Circuit (and the Arizona District Court below which upheld the ACC clause) did not address whether the causal link between the damage to the garage and the damage to the house, which occurred approximately one month apart, was too tenuous for application of an ACC clause. This is a narrow ruling, and ACC clauses should generally be enforced for non-fire losses.

Case Law Discussion

In recent years, catastrophe storms have generated significant litigation, frequently involving interpretation of ACC clauses, mostly in the context of whether the insured's loss was caused by wind, a covered peril, and flood, an excluded peril. For example, following Hurricane Katrina, courts closely scrutinized sequential loss language in water exclusions' ACC clauses. We conclude with a look at these cases in next month's issue.

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Benjamin Fleischner, Ann Marie Petrey and Eric Leibowitz are members of the insurance coverage practice at White, Fleischner & Fino LLP. This article is written for educational purposes only and does not constitute legal advice or reflect any advice given by White Fleischner & Fino LLP to its clients or the views and opinions of any clients of the firm.