Ensuing or resulting loss clauses in homeowners’ and commercial property policies are included in the prefatory language to some, but not all, exclusions. Typically a property policy has a first set of exclusions (section “1” or “A”) that include an anti-concurrent causation clause and do not have an ensuing loss clause. A second set of exclusions (which may be labeled section “2” or “B”) typically do not include an anti-concurrent causation clause and have an ensuing or resulting loss clause. In a typical ISO policy form, for example, this second set of exclusions might include the “Weather conditions” exclusion, the “Acts or decisions” exclusion and the “Faulty, inadequate or defective” exclusion.
Ensuing loss clauses have a variety of different forms. One form of this clause is:
We do not insure for loss to property described in [applicable coverages] caused by any of the
following. However, any ensuing loss to property described in [applicable coverages] not
excluded or excepted in this policy is covered.
Another form of this type of clause is as follows:
But if a loss not otherwise excluded results, we’ll pay for that resulting loss.
Other policy wording provides as follows:
In the event an excluded cause of loss results in a Covered Cause of Loss, the Company
will be liable only for such resulting loss or damage.
A classic example of an ensuing loss is the San Francisco earthquake of 1906, which led to widespread fires. Loss caused an earthquake was generally excluded then (and now) under property insurance policies, but insurers intended to provide coverage for damage caused by fire, which was a separate and independent cause of loss.
The U.S. Court of Appeals for the Sixth Circuit has explained that an ensuing loss clause serves two purposes: (1) the clause reaffirms “that what is not excluded is covered”; and (2) the clause “establishes that chronologically later-in-time damages ‘caused’ by ‘a peril not otherwise excluded’ remain covered.” TMW Enters., Inc. v. Federal Ins. Co., 619 F.3d 574, 577-79 (6th Cir. 2010). Courts have repeatedly recognized that, for the ensuing loss clause to apply, there must be a “subsequent ensuing cause of loss separate and independent from the initial excluded cause of loss . . . .” Weeks v. Co-Operative Ins. Cos., 817 A.2d 292, 296 (N.H. 2003) (emphasis added). This is so that the ensuing loss clause, as an exception to an exclusion, does not eviscerate the exclusion by allowing coverage for a loss that was caused by the excluded cause of loss. A leading case on this point is Acme Galvanizing v. Fireman’s Fund Ins. Co., 270 Cal. Rptr. 405 (Cal. Ct. App. 1990).
It is also important to note that an ensuing or resulting loss clause does not provide coverage where the claimed “second loss” is separately excluded by another exclusion in the policy. For example, if faulty design or construction of a dam or levee leads to a flood, even assuming that the flood was a separate and independent cause of loss that would be an ensuing loss, the damage caused by the flood would not be covered if it is separately excluded by a flood exclusion.
We have discussed on a number of occasions the issue of causation when there are multiple causes of loss, some covered and some not covered. Most jurisdictions apply what is known as the efficient proximate cause analysis with a minority of jurisdictions applying the concurrent causation analysis, both of which are explained on our blog … Continue Reading
In National Railroad Passenger Corp. v. Aspen Specialty Ins. Co., 2016 U.S. App. LEXIS 16074 (2d. Cir. Aug. 31, 2016), Amtrak sought the entire $675 million of available coverage from a number of its insurers for damages incurred as a result of Superstorm Sandy. Most of Amtrak’s damages resulted from flooding of tunnels under the … Continue Reading
In New London County Mut. Ins. Co. v. Zachem, 145 Conn. App. 160 (2013), the Connecticut Appellate Court defined the term “vacant” in a vandalism exclusion to mean that a dwelling is “unoccupied,” and does not otherwise contain “items ordinarily associated with habitation,” such as furniture or personal property. The Appellate Court further applied its … Continue Reading
In insurance fraud cases involving actual or alleged destruction of evidence by the insured, an issue often arises regarding whether an adverse inference instruction is appropriate, and, if so, what form it should take. The Second Circuit recently approved a “light” form of adverse inference instruction that allowed the jury to make an adverse inference … Continue Reading
A New York trial court recently addressed the definition of “collapse” and the meaning of the ensuing loss clause in Copacabana Realty LLC v. Fireman’s Fund Insurance Company, No. 10-2919, 2013 NY Slip Op 30960(U) (NY Sup. Ct. Suffolk County Apr. 29, 2013), granting the defendant insurer’s motion for summary judgment on both issues and … Continue Reading
Ensuing loss clauses can be a common source of litigation when insureds argue that part or all of the loss is purportedly caused by some event occurring subsequent to the excluded cause of loss. We provide an overview of ensuing loss clauses here. The Second Circuit recently affirmed the Southern District of New York’s holding … Continue Reading
Typically, disputes over ensuing loss provisions focus on whether the “secondary” loss complained of is actually separate and distinct from the excluded loss, or whether the “secondary” loss is separately excluded. In Platek v. Town of Hamburg, 948 N.Y.S.2d 797 (App. Div. 4th Dep’t 2012), the Fourth Department considered whether the exception to the applicable … Continue Reading
Ensuing Loss Clause Does Not Create Coverage For Otherwise Excluded Losses Property insurance policies often contain exclusions with ensuing loss provisions, which state that an ensuing loss not excluded is covered. Whether a loss constitutes a covered ensuing loss is therefore frequently a critical issue in a coverage determination. In Sprague v. Safeco Insurance Company of … Continue Reading