Concurrent Cause Issues in Insurance: How to Unravel the Language | Woodruff sawyer

One of the terms that can be difficult to grasp is simultaneous causality. As severe weather events caused by climate change become more common, property owners want to be sure they are covered against damage. However, weather-related property damage can have several causes. For example, high winds can cause roof damage, which can lead to water damage and then mold.

This article will help you understand co-occurring causes and insurance issues that can accompany them.

What is simultaneous causation?

Legal precedents for concurrent causality date to lower court decisions in the 1980s. For example, California courts ruled that if a covered risk increases the loss of an excluded risk, a policyholder may seek full loss.

In response, many insurance policies (property, casualty, and liability) began to include simultaneous causation (ACC) statements. These provisions help protect the insurer from increased liability and costs, e.g. B. if the same damage is paid more than once. Some ACC provisions list specific hazards that are covered and those that are not.

However, not all state courts apply concurrent causality in the same way. Some attempt to determine the immediate (or predominant) cause of a loss. If the court rules that the immediate cause of the water and mold damage was the strong wind and the insured has a policy that covers wind damage, the additional losses should be part of the coverage. On the other hand, if the court rules that the immediate cause of the mold was flooding and not high winds, that damage may not be covered.

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Examples of simultaneous causation

Consider earthquake coverage as an example of simultaneous causation. A standard earthquake policy will cover some of the loss and damage that an earthquake could cause to your home or business, personal effects or business property, or inventory or other property you own.

But what if the earthquake causes a dam to fail and flooding occurs? Is the cause of the damage the earthquake or the flood? And are you still insured?

These terms have been hotly debated over the years.

In general, the CC doctrine states that if two independent events (one covered by your policy and one not included) combine and cause damage to your home or business, the policyholder is entitled to recover losses if the covered event directly caused part of the damage.

However, EPC doctrine states that recovery is only permissible if the covered cause was the primary cause of the property loss. Using the example of an earthquake, the insured must demonstrate that the earthquake was the main cause of the water damage.

What does your policy cover?

It is important that you read your policy carefully to know what risks and rules apply to your coverage. However, nothing is easy when it comes to interpreting policies. Here is an example.

The State of Oregon defines EPC as “the active and efficient cause that initiates a chain of events that will produce a result without the intervention of any force, actively and efficiently originating and operating from a new and independent source.”

This definition means that when there are multiple causes of a single loss in Oregon, the EPC “is the relevant reason for determining coverage under an insurance contract.” (See Naumes, Inc. v. Landmark Ins. Co. for the case that established that language.)

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Following this precedent, if an earthquake in Oregon causes a dam to collapse leading to flooding of the nearby area, the earthquake — not the flooding — would be considered the cause of the damage.

Of course, each loss must be judged on its own facts and political language. In fact, there is another case in Oregon that contains different language than the Naumes case. Policy language limits coverage to property damage caused “directly and immediately” by an event or hazard. In this case, the court ruled that “direct and immediate” language “only looks back to the nearest cause in time.”

So, under the “direct and immediate” language and analysis, flooding in the previous earthquake scenario would be the cause of the damage. Coverage would only be available if the policyholder had separate flood insurance.