2018 Hurricane Season Promises to Pack a Punch

2018’s first named tropical weather system already struck Florida and states near the Gulf of Mexico. Sub-tropical storm Alberto came a full week before the official start of the 2018 Atlantic Hurricane Season and serves as an unpleasant reminder of 2017’s devastating storm impact. Last year’s hurricane season was one of the most active and destructive in recorded history, producing seventeen named storms and causing over $250 billion of damage across the Gulf Coast and Puerto Rico. And, according to the National Oceanic and Atmospheric Administration’s (“NOAA”) forecast, this year’s hurricane season could be dangerously similar. 

The NOAA is predicting between ten and sixteen named storms in the 2018 Atlantic Hurricane Season. Named storms are those with sustained winds exceeding 39 mph, which include all hurricanes and tropical storms. “Major storms,” featuring sustained winds exceeding 111 mph, can destroy roofs, level supporting structures, and launch projectile debris at deadly speeds. Although high winds alone can cause serious damage, hurricanes’ intense rainfall and storm surges can devastate local communities. Water damage increases even further when hurricanes stall, like 2017’s Hurricane Harvey did, dumping over thirty-three trillion gallons of water across the southern U.S., flooding much of Houston, southern Texas, and parts of Louisiana. Harvey demonstrated the devastating effects of combined winds and heavy rain and alone caused over $125 million in damage, tying 2005’s Hurricane Katrina as the costliest hurricane in recorded history. 

Should the 2018 hurricane season bring similar storms to areas already damaged by extreme weather, the combination of unrepaired damage from storms like Harvey and new property damage caused by wind and flooding could pose concurrent causation issues. The doctrine of concurrent causation describes when two causes of loss combine to cause property damage. While the doctrine often comes into play when covered and excluded perils combine to cause damage – for example, excluded flood and covered wind damage – it also governs when a property has pre-existing storm damage when it is struck by a later storm. If a policy covers only one of the causes of loss (or is in place for only one of the events of damage), the damages must be segregated and attributed accordingly. For example, if insurers cover losses exclusively caused by wind, but generally exclude flood damage, the flood damage must be carved out and segregated from the claimed wind damage. Texas law’s interpretation of the concurrent causation doctrine is unique because the insured, rather than the insurer, has the burden to: (1) establish that the property damage was caused by the covered peril; and (2) provide evidence of the amount of damage caused by the covered peril. This charges the policyholder with segregating damage. Assuming policyholders meet that burden, they may recover for damage caused by the covered peril only. But if the same damage is caused by a combination of those perils (called “indivisible loss”), that injury may be totally unrecoverable. However, “indivisible” losses are difficult to categorize, and it behooves both parties to thoroughly document existing damage to ease the task of segregation. 

Notably, under Texas law, the presence of an Anti-Concurrent Causation clause (“ACC” clause)—standard in most policies—expressly precludes recovery for damage resulting from concurring or sequential causes if any of the causes contributing to the damage is an excluded cause of loss . If, for example, an insurance policy excludes flood, and water and wind (a covered cause of loss) combine to damage a property, ACC clauses exclude coverage for the damage, even if the property may have first been damaged by wind. In Texas, these clauses act to wholly preclude recovery in the event of an “indivisible” loss, even if a covered peril contributed to the damage. But where traditional policies exclude flood coverage, FEMA’s National Flood Insurance Program (NFIP) operates to compensate a small percentage of homeowners. 

The critical task this hurricane season, then, will be to identify and segregate property damage that: (1) was caused by a prior storm(s), but remains unrepaired; (2) occurred during the pendency of a prior policy that is no longer in effect; or (3) was caused by a combination of excluded and covered causes of loss. In the likely event of a strong storm this year that causes damage in areas affected by previous storms, and in the absence of an ACC clause, a Texas court would employ the concurrent causation doctrine. This would permit recovery for damage caused solely by a covered loss—wind damage from Harvey, for example—even when a non-covered loss also damages the property. However, where damage is “indivisible” and an ACC clause applies, unrepaired Harvey damage exacerbated by damage from a new storm could be considered concurrent or sequential, and courts likely would not permit recovery. Accordingly, the task of segregating damage looms large, and underscores the importance of accurately documenting existing damage—both covered and excluded—resulting from Hurricane Harvey and other previous storms. With sub-tropical storm Alberto, the 2018 Atlantic Hurricane Season has already begun. The Gulf Coast is no stranger to hurricanes’ strong winds and flood potential, but the amount of unrepaired Harvey damage and the possibility of equally strong storms in 2018 present unique coverage concerns. Consequently, insurers should be prepared to address concurrent causation issues heading into this year’s Atlantic Hurricane Season. 

For more detail, please see “When Perils Combine—Concurrent Causation and Texas Law,” authored by Shannon O’Malley of Zelle LLP, published in Claims Journal on August 31, 2017.

Posted by Shannon O'Malley and Zane Cavender