Nationwide v. Leonard: Fifth Circuit upholds anti-concurrent cause provision as unambiguous

The Fifth Circuit yesterday, in the Nationwide v. Leonard appeal, reversed Judge Senter’s ruling that the anti-concurrent cause language in the Nationwide homeowners policy was ambiguous. Here is a pdf of the opinion.  Here’s an Associated Press story about the decision.

The Fifth Circuit reached the result I agree with, but the court said too much.  Its reading of the contract language was right, but its causation analysis was not entirely correct.  The court unnecessarily spent time talking about storm surge as involving concurrent causes — covered wind and uncovered flood.   In saying this, it was as if the court didn’t pay any attention to its later analysis of the flood exclusion, which clearly classifies "flood, surface water, waves . . .  whether driven by wind or not" as excluded water damage.  As the court said, storm surge has been held by many courts to fall within this exclusion, and all things within the definition of the exclusion are water damage, or if you prefer, flood.  All these things, therefore, are one cause.

So we can see the court is dead wrong when it analyzes storm surge as being the product of concurrent causes.  Perhaps in a philosophic sense it is correct, perhaps not, that wind that drives waves is two forces or two causes.  In this philosophic sense, I still see flood as flood, whether it human negligence, earthquake, wind or some other factor can be said to be in the causal chain, but I can see the argument for the other side.  But we are not talking about philosophy with this case, we are talking about the contract language.  There is absolutely no need to discuss storm surge as involving concurrent forces once you accept that it is flood.  By definition, it becomes one force, one peril, one cause.  It will only confuse others, and perhaps the court itself, by trying to get fancy with a causation analysis that can’t lead anywhere. 

Before looking more closely at this causation analysis, let’s recap the underlying case and its reasoning. The Mississippi home of Paul and Julie Leonard was extensively damaged by high winds and then by storm surge flooding during Hurricane Katrina.  Nationwide paid the Leonards some $1,667 for wind damage, and said the rest of the property damage was caused by excluded flood.  In the end, in a bench trial Senter agreed with that formulation with some minor revisions, and he also said the Leonards’ insurance agent was not liable for alleged misrepresentations, which the Leonards would not have been justified in relying upon had he made them, because the policy clearly excluded flood damage.  Senter also got it right that storm surge is just another name for excluded flood, and the fact that wind is involved does not change the fact it is defined as flood — one cause, in other words.  However, where I have differed with his underlying opinion is that he said the anti-concurrent cause language that leads in to the flood exclusion was ambiguous, because, in his view, it would mean that even just an inch of flood would remove coverage for a vast amount of wind damage. 

Here is the anti-concurrent language that precedes the flood exclusion:

1. We do not cover loss to any property resulting directly or

indirectly from any of the following. Such a loss is excluded even if

another peril or event contributed concurrently or in any sequence

to cause the loss. . . .

Now, perhaps where Judge Senter went wrong was in not seeing the hypothetical wind damage and the hypothetical flood damage as causing separate "loss to property," as the clause says.  (Remember also that the coverage grant of the policy covers "accidental direct physical loss to property").  If they cause separate damage or loss to property, they obviously have not caused the same damage and each is a single cause of a single property loss.  The overall damage to the house itself is not the loss, in this sense, as long as individual separate forces inflicted unique damage. In the hypothetical that Judge Senter posed, anti-concurrent language would not come into play, nor would the situation he worried about — lack of payment for covered wind damage — have occurred.  Even if it was relevant, the anti-concurrent language merely says that the excluded causes following it are excluded regardless of other causes, it does not say that property damage that is separately caused by a covered cause becomes uncovered merely because it occurred at the same time as the other damage.  Concurrent does not connote proximity in time, it means that two causes combined to create the same damage, and the damage would not have occurred but for each.  In the sense the policy speaks of, concurrent therefore means multiple causes of the same damage.  Where single causes result in single damage, even if they occur at or about the same time, there obviously are no multiple causes and it is not necessary to consider the anti-concurrent cause provision.

I had hoped this would get straightened out by the Fifth Circuit, but the court did not make these observations and furthermore, it also got part of the causation analysis wrong.  Look at this passage from the Fifth Circuit’s decision:

The inundation of the Leonards’ home was caused by a concurrently caused peril, i.e.,

a tidal wave, or storm surge — essentially a massive wall of water — pushed ashore by Hurricane Katrina’s winds.

