I read the opinion over again, and I have a few things to add after what I wrote yesterday. So I’ll refer you to that post and my post at Point of Law, which has a link to a Randy Maniloff article you should read about the underlying case, and I’ll also make these observations: (Here, again, is a pdf of the Fifth Circuit’s decision)
— Want more news? Here’s an Associated Press story on the case, where I’m quoted as saying the Fifth Circuit got it right and that it was an easy call. I think that is correct. There have been attempts for at least the last 40 to 50 years for courts to expand property insurance causation to include human negligence as well as physical forces themselves. One of the first and certainly the most noted case in this line is Sabella v. Wisler, 59 Cal.2d 21 (1963). Human negligence, it can be argued, is qualitatively different in a causal analysis than a physical force, because the word "negligence" is merely a conclusion borrowed from the field of torts about the legal responsibility for setting forces in motion. It is not in itself a physical force. In any event, the Fifth Circuit was not going down that road, and said human negligence was not a "cause" of the New Orleans Katrina flooding — it may have been a contributing factor in the cause, which was flooding, but it was not a cause. Without getting into the observation that many policies now carry contractual language that directly overturns negligence as the cause of a property loss, I will say the Fifth Circuit’s analysis is the traditional first-party property analysis, and the one insurers have worked to get for the past 30 years in revising their policy language. For the most part, and in the most important particulars, the Fifth Circuit’s causation analysis was right on the money: it was single force causation, the most uncomplicated analysis in property insurance. Once the court decided on that route, upholding the flood exclusions was a given and an easy call.
— I thought I noticed the court taking a subtle dig at the 85-page length of Judge Duval’s underlying opinion. See page 6 of the Fifth Circuit’s opinion.
— Let’s remember that the policies in question here don’t merely exclude "flood," they state they exclude "water damage," and flood is one definition of water damage. Other definitions include surface water and overflow of a body of water. Judge Duval attempted to say that flood included only "natural" events, and that no "overtopping" of the canals occurred — they broke open. However, it was the overflow of a body of water that created the forces that breached the levee walls, as the appellate court pointed out, and additionally, the policies speak of "overflow," not "overtopping," which is a word Duval plucked out of thin air.
— In perhaps a foreshadowing of the way the Fifth Circuit may go on the appeal in Tuepker v. State Farm, now before the court, the Fifth Circuit stomped on Judge Duval’s reasoning that the policies’ Hurricane Deductible didn’t affect the reasonable expectations of policyholders or the interpretation of the flood exclusion. Remember, Judge Senter in Tuepker said the following:
Because this policy carries a specific "Hurricane Deductible Endorsement," it is apparent to me that it was intended to cover damages sustained in a hurricane because of the effects of rain, hurricane winds, and objects that might be carried by those winds, whether or not there was also damage caused by the high water. Thus, to the extent that State Farm contends that the hurricane itself, i.e. the hurricane winds and rain, would constitute a weather condition that would completely relieve State Farm of liability for damage to insured property . . . I find that the policy is ambiguous and its weather exclusion therefore unenforceable in the context of losses attributable to wind and rain that occur during a hurricane. Tuepker opinion, p. 7.
He said the same thing about the State Farm flood exclusion and its anti-concurrent, anti-sequential cause lead-in language:
I find that these two exclusions [the weather conditions exclusion and the flood exclusion] are ambiguous in light of the other policy provisions granting coverage for wind and rain damage and in light of the inclusion of the "hurricane deductible" as part of the policy. Tuepker opinion, pp. 8-9.
Here’s a pdf of Judge Senter’s opinion in Tuepker so you can read and judge for yourself. About the Hurricane Deductible Endorsements in the In Re Katrina policies, the Fifth Circuit said this:
[T]hey do nothing more than alter the deductible for damage caused by a hurricane. Nothing in the language of the endorsements purports to extend coverage for floods or to restrict flood exclusions; indeed they do not even include flood or water (other than rain) in the definition of "hurricane." Further, the endorsement state that all other provisions of the policies apply, indicating that the flood exclusions remain in effect. The hurricane-deductible endorsements therefore would not give a reasonable policyholder the impression that flood resulted from a breached levee would be covered.
A hint, perhaps just a hint, perhaps more than a hint, of the thinking of the Fifth Circuit as it will apply to Tuepker. (Remember also that the State Farm "weather conditions" exclusion contains an exception that specifically states the exclusion does not apply to covered damage, so in the context of wind damage, which is covered, it can’t be ambiguous).
The court said the efficient proximate cause doctrine and the policies’ anti-concurrent cause language are not relevant in this case. This is correct reasoning, because the flooding was only single causation. Both efficient proximate cause and anti-concurrent language are appropriate only where multiple causes combine to create the same damage. For more on this, read my post of yesterday. If this is the thinking of the Fifth Circuit, they will accept my conclusion that the damage in Tuepker is also not mutiple causation of one loss, but rather two independent single causes that resulted in separate losses (assuming there is evidence of wind damage to the Tuepker home beyond mere speculation). Therefore, neither the efficient proximate cause doctrine, which it seems Judge Senter was driving at in his Tuepker opinion, nor State Farm’s anti-concurrent cause language, were implicated and there can be no ambiguity regarding either the flood exclusion or the anti-concurrent language. Contrary to the belief of many, State Farm has not asserted the anti-concurrent cause language as a reason to deny wind payment to the Tuepkers. As they have stated it in briefing, State Farm’s position is that wind damage is due to one cause and flood damage to another, making the first covered and the second uncovered. The problem is one of proving wind damage and allocation of the damage between the two losses, which is a far different analysis than a causal analysis.
I have been saying this now for many months: this type of damage at issue in Tuepker is two independent single forces that did not combine or operate in sequence to cause the same loss, but rather operated separately to cause two separate losses. Single causation only. (I am not ruling out that there could be instances where wind and water operate concurrently or in sequence to produce the same damage, but that is not the case in Tuepker or the vast majority of Katrina cases). Think of it like this: a homeowners policy does not insure against destruction of a house, it insures against "accidential direct physical loss to the property," or some such phrase. To the degree two separate forces cause separate damage, it is an instance of two single causes. Each single cause of separate loss must be evaluated for coverage in its own right. I have stayed awake into the wee hours on many, many nights researching and analyzing this issue, wrestling with Tuepker and Sabella and cases without number, hearing the voice of David Hume and the words of the 1985 anti-concurrent article by Michael E. Bragg in the footsteps of the night janitors and security guards as they peer into my office to see who could possibly be working at 2:30 a.m. I have been to hell and back in search of the answer. I know I’m right on this one.