In a unanimous decision, the Mississippi Supreme Court has explained how the anti-concurring cause clause (ACCC) in the standard homeowners insurance policy should be interpreted. Although this decision was from Mississippi, it will prove to be informative in Florida as there is very little Florida law on this important issue. I’ve previously blogged extensively on the ACCC in Florida and the related topic of efficient proximate case. That blog can be accessed by clicking here. (A word of warning…whenever I write on the ACCC, by necessity, it is long and tedious. Sorry).
In Corban v. USAA, the Corban’s home was damaged by wind and flood during Hurricane Katrina. The Corbans had previously purchased a flood policy and a homeowners policy from USAA. The homeowners policy contained an exclusion for flood and an ACCC which purported to exclude coverage for covered losses that "combine" with excluded losses to bring about the loss.
During the adjustment of the claim, USAA concluded that a majority of the damage was caused by flood, and that much of the remaining damage was caused by a combination of flood and wind. USAA did make payments for wind damage to the roof. USAA denied the remainder of the dwelling claim under the ACCC provision of the homeowners policy. Experts employed by the Corbans opined that the home was destroyed by wind before the storm surge arrived.
The trial court found that the homeowners policy barred "coverage for any damage caused by water as defined in the policy or caused concurrently or sequentially by wind and water in combination."
On interlocutory appeal, the Mississippi Supreme Court undertook to answer three questions:
1. Whether the circuit court erred in finding that ‘storm surge’ is included in the ‘water damage’ exclusion.
2. Whether the circuit court erred in finding that the ACC clause is applicable in the case sub judice.
3. Which party bears the burden of proof.
Initially, the Court ruled that
‘storm surge’ is contained unambiguously within the ‘water damage’ exclusion. This Court finds that ‘storm surge’ is plainly encompassed within the ‘flood’ or ‘overflow of a body of water’ portions of the ‘water damage’ definition, and no other ‘logical interpretation’ exists.
With regard to the second question, the Court first noted that
No reasonable person can seriously dispute that if a loss occurs, caused by either a covered period (wind) or an excluded peril (water), that particular loss is not changed by any subsequent cause or event. Nor can the loss be excluded after it has been suffered, as the right to be indemnified for a loss caused by a covered peril attaches at that point in time when the insured suffers deprivation of, physical damage to, or destruction of the property insured. An insurer cannot avoid its obligation to indemnify the insured based upon an event which occurs subsequent to the covered loss. The insured’s right to be indemnified for a covered loss vests at time of loss. Once the duty to indemnify arises, it cannot be extinguished by a successive cause or event…. The same principle applies in reverse. In the case of a loss caused by an excluded peril, that particular loss is not changed by any subsequent covered peril or event. Nor can that excluded loss become a covered loss, after it has been suffered.
Next, and still with regard to the second issue, the Court analyzed the "concurrent" and "in any sequence" language of the ACCC. With regard to "concurrent" causes, the Court held that in order for the exclusion to apply, covered and excluded events must "act in conjunction, as an indivisible force, occurring at the same time, to cause direct physical damage resulting in loss." The Court then noted that "[b]ased on the record as it now stands, and as presented by both parties, the subject perils acted in sequence, not concurrently, i.e., at different times, causing different damage, resulting in separate losses.
The Court then held that the "in any sequence" language of the ACCC was ambiguous when read in conjunction with other portions of the policy, and held that this language
applies only if and when covered and excluded perils contemporaneously converge, operating in conjunction, to cause damage resulting in loss to the insured property. If the insured property is separately damaged by a covered or excluded peril, the ACC clause is inapplicable. If damage is caused by a covered peril, the insured is entitled to indemnification for the covered loss, as the insured’s right to recover for the loss has vested. Conversely, if the damage is caused by an excluded peril, the insured is not entitled to indemnification for that uncovered loss.
The Court then noted that
[b]ased on the evidence thus far presented, the same loss with multiple causes is not at issue here. Thus, a finder of fact must determine what losses, if any, were caused by wind, and what losses, if any, were caused by flood. If the property suffered damage from wind, and separately was damaged by flood, the insured is entitled to be compensated for those losses caused by wind. Any loss caused by ‘[flood] damage’ is excluded. If the property first suffers damage from wind, resulting in loss, whether additional ‘[flood] damage’ occurs is of no consequence, as the insured has suffered a compensable wind-damage loss. Conversely, if the property first suffers damage from flood, resulting in a loss, and then wind damage occurs, the insured can only recover for losses attributable to wind.
The Court then stated
We conclude the ACC clause has no application for losses caused by wind peril. An insurer may not abrogate its duty to indemnify for such loss by the occurrence of a subsequent, excluded cause or event….
* * *
After a thorough examination of Mississippi case law, the evidence presented to date in this case, the briefs of the parties and amici, and the USAA policy at issue, this Court declares the ACC clause inapplicable. We respectfully reject the proposition that, under the subject ACC clause, ‘indivisible damage caused by both excluded perils and covered perils or other causes is not covered.’
The Court next turned its attention to the all-important issue of burden of proof. The Court held:
This Court finds that with respect to the ‘all-risk’ coverage of ‘Coverage A – Dwelling’ and ‘Coverage B – Other Structures,’ the Corbans are required to prove a ‘direct, physical loss to property described.’ Thereafter, USAA assumes the burden to prove, by a preponderance of the evidence, that the causes of the losses are excluded by the policy, in this case, ‘[flood] damage.’ USAA is obliged to indemnify the Corbans for all losses under ‘Coverage A – Dwelling’ and ‘Coverage B – Other Structures’ which USAA cannot establish, by a preponderance of the evidence, to have been caused or concurrently contributed to by ‘[flood] damage.’ ‘Contributed to’ comes into play only when ‘[flood] damage’ is a cause or event contributing concurrently to the loss. Pursuant to the policy language, only if proof of a ‘concurrent’ cause is presented to a jury for consideration would the jury receive an instruction including the policy phrase ‘contributing concurrently.’ Likewise, striking the proper balance, under ‘Coverage C – Personal Property,’ discussed in PP 52-53 infra, the plaintiff must prove that the loss was caused by a peril insured against, not ’caused or contributed to." Upon proper instruction, these determinations are for a jury.
A copy of the Corban decision can be downloaded by clicking here.
You can access and view the actual Mississippi Supreme Court Oral argument by clicking here.