An important issue that frequently arises in connection with devastating storms and other natural disasters is determining whether peril-specific exclusions, deductibles, or sub-limits found in commercial property insurance policies apply to claims for losses that have more than one contributing cause of loss. For example, Superstorm Sandy damaged many businesses and homes with a combination of high winds, severe rain, and flooding. Some property insurance policies may exclude coverage for flood losses and cover wind losses. Substantial debate has arisen over the years about the appropriate causation test and application of that test to multi-peril losses.
Some insurers attempt to address the causation requirement by modifying their policies in an attempt to limit policyholders’ coverage in connection with multi-peril losses. A recent commercial property policy contains the following provision:
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.
See ISO Properties, Inc., Commercial Property, Causes of Loss – Special Form, Form CP 10 30 06 07 (2007).
Such terms are often referred to as “anti-concurrent causation language.” Some states, such as California, Washington, North Dakota, and West Virginia bar or limit application of anti-concurrent causation clauses. Other courts find anti-concurrent causation language ambiguous and have construed the language in favor of coverage for the insured. See, e.g., Brooklyn Bridge, Inc. v. S.C. Ins. Co., 309 S.C. 141, 143-45 (1992). Until now, at least some New York courts recognize such provisions as enforceable.
Last week, New York Assemblyman Phil Goldfeder (D-Rockaway Beach) introduced a bill that would prevent insurance companies from using anti-concurrent clauses. The proposed bill A07455 amends New York insurance law as follows:
An insurer shall not deny or exclude coverage for any claim for loss or damage that would other-wise be covered by a policy solely because an event or peril not covered under the policy or specifically excluded under the policy was a contributing factor in such loss or damage or occurred simultaneously with the event or peril that was covered.
Yesterday, the New York State Assembly’s insurance committee approved the bill that is now eligible to be voted on by the entire Assembly. New York state Sen. James Seward (R/C/I-Oneonta), who chairs the Senate’s insurance committee, introduced a companion bill this week, which was referred to the Senate insurance committee.
If the bills pass into law, insurers covering businesses and homes in New York will not be able to rely on anti-concurrent causation clauses as a purported ground on which to deny coverage. Absent an anti-concurrent causation clause, insurers and policyholders addressing causation under New York law turn to New York’s efficient and dominant cause test that the Appellate Division espoused in Throgs Neck Bagels, Inc. v. GA Insurance Co. of New York, 671 N.Y.S.2d 66 (App. Div. 1998).
There, following a fire, the insured bagel shop sought coverage for property damage and the resultant lost business, and the insurer denied coverage for most of the claim based on a “law or ordinance” exclusion because the government ordered the building closed. If the insurance policy in that case contained an anti-concurrent causation clause, the insurer may have arguably possessed a plausible ground on which to deny coverage because the excluded government order contributed to the policyholder’s loss (putting to one side for present purposes whether the anti-concurrent causation language may be unenforceable as ambiguous, or whether “law and ordinance” exclusions even apply to losses caused by government orders issued in connection with sudden or catastrophic events). Without an anti-concurrent causation clause, the court held that fire was the efficient and dominant cause of all of the losses for which the insured sought coverage.