Later in the opinion, the court goes into an extensive analysis of how storm surge has almost always been viewed as flood, and that the language of the flood exclusion encompasses storm surge.  So the court’s use of the term concurrent is loose, inaccurate and not helpful.  By its own logic, flood itself is a cause.  You may say wind and water are the forces that make up one type of flood, storm surge, and I respond that under the contract it is nevertheless defined as one cause.  So it cannot be concurrent with itself, it could be concurrent only with some other cause.  If, on the other hand, storm surge did not fall under the definition of flood, then I could more readily see it falling under the operation of the anti-concurrent language. If you insist on seeing it as two causes, then one is covered wind and one is excluded water, and because they would combine to create the same damage, they could be analyzed as concurrent, except that concurrent is often considered, in the strictest sense, to apply to independent forces that operate together to bring about a result.  Sequential forces are those, in this strict sense, that are dependent on one another, which is probably a better analysis.  But that is all murmuring, because storm surge is defined as water damage and water damage is excluded.

In the end, the court got to the right result: it upheld Senter’s verdict on damages, but corrected his reasoning about the ambiguity of the anti-concurrent language.  Most of the court’s opinion was lucid and admirably direct, however, its explanation of causation was not its shining moment and does little to clear up misconceptions and false doctrine regarding causation analysis.

Both Nationwide and the Leonards appealed from Senter’s verdict, although somewhere along the way the Leonards’ attorney, Dickie Scruggs, apparently decided that chances were pretty good Nationwide would get the ruling on ambiguity of the anti-concurrent language reversed.  The Leonards then dropped their appeal regarding coverage of their homeowners policy, hoping that, without the damages being at issue, Nationwide would have no actual controversy on which to base its appeal.  The Fifth Circuit gave this argument the skunk eye. 

One final thing: the AP story above says that Scruggs vowed the Leonards will appeal. Really? They are going to appeal this thing to the U.S. Supreme Court? You know as well as I do the chances of cert. being granted on this case, an issue of state insurance law, are between slim and none, and slim just left town.


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9 Responses to Nationwide v. Leonard: Fifth Circuit upholds anti-concurrent cause provision as unambiguous

  1. Kevin

    Any comments on the Louisiana 3d Circuit Court of Appeals decision in Landry v. Louisiana Citizens Prop. Ins. Co.
    How do you think it compares to Chauvin?

  2. Yes, I read the case twice yesterday on the bus home from work and was going to write about it when I learned of the Leonard decision. Not enough time to write about both, considering the faults of the case. Landry is an unholy mess, it’s conclusion is unclear and its causation analysis was hopelessly confused. I try to be charitable, but these are public cases to which people look for guidance, it’s not too much to ask that a court actually come to the point. Even though I disagree with some of the analysis in Leonard, the Fifth Circuit at least wrote clearly. I will do a small post on it today and more on Monday.

  3. Kevin

    I agree with your Landry assessment. It’s all over the place. It looks like the court was trying to hard to come some place between the trial court and the Fifth Circuit.

  4. Cain

    One final thing: the AP story above says that Scruggs vowed the Leonards will appeal. Really? They are going to appeal this thing to the U.S. Supreme Court? You know as well as I do the chances of cert. being granted on this case, an issue of state insurance law, are between slim and none, and slim just left town.
    In reference to the above:
    Slim has not left town, he is in Washington by the name of Trent Lott (Dickie Scruggs’ brother-in-law) and he will see that Dickie gets his time with the Supreme Court. After all, Trent Lott only ran for re-election to stick it to the insurance companies.

  5. If I thought for one second anyone on the Supreme Court would take Trent Lott or anything he says seriously I would have trouble sleeping. Probably the only time his name is mentioned there is as the butt of a joke.

  6. Fifth Circuit backs insurer in key Katrina case

    Insurers took a few hard knocks at the federal trial court level in Katrina litigation, but on appeal before the U.S. Fifth Circuit Court of Appeals, they have seen much better results. The latest example is Leonard v. Nationwide, a…

  7. Cato

    State contract claim, maybe not. Jurisdiction to render advisory opinion, yes. The 5th Circuit just issued 36 pages of dicta.Nationwide simply wanted the 5th circuit business judges to rewrite Judge Senter’s opinion.

  8. Well, you are talking about Scruggs’ attempt to keep the Fifth Circuit from overturning Senter’s ruling of ambiguity by dismissing his own appeal. Although we can see the Fifth Circuit is going to do the same thing in the Tuepker case next month, preserving this ruling of ambiguity would have been of value because the State Farm policy in Tuepker is not an ISO anti-concurrent cause clause like the Nationwide policy. So all ISO anti-concurrent cause provisions would have been suspect. The Fifth Circuit didn’t buy it, I doubt the Supreme Court would see that particular issue as one where they have to step in.

  9. Mark

    Gene Taylor has Nancy Pelosi’s ear and I would think she carries far more stroke than Lott. However, I see a predominate share of Bush (H and W) and Reagan appointees on the Fifth Circuit. Should be interesting to see it play out, but Scruggs is merely posing for his clients and the press.