In Stor/Gard, Inc. v. Strathmore Ins. Co., No. 12-1650, 2013 U.S. App. LEXIS 11015 (1st Cir. May 31, 2013), the First Circuit rejected the notion that a 2% contribution to a loss could be a “cause” of the loss. Defendant Strathmore Insurance Company (“Strathmore”) insured Plaintiff SGI, which owned property with self-storage warehouses, and Plaintiff Stor/Gard, Inc., which managed the property (together, “Plaintiffs”). Id. at *2. At one edge of the insured property was a retaining wall at the bottom of a steep slope rising above the property. Id. In March, 2010, during or after a three-day snowstorm, soil from the slope ran over the retaining wall, onto the property, causing a collapse (the “Loss”). Id. at *2. Plaintiffs made a claim and Strathmore obtained two engineering reports reflecting that water from the storm had soaked into the slope above the retaining wall causing the landslide that caused the loss, and that the loss was due to “a combination of heavy rain infiltrating into the slope and the inadequate subsurface drainage behind the retaining wall.” Id. at *8-9 (quotations omitted).  Both reports agreed that though there may have been some nominal amount of leakage from a drain pipe, it “was not a cause or contributing factor,” that the loss was due to “slope and retaining wall failure.” Id. (quotations omitted).  One of the reports indicated the drain leakage “represented merely 2 percent of the water [that] infiltrated the area.” Id. (quotations omitted).

Strathmore denied Plaintiffs’ ensuing claim pursuant to, in relevant part, the landslide, collapse, and weather exclusions in the policy, and Plaintiffs sued, alleging breach of contract and violation of Massachusetts’ unfair and deceptive practices statute, M.G.L. c. 93A.  Id. at *9. A magistrate judge sitting by consent of the parties granted Strathmore’s motion for summary judgment and the First Circuit affirmed.  Id. at *1, *9-10.

The policy contained a standard ISO earth movement exclusion with an anti-concurrent causation clause. 

The “additional coverage – collapse” section, however, provided coverage for, in relevant part, “direct physical loss or damage” if “caused by collapse of a building or any part of a building” and “caused by” a listed peril.  Id. at *6. Among the listed perils was, indirectly, “water damage,” meaning “accidental discharge or leakage of water . . . as the direct result of the breaking apart or cracking of a plumbing . . . or other system” on the property. Id.

The magistrate rejected Plaintiffs’ argument that the anti-concurrent causation provision in paragraph 1 of the exclusions section does not apply if an “additional coverage” (here, collapse) is the concurrent cause because the “additional coverage” section does not itself have an anti-concurrent causation provision. Id. at *10-11.  Instead, the magistrate agreed with Strathmore’s argument that the un-contradicted evidence was that the Loss was caused by a landslide and was excluded from coverage, and that the causes of loss in the “additional coverage” section “are still subject to the exclusions in the exclusions section.” Id. at *10-11 (quotations omitted, alterations in the original).

Reviewing the decision de novo, the First Circuit affirmed under simpler reasoning.  Id. at *9, 12. The court reviewed Massachusetts’ law of causation, explaining that Massachusetts  follows the efficient proximate cause approach to losses with multiple causes, meaning coverage exists if either “the predominant cause of the loss is a covered peril,” or a covered cause of loss “set in motion a train of events leading to a loss.” Id. at *4-5 (quoting Boazova v. Safety Ins. Co., 968 N.E.2d 385, 394 n.4 (Mass. 2012) (quotations omitted), Jussim v. Mass. Bar Ins. Co., 610 N.E.2d 954, 955-56 (Mass. 1993) (quotations omitted)). However, the court explained further that Massachusetts law has enforced anti-concurrent-cause provisions which “contract around” the concurrent-cause doctrine.  Id. at *5.

The First Circuit rejected the plaintiffs’ argument premised on the leaking pipe being a 2% cause of the loss. The court held that the 2% contribution from the leaking drain pipe simply could not be “the predominant cause of the loss” and could not have “put in motion events that caused the collapse.” Id. at *17 (citations omitted). Since the water did not cause the loss, there was no “additional coverage” for collapse, and there was no concurrent causation issue in the first instance.

This holding could be helpful for insurers confronting circumstances in which a potentially covered cause of loss is, at most, a small factor in causing the loss.