Court in Montana Applies Anti-Concurrent Causation Clause to Earth Movement Exclusion

Alycen A. Moss and Elliot Kerzner | Property Insurance Law Observer

A district court in Montana recently applied an anti-concurrent clause in a property insurance policy to preclude coverage based on an earth movement exclusion. In Ward v. Safeco Ins. Co. of Amer., No. 1:19-CV-0133-SPW, 2021 WL 3492294 (D. Mont. Aug. 9, 2021), the insured’s tenant reported that water was leaking from a main pipe serving the insured’s property, and the leak caused some soft spots to form in the floor of the kitchen. The insurer and agent’s subsequent inquiries led to the understanding that a leak under a slab affected the soil, which caused the house to settle, which then caused damage to the house.

The insurer then retained an engineering firm to investigate the insured’s claim. Following an inspection of the property, the engineering firm reported that a portion of the cracks in the concrete perimeter were not new and were caused by the shape of the structure on which the house sat. As to the newer cracks in the foundation, the firm concluded that the settlement could have been caused by a lack of care taken to make sure the foundation was supported by consolidated soil during the excavation of the new water line.

Based on the engineering report, the insurer determined that coverage for the damage was precluded by the policy’s earth movement and water damage exclusions, and denied the claim. The insured then filed a claim with the Montana Commissioner of Securities and Insurance, which provided the insurer with a report from a structural engineer stating that the water line break was the cause of the soil settlement resulting in the floor slab settlement. The insurer stood by its position that the damage was not covered, and the insured sued for coverage in a Montana district court.

In her lawsuit, the insured argued that the exclusions relied on by the insurer were ambiguous. In particular, she contended that the earth movement exclusion was limited to large earth events. However, the court rejected the insured’s arguments, holding that the policy’s earth movement exclusion was unambiguous and applied to any earth movement, no matter how small. The court further held that the term “earth” was clearly intended to include all natural materials that comprise the surface of the earth, including rocks and soil.

The insured further argued that the loss should be covered pursuant to Montana’s proximate cause doctrine, which mandates coverage for excluded events when those events are caused by a covered peril. Even if there was earth movement, the insured contended that the proximate cause of the damage was the breaking of the water main, a covered peril.

The court rejected this argument based on the policy’s anti-concurrent clause, which stated that the insurer would not cover “loss caused directly or indirectly by any of the following [exclusions] . . . regardless of any other cause or event contributing concurrently or in any sequence to the loss.” Because the consolidation and shifting of the soil – an excluded peril – caused the claimed damage, coverage was precluded by the earth movement exclusion even if the damage was also caused by a covered peril. Accordingly, the court granted summary judgment to the insurer.

Under Ward, insurers in Montana can now rely on anti-concurrent causation clauses to deny coverage for property damage caused by an excluded peril, such as earth movement, even when the excluded peril is caused by a covered peril, such as a broken water pipe. Although Montana generally follows the proximate cause doctrine, parties may contract around this doctrine by including an anti-concurrent causation clause in their policies. As Ward demonstrates, a properly worded anti-concurrent causation clause serves to preclude coverage for excluded perils even when a covered peril may be the proximate cause of the loss.

Anti-Concurrent Causation Clause Eliminates Loss from Hurricane

Tred R. Eyerly | Insurance Law Hawaii

    The court found the insured was not covered for losses caused by Hurricane Laura due to the implementation of the policy’s anti-concurrent causation clause. Aegis Sec. Ins. Co. v. Lejeune, 2021 U.S. Dist. LEXIS 106804 (W. D. La. June 7, 2021). 

    At the time of the hurricane, the insureds’ home was covered by a manufactured home insurance policy issued by Aegis. The policy excluded coverage for damage “caused by, contributed to or aggravated by” flooding. The policy’s anti-concurrent causation clause read, “We do not pay for loss to the types of property covered under this policy caused 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.” The policy’s exceptions followed. 

    After the storm, the insureds submitted their claim. Aegis filed suit for declaratory judgment. Aegis relied upon reports that the manufactured home and barn owned by the insureds were damaged by winds, then displaced and destroyed by storm surge associated with the hurricane. The home first sustained damage from the storm’s high winds before it was displaced from its concrete piers by a 12 to 16 foot storm surge. 

    The court noted that the Fifth Circuit had held that an anti-concurrent causation clause like the one in this policy was not ambiguous and may properly exclude coverage for damages caused by a combination of an excluded peril and a non-excluded peril. Such provisions were not precluded by Louisiana statutory law, case law, or public policy. 

    The insureds asked the court to take judicial notice of the storm’s high winds and argued that their home was totaled and rendered uninhabitable by wind long before the storm surge arrived. Aegis, however, met its burden of showing that an exclusion applied. The insureds’ argument was insufficient to create a genuine issue of material fact on the applicability of the exclusion or their own ability to show that the damages were segregable.

    Accordingly, Aegis was entitled to a declaratory judgment. 

Florida Appellate Court Holds Anti-Concurrent Cause Provision in Exclusion Excludes Entire Loss When a Covered Cause Occurs Concurrently With an Excluded Cause

Derek R. Lenzen | Phelps Dunbar

A Florida appellate court held that where water damaged property through walls and windows (an excluded cause) and also through a door (a covered cause), the all-risk policy’s anti-concurrent cause provision controls, and coverage for the entire loss is excluded. Security First Ins. Co. v. Czelusniak, 45 Fla. L. Weekly D 1151, 2020 Fla. App. LEXIS 6494 (Fla 3d DCA May 13, 2020).

An insured reported that water entered the interior of the insured property and caused damage and mold growth. The insurer denied coverage, and the insured filed suit. It was undisputed that water entered the property through walls, windows and doors. The policy explicitly excluded loss caused by water entering through walls or windows. However, water entering through doors was not excluded. The trial court granted the insured’s motion for directed verdict pursuant to the concurrent clause doctrine outlined in the case Sebo v. American Home Assurance Co.,Inc., 208 So. 3d 694 (Fla. 2016) (when damage from an excluded cause occurs concurrently with a covered cause so that a fact-finder is unable to separate the two causes, the entire loss is covered).

The appellate court reversed, finding that the trial court erred in not considering the anti-concurrent cause wording in the exclusion. The policy excluded coverage for damage from water entering through walls or windows “regardless of any other cause or even contributing concurrently or in any sequence to the loss.” The court held that because that damage occurred concurrently with the damage from water through doors, coverage for the entire loss is excluded due to the anti-concurrent cause provision in the exclusion.

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.”