While Puerto
Rico was spared a direct hit from Hurricane Irma, it now appears it will face
the full brunt of Hurricane Maria. Maria is projected to strike Puerto Rico as
a Category 4 Hurricane. Many of the same concurrent causation issues that we
predicted may occur with Irma are also likely to exist with Maria and may be
even more pronounced with the increased severity of damage from Maria.
Therefore, we
thought it might be helpful to provide a re-post of our original analysis of
concurrent causation in Puerto Rico:
Many policies
may exclude flood and limit or exclude losses arising from power interruption.
Combined with the significant wind damage that is expected, it is inevitable
that disputes over the extent of covered versus non-covered loss will arise.
Unlike most
U.S. jurisdictions, Puerto Rico has a bilingual, mixed legal system. Due to
Puerto Rico’s colonial history with Spain, its legal system was modeled under
the Spanish civil code. The civil code is the primary legal source in this
jurisdiction and is applied to areas such as contractual and property
law.
It should also
be noted that the local legal system and courts operate in Spanish. It is only
at the Federal level that English is used. Even in those cases, federal courts
often rely on local legal opinions issued in Spanish.
In considering
damage caused by covered and excluded losses, Puerto Rico has adopted the
efficient proximate cause doctrine. In Fajardo Shopping Ctr., S.E. v. Sun All.
Ins. Co. of Puerto Rico, 167 F.3d 1, 7 (1st Cir. 1999), the First Circuit,
applying Puerto Rican law, applied the efficient proximate cause test to
determine if damage to a roof was proximately caused by winds from Hurricane
Hugo, a covered loss, or faulty design or construction, an excluded loss. Id.
The court ultimately concluded that the insured had proven that the winds from
Hugo were the efficient proximate cause of the loss and therefore coverage
applied. Id. at 11. The court concluded that the insured need not prove
that the wind was the sole cause of damage to prevail, only that the damage
would not have occurred in the absence of the wind. Id. Fajardo relied
on several local Spanish language opinions.
While many
policies may include typical Anti-Concurrent Causation (“ACC”) clauses, it does
not appear that Puerto Rican courts have been asked to evaluate the
enforceability of these clauses, or how these clauses would impact the
application of the efficient proximate cause analysis. These clauses will
typically state:
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.
In
jurisdictions that enforce these clauses, they will act to exclude loss that
was concurrently caused by both a covered loss and an excluded loss. See JAW
The Pointe, L.L.C. v. Lexington Ins. Co., 460 S.W.3d 597, 609 (Tex. 2015).
An ACC
provision overrides the efficient proximate cause doctrine in applicable
circumstances. Generally (with some exceptions in particular jurisdictions)
these clauses are enforceable in the US. At this time, nothing suggests that
that the clause is unenforceable in Puerto Rico or that insurers cannot adjust
losses pursuant to the plain meaning of the policy wording. Because it is an
issue of first impression, however, it will be important to monitor any legal
challenges to it and the development of the case law on this issue.