A multiple cause loss is exactly what it sounds like; it
is a loss with multiple, or a combination of, causes. An example would be a bursting water pipe
that was caused by both cold weather and a homeowner’s negligent failure to maintain
above-freezing temperatures in a home.
These losses become significant for insurance purposes when one cause of
a loss is a covered peril, but another cause is excluded from coverage.
Courts have traditionally applied one of two separate
doctrines to determine the existence of coverage for multiple cause losses: the
efficient proximate cause doctrine or the concurrent cause doctrine. Under
the efficient proximate cause doctrine, when there are multiple causes of a
loss, the cause that set the other causes in motion is deemed the cause of the
loss for purposes of determining the availability of coverage. In other words, under the efficient proximate
cause doctrine, a loss is generally covered if it is caused by a covered peril
that sets an uncovered peril in motion; but a loss is not covered if it is
caused by an uncovered peril that sets a covered peril in motion. Conversely, under the concurrent cause
doctrine, coverage may be available when a covered peril is a cause of the loss
even though it is not the primary or efficient cause of the loss.
The concurrent cause doctrine is the more insured-friendly
of the two doctrines. To avoid coverage
where the concurrent cause doctrine is applicable, an insurer may be required
to show that none of the multiple causes of the loss is a covered peril, whereas
to avoid coverage where the efficient proximate cause doctrine is applicable, the
insurer is only required to show that the primary or efficient cause of the
loss is excluded. Because the concurrent
cause doctrine increases an insurer’s burden of proof, it likely also will increase
the costs to adjust the loss in the form of testing and experts.
A December 2016 Florida Supreme Court decision added
clarity to the Florida insurance market with respect to multiple-cause
losses. In Sebo v. Am. Home Assurance Co., 208 So. 3d 694 (Fla. 2016), the
Florida Supreme Court adopted the concurrent cause doctrine in a case involving
an “all risk” homeowners’ policy. The
insured property was an $8 million home, and was eventually demolished as a
result of extensive water and wind damage.
It was undisputed that defective construction combined with rainwater
and hurricane winds caused the damage. The
policy excluded losses caused by defective construction, but it covered losses
caused by weather. Ultimately, the
court applied the concurrent cause doctrine and found that the entire loss was
covered, reasoning that “where weather perils combine with human negligence to
cause a loss, it seems logical and reasonable to find the loss covered by an
all-risk policy even if one of the causes is excluded from coverage.” Sebo
reversed a prior Florida Court of Appeals decision that applied the efficient proximate
cause doctrine.
The application of the concurrent cause doctrine in Sebo will likely have a significant
impact on the Florida insurance market.
But, perhaps as importantly, Sebo
also highlights the significance of careful drafting of policy language. The court in Sebo applied the concurrent cause doctrine because the policy “did
not explicitly avoid applying [the concurrent cause doctrine].” In other words, had the policy excluded
coverage for losses when any excluded peril contributes directly or indirectly
to a loss – sometimes referred to as an “anti-concurrent causation clause” –
the Sebo court likely would have found no coverage. Now more than ever, the inclusion of such
clauses in policies issued to Florida insureds will be of utmost importance to
insurers doing business in Florida.
Published by Nick Dolejsi
Published by Nick Dolejsi
