Anti-concurrent Clause and Faulty Workmanship Exclusion

Larry P. Schiffer | Squire Patton Boggs

Anti-concurrent clauses preclude coverage even where the loss is partially caused by a covered cause of loss. This clause received considerable attention in hurricane-related coverage litigation following Hurricane Katrina. In a recent case, the Eighth Circuit Court of Appeals addressed the anti-concurrent clause in the context of damage allegedly caused in part by faulty workmanship.

In Joseph J. Henderson & Sons, Inc. v. Travelers Property Casualty Insurance Co. of America, No. 18-3341 (8th Cir. Apr. 20, 2020), a contractor installed panels on a building as part of an environmental project. The panels on the roof of the building were damaged during a windstorm. The contractor sought coverage under the owner’s (city) builder’s risk policy. The insurer disclaimed coverage because of the alleged faulty workmanship by the contractor based on the policy’s exclusion for faulty workmanship. The contractor sued seeking coverage and the insurer lost its motion for summary judgment. After a jury trial, judgment was entered in favor of the the contractor finding coverage. The appeals court affirmed.

The anti-concurrent clause was contained in the external event exclusion. It provided that the insurer would not pay for losses caused by certain external events. The exclusion stated that the policy would not pay under those circumstances regardless of any other cause or event that contributed concurrently or in any sequence to the loss. The court identified this as the anti-concurrent clause, also known to many of us as an anti-concurrent causation clause.

The policy had another exclusion for faulty workmanship. This is the exclusion relied upon by the insurer. The court found it important that the faulty workmanship exclusion did not include anti-concurrent language. In fact, the court noted that the exclusion provided that it did not apply “if loss or damage by a Covered Cause of Loss results.”

In affirming the denial of summary judgment, the appellate court rejected the insurer’s argument that the faulty workmanship exclusion included an anti-concurrent provision. The court construed the exclusion to provide that the policy would not pay for damage caused by faulty workmanship, except when the damage is caused in part by a covered event, such as a windstorm. The court concluded that the faulty workmanship exclusion did not contain an anti-concurrent provision.

The court also rejected arguments that the faulty workmanship was the sole proximate cause of the damage. Instead, the court held that the faulty workmanship and the windstorm were independent causes even though the damage could not have been caused by either independently of each other. Based on the evidence, the court held that the jury could have found that the contractor’s faulty workmanship was not the sole proximate cause of the damages. Accordingly, the denial of summary judgment was affirmed.

Anti-Concurrent Clause Enforced Where Loss Was Caused By Covered and Non-Covered Perils

Paul LaSalle | Property Insurance Coverage Law Blog | May 29, 2019

Last week, I had the pleasure of presenting at the Spring Meeting & Seminar of the Professional Public Adjusters Association of New Jersey (“PPAANJ”). One of the more thoroughly discussed topics during my presentation was a recent New Jersey federal court decision involving insurance policy language commonly known as an anti-concurrent/anti-sequential causation clause.1 The clause bars coverage when two identifiable causes-one covered and one not covered-contribute to a single loss.2

In that case, after Superstorm Sandy, an insured submitted a claim for sustained damage to its homeowner’s insurer. The insurer inspected the property and determined that high winds caused and contributed to damage to certain portions of the property. The insured then hired its own inspector to assess the damage and prepare an estimate of the costs of repairs. The insured’s inspector identified the same portions of the property as wind-damaged as the insurer’s inspector (though with more extensive and costly repairs). The insured also hired a causation expert, who concluded that first wind, then flooding, caused additional damage to the insured’s in-ground pool, boardwalk and electrical transformer.

The insurer sought to dismiss the insured’s damages claim as to to the in-ground pool, boardwalk and electrical transformer arguing that the anti-concurrent/anti-sequential causation clause in the insurance policy barred any recovery for damages arising from both wind (a covered peril) and flood (an excluded peril).

The court agreed with the insurer, noting that federal and state courts in New Jersey have applied and enforced similar anti-concurrent/anti-sequential causation provisions “to exclude all coverage for a loss occasioned by a flood, even when a flood acts concurrently or sequentially with a covered peril.” The policy’s anti-concurrent/anti-sequential clause barred recovery for the in-ground pool, boardwalk and electrical transformer because the insured’s own expert concluded that first wind, and then flooding, caused the damage to those items.

This case highlights that—depending on your jurisdiction—an anti-concurrent/anti-sequential causation clause within an insurance policy may apply to bar a claim even where a covered peril causes damage prior to an excluded peril.
1 Zero Barnegat Bay, LLC v. Lexington Ins. Co., 2019 WL 1242436 (D.N.J. March 18, 2019).
2 By way of example: “We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.”