Anti-concurrent causation clause: A ‘trap door’ in your home insurance policy

If homeowners affected by Hurricane Irene or its less powerful incarnation, Tropical Storm Irene, experienced wind and flood damage, they could be in for a rude awakening when they file insurance claims.

That’s because something known as an anti-concurrent causation clause – legal jargon tucked into many home insurance policies – could prevent you from being paid for both the wind and flood damage.

Clause causes confusion

anti concurrent causation clause Robert Hunter, insurance director for the Consumer Federation of America, a nonprofit consumer advocacy group, says this clause states that if an insured event, such as wind, happens about the same time as an event excluded in your policy, such as a flood, neither is covered – regardless of the sequence of events. Hunter says the clause is “a trap door” in your home insurance policy that wind-damage losses can fall through.

In places that aren’t prone to hurricanes, standard homeowner’s insurance policies cover wind damage but don’t cover flood damage. Flood insurance must be purchased separately through the National Flood Insurance Program or a few private insurers; a lender usually requires flood insurance coverage if it has a mortgage on a home that's in a federally designated flood zone.

In some cases, insurance coverage for wind and flood damage may depend on which peril came first, says Daniel Schwarcz, an associate professor at the University of Minnesota who specializes in insurance matters. In other cases, Schwarcz says, it may depend on which peril was the “predominant” cause of damage. In the latter scenario, neither the wind damage nor flood damage will be covered if a clause in your policy excludes one of those perils and the excluded peril contributed at all to the damage, Schwarcz says.

A typical anti-concurrent causation clause reads something like this: “We do not insure for such loss regardless of: a) the cause of the excluded event; or b) other causes of the loss; or c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss.”

Clause aimed at avoiding lawsuits

Loretta Worters, a spokeswoman for the Insurance Information Institute, says the anti-concurrent causation language has been added to homeowner’s policies to “avoid arguments and litigation over the meaning and integrity of the exclusions” in the policies.

“The items listed are meant to be excluded regardless of how the loss began,” Worters says. “Insurers handle each claim on its own merits and pay what is owed based on the contract with the policyholder.”

Jeffrey Weinstein, an attorney at New York law firm Mound Cotton Wollan & Greengrass LLP who specializes in insurance law, writes in an article about flood insurance that home insurers want to keep the clause in their policies so that when flood damage occurs, insurers can lean on flood-coverage exclusions and have policyholders turn to their flood insurers first to cover an entire loss (flood and wind).

Willem Rijksen, a spokesman for the American Insurance Association, a trade group for property and casualty insurers, defends the use of anti-concurrent causation clauses in home insurance policies.

Rijksen says the association "supports the ability of insurers to clarify coverage that is based upon the premiums people pay. The language of a policy needs to accurately reflect the coverages that are purchased. An anti-concurrent causation clause, as well as other clauses, can help do just that.”

Hurricane Katrina sheds light on clause

For many Americans, the anti-concurrent causation clause first came to light in 2005 after Hurricane Katrina.

Schwarcz, the Minnesota professor, says much of the Katrina property damage was caused by both wind and water. In many cases, home insurers treated these two kinds of losses separately, so the anti-concurrent causation clause didn’t come into play. But when home insurers treated property damage as a single loss triggered by wind and water, it often resulted in complete denial of coverage because of the anti-concurrent causation clause, Schwarcz says.

In the wake of Katrina, numerous lawsuits were filed over the anti-concurrent causation language. In some of the legal cases, the language was upheld in favor of home insurers, Hunter says. In other cases, the language was determined to be ambiguous and courts sided with homeowners.

Worters says anti-concurrent causation clauses don't exist in every state. For instance, they've been declared invalid in California, North Dakota, Washington and West Virginia. When he was in Congress, U.S. Rep. Gene Taylor, a Mississippi Democrat, unsuccessfully tried to outlaw these clauses in some flood insurance policies.

“It is a horrible provision,” Hunter says of the clause, “and insurers using it should be ashamed.”

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