On November 6, the Consumer Federation of America sent a letter to elected officials in states affected by Hurricane Sandy in which it suggests that regulators should “block application” of anti-concurrent causation clauses:
A typical anti-concurrent causation (ACC) clause might read, “[w]e 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.” The list almost always includes flooding as an exclusion. Different insurers have different formulations of the clause in place in their policies. The ACC clause was intended to limit the insurer’s liability when a covered risk damages a structure at about the same time as an excluded risk, regardless of the order of such events. After Hurricane Katrina, courts were asked to determine whether the insurance companies’ language supersedes the common law doctrine of proximate cause. While many of the courts ruled that insurance companies could, in fact, use ACC clauses to avoid the common law rule of proximate cause, others found the clause too ambiguous, ruled the other way.
CFA calls on you to block application of this clause for victims of the winds and floods of Sandy in your state.
This type of post-hoc modification of insurance contracts potentially could be unconstitutional, and could have a serious adverse impact on the insurance industry. Anti-concurrent causation clauses have been widely upheld and their use prohibited only in a few states. For examples of how anti-concurrent causation clauses were applied in the Hurricane Katrina litigation with respect to segregation of wind damage from flood damage, see the U.S. Court of Appeals for the Fifth Circuit’s opinion in Leonard v. Nationwide Mutual Ins. Co., 499 F.3d 419 (5th Cir. 2007) and the Mississippi Supreme Court’s opinion in Corban v. USAA, 20 So. 3d 601 (Miss. 2009).