One of my friends who follows this stuff more closely than I have been able to do since the Scruggs Supernova happened has been sending me copies of court decisions on property loss causation. This is a subject I take a great deal of interest in, and I’m going to comment on the causation analysis of two recent decisions, one from New Hampshire and one from Vermont.
The more recent case is Bates v. Phenix Mutual Fire Ins. Co., a February 13 decision by the New Hampshire Supreme Court. A large rainstorm caused flooding behind a roadway, and a culvert under the road was inadequate to carry relieve the pressure of the built-up water, which burst through the roadway and flooded the policyholder’s real and personal property.
Although the insured’s homeowners policy contained an anti-concurrent cause provision, the parties did not argue that it was relevant and the court did not analyze it as relevant — which is correct all around. The loss here was not caused by flying rocks or debris from the roadway, it was caused by water. If the damage had consisted of a rock thrown a great distance because of a spectacular eradication of the road, then it would have been correct to examine the anti-concurrent, anti-sequential cause provision, because this type of loss would be an example of sequential causation (forces acting like dominoes).
But even though the plaintiff argued for payment under a clause covering "explosion" — the road kind of exploded in a manner of speaking when it was swept away — there does not appear to have been a credible argument that the damage was caused by anything but water, which was uncovered because of the flood exclusion. In this case, then, we are dealing only with single causation, and anti-concurrent, anti-sequential language is applicable only where multiple forces cause the same exact damage. Bates presents a fairly simple causation analysis, but fairly simple analyses are not always handled well. I should note that it is not clear from the opinion, but the "explosion" definition appeared to apply only to personal property coverage, not coverage for the structure itself. The court, however, did not make such a distinction.
The other case I want to talk about is from late last year from the Vermont Supreme Court — Sperling v. Allstate Indemnity Co. Allstate policies, of course, do not have anti-concurrent causation language in them. Instead, they have language mandating analysis under the "efficient proximate cause" standard — if loss is due to multiple causes, one must determine which is the primary or dominant cause, and if that one is covered, the loss will be covered. Under anti-concurrent cause language, however, even if a covered cause was dominant, as long as an uncovered cause was a "but for" reason for the damage, it is not covered. A harsher rule, anti-concurrent cause, but one that was thought by insurers to be easier for courts to apply and less subject to judicial misunderstanding, flights of fancy or creativity.
In Sperling, the insureds fell victim to an incredibly unlucky event — a suitcase fell off a shelf in the basement and broke a valve on a heating oil tank, releasing 160 gallons of home heating oil into the basement. The insureds’ homeowners policy had an exclusion for contamination and pollution, including language that said this type of damage was excluded where it was the predominant cause of loss. This is usually considered the language of an efficient proximate cause analysis, but the court here gave a different interpretation of this language than I would have expected.
If I was arguing the insureds’ case, the choice to me was obvious — say that the predominant or moving cause of loss, the one that set the other in motion, was not heating oil contamination but a falling suitcase, and the resulting loss is therefore covered. That is in fact one of the arguments used by the insureds.
The court rejected the argument, however. It said that the language that I would characterize as efficient proximate cause language in fact was not. The court said the language states only that if contamination is the predominant cause of the loss, it is excluded. But, the court said, the clause does not state the opposite — that if the predominant cause is a covered cause but pollution is a secondary cause, then the loss is covered. This seems like a strange reading of the language, one that turns it into a de facto anti-concurrent cause provision, when it obviously is not. I would have expected the court to say that the language, by stating that a loss is uncovered when an uncovered cause is predominant, implies the reverse — that the loss is covered when the uncovered cause is secondary.
Anyone have any other thoughts on these decisions?