Many commercial and residential property insurance claims arising from major hurricanes like Hurricane Harvey present damage caused by multiple causes of loss, some of which may be covered (e.g., wind) and some of which may not (e.g., flood). One of the recurrent legal issues in these multiple causes of loss claims is the treatment of anti-concurrent causation clauses under the applicable state law.
The Texas Supreme Court addressed the enforceability of an anti-concurrent causation clause for the first (and to date, only) time in JAW the Pointe, LLC v. Lexington Ins. Co., 460 S.W.3d 597 (Tex. 2015) (“JAW”). The anti-concurrent clause at issue in that case provided that: “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.” JAW, 460 S.W.3d at 604 (emphasis added).
In JAW, the Court considered the application of the anti-concurrent causation clause in the context of a dispute about whether a policyholder was entitled to Ordinance or Law coverage for the cost to bring an apartment complex into compliance with current building codes. The municipality’s code enforcement decision was based on its review of the policyholder’s building permit application, which reported damage from Hurricane Ike caused by both wind (covered) and flood (excluded) in excess of fifty percent of the overall value of the apartment complex. The policyholder argued that the covered wind damage alone caused enough damage to trigger the code upgrade requirement, and therefore, the code upgrades should be covered.
The Texas Supreme Court rejected the policyholder’s claim for Ordinance or Law coverage. Under the anti-concurrent causation clause, the policyholder was not entitled to coverage for loss or damage caused “concurrently or in any sequence” with an excluded cause of loss, such as flood. Regardless of what could have triggered the enforcement of the code upgrade requirement, the municipality’s enforcement decision was actually based on the wind and flood damage included in the policyholder’s permit application.
Following the decision in JAW, it is clear that anti-concurrent causation clauses are, as a general matter, enforceable under Texas law. How they will be interpreted in the context of various coverages and circumstances will likely be a recurrent issue in property claims arising from Hurricane Harvey.