Anti-Concurrent Clauses

For example, following Hurricane Katrina, courts closely scrutinized sequential loss language in water exclusions' ACC clauses. The courts have generally upheld ACC clauses where the insured's loss and damage resulted from both the covered peril of wind and the excluded peril of water. See Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419 (5th Cir. 2007); Tuepker v. State Farm Fire & Cas. Co., 507 F.3d 346 (5th Cir. 2007); and Dickinson v. Nationwide Mut. Fire Ins. Co., 2008 U.S. Dist. LEXIS 34354 (S.D. Miss. Apr. 25, 2008). But see Corban v. United Servs. Auto. Ass'n, 20 So. 3d 601 (Miss. 2009) (ACC clause in the water damage exclusion was inapplicable to exclude coverage where the damage occurred at different times resulting in separate losses). Courts have, however, declined to exclude coverage for wind damage that preceded flooding damage. These courts determined that wind and water caused separate losses. See, e.g., Broussard v. State Farm Fire and Cas. Co., 523 F.3d 618 (5th Cir. 2008); see generally Mills v. State Farm Fire & Cas. Co., 2007 U.S. Dist. LEXIS 37411, *10 (S.D. Miss. May 18, 2007) (“In my view, if there is wind damage covered under a homeowners policy, the right to collect the insurance applicable to that damage would come into existence at the time the damage occurred. If the insured property were later more severely damaged by flooding, the wind damage would not become payable under the flood policy; the insurer under the homeowners policy would still be responsible for this wind damage.”)

More recently, in the context of Sandy and Hurricane Irene, the following cases have upheld ACC clauses involving loss and damage. See Johnson Gallagher Magliery, LLC v. Charter Oak Fire Ins. Co., 2014 U.S. Dist. LEXIS 35548 (S.D.N.Y. Mar. 18, 2014) (Sandy claim); and Ashrit Realty LLC v. Tower Nat'l Ins. Co., 2015 N.J. Super. Unpub. LEXIS 107 (App. Div. Jan. 20, 2015) (in a case involving an Aug. 14, 2011 storm and Hurricane Irene, finding that even if hidden decay, a covered cause of loss, was a cause of the loss, the cause of the damage was earth movement, including soil erosion caused by the action of water under the ground's surface, and there was no coverage based upon exclusions for earth movement and water with ACC clause).

The recent case of JAW The Pointe, L.L.C. v. Lexington Ins. Co., 460 S.W.3d 597 (Tex. 2015) involved damage from Hurricane Ike to an apartment complex in Galveston, TX, owned by the insured. The hurricane's damage triggered the application of various city ordinances requiring that all apartment complexes that were “substantially damaged” had to be brought into compliance with city code requirements. The insured's policy contained provisions for Ordinance or Law Coverage, but they operated only when a covered loss caused the enforcement of the law or ordinance. In this case, the damage resulted from both wind and flooding, the latter of which was excluded from coverage. The Supreme Court of Texas found that the flood damage and wind damage combined to cause the losses. As both types of damage contributed concurrently, or sequentially, to the insured's losses, the ACC clause excluded coverage.

A point to keep in mind is that claims involving ACC clauses will be both fact- and expert-driven, as highlighted in the recent decision in Cashew Holdings, LLC v. Canopius US Ins., Inc., 2013 U.S. Dist. LEXIS 125471 (E.D.N.Y. Sept. 3, 2013). In the context of whether a loss was caused by the excluded peril of flood or the covered peril of wind, the insured's expert was of the opinion that while wind forces were the primary cause of the loss, water played some role, albeit a smaller one, and the court found that the “water” exclusion containing an ACC clause applied. The court heard testimony from the insured's engineer that there was significant wind damage to the building and from the insurers' engineer that the damage was either pre-existing or caused by flood. The court found the insurers' engineer more credible. As in any coverage dispute, this case highlights that it will be a battle of the credibility of the experts, with the insured's expert to demonstrate why the insured's loss was due to a separate, non-excluded cause of loss, and the insurer's expert to demonstrate intertwining of causes.

Conclusion

Enforcement of ACC clauses, as with most insurance coverage issues, depends on the policy wording, the specific facts and the applicable law. Interpretation of ACC clauses is highly state-specific, but the increasing amount of litigation and jurisprudence arising out of events, such as Hurricane Sandy, may contribute to clearer judicial guidelines over the course of the next several years.

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.