I like to talk about insurance coverage law, even more than I like playing Shredder at chess, probably because I do better at coverage law than I do at taking on Shredder, whom I have not yet beaten on the "Hard" setting without cheating. So I was interested in this fight between Walter Olson of PointofLaw and Cyrus Dugger at TortDeform, specifically Cyrus’ point about the use of the anti-concurrent provision by insurers in Katrina claims adjusting and litigation.
As time has gone on in these Katrina cases, I have come to see the anti-concurrent language in State Farm homeowners policies, and those of other insurers, as largely beside the point. I want to show you why, so if you would, look at the anti-concurrent language in Section I – Losses Not Insured, Subsection (2), on page 12 of this pdf of the State Farm policy. (It’s from the Tuepker case, but it doesn’t really matter which case it is, all the State Farm policies are the same).
A great deal of misunderstanding has arisen about this language. Now one thing I hate is when, outside of a coverage opinion, denial letter or reservation of rights letter, someone quotes insurance policy provisions at length. So I’m not going to do that. But it is, regrettably, necessary to quote from the policy to make my point. The subsection says that "We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events. We do not insure for such loss, regardless of . . . ." Following the anti-concurrent language are three exclusions that fall under its definition: ordinance or law, earth movement and water damage.
The key words in this anti-concurrent provision are "would not have occurred in the absence of" and "do not insure for such loss." Let’s think about that for a minute in the context of a Katrina case. If you have wind damage, which is covered, and flood damage, which is not, would the wind damage have occurred in the absence of the flood damage? Of course. Many, many homes were damaged by wind and the water never got close to them. So the clause does not say the covered damage is excluded. The clause also says that "such damage," meaning the excluded causes that follow, will never be covered, even if they act concurrently or in sequence with covered causes. Let’s be very clear on this: the provision does not say covered damage is excluded, merely that uncovered damage cannot become covered because a covered cause acted as a precursor in a chain of events.
Let’s look at another case where emotions are not running so high: Ramirez v. American Family Mutual Insurance Co., 652 N.E.2d 511 (Ind.App. 1995). In the case, damage from a power outage was covered, but failure of sump pumps was not covered. An ice storm downed power lines, which led to a power outage, which led a sump pump to fail, which led to water backing up and flooding the basement. The court ruled that the anti-concurrent provision, which was similar to the one quoted above and nearly identical to two other anti-concurrent provisions in the State Farm policy, prevented the theoretically covered cause from leading to coverage for the excluded cause. Can you see how this makes sense? An exclusion, after all, removes from coverage something that would have been otherwise covered. The anti-concurrent provision just makes sure this is so, and prevents doctrines like "efficient proximate cause" from overturning policy language.
In the Katrina cases, however, if wind damaged a home, it did not work "in sequence" in the way explained in the Ramirez case, it just so happened that the wind damage came before the flood. The two really are not concurrent causes at all, they are independent causes of loss, and so I don’t see the anti-concurrent language as being much of a factor: the wind is covered, the flood is excluded. It’s fairly simple when you look at it that way. Neither is the flood damage covered because of the wind damage. Wind that blew shingles off a house is separate from atmospheric conditions that led to flood surge, but even if you say they are the same thing, the flood damage is not covered merely because wind helped drive the water.
I have heard from Katrina victims that adjusters cited the anti-concurrent provision in denying claims. This may have been loose talk, cognitive dissonance, lack of understanding or whatever words you want to put on it. The failure to communicate could fall equally on the speaker and the hearer, and I’ve heard people refer to the anti-concurrent provision when all they really are talking about is the flood exclusion. If folks were citing the working of this provision as excluding wind coverage, that to me does not seem a good faith reading of the clause. But I suspect the reality is more complicated than that. Remember that, until the flood exclusion was upheld, there was a lot of talk about how "storm surge" isn’t really a flood, partly because wind is a component of a hurricane.
Much of the confusion about who said what and what they meant stems from that argument, and that argument is a patently ridiculous proposition. The reality is more likely that statements about the anti-concurrent provision were intended to counter silly notions that floods aren’t floods when wind or power outages or whatever plays some part in the flood. At times like this, I think of Thucydides, who called his History of the Peloponnesian War "a gift for the ages" because human nature remains constant over time. One aspect of human nature is selection bias, where people filter out what doesn’t fit within their understanding, point of view or bias. In discussions of Katrina insurance law, there has certainly been plenty of that.