Little-known anti-concurrent causation clause can surprise homeowners

Mary Lou Jay

Many who suffered the heartbreak of losing their homes during Hurricane Katrina consoled themselves with the thought that their home insurance would provide enough money to help them rebuild their homes and lives.

Unfortunately, that wasn't always the case.

Because of a little-known but very common clause in their home insurance policies -- the anti-concurrent causation clause -- many found that their insurers would pay nothing for their losses.

Anti-concurrent causation clauses are found in many home insurance policies, although their exact wording varies from insurer to insurer. In general, these clauses state that the insurer will not pay for a loss that is caused by two simultaneous events such as wind damage and water damage) if one of those events is excluded by the policy.

For example, most policies exclude flood damage, but include wind damage. Suppose a home was damaged by rain when the roof was ripped off by high winds. Ordinarily, that wind damage would be covered. But under an anti-concurrent clause, if the house later flooded, the insurance company might refuse to pay for any of the damage if the policyholder lacked flood insurance.

For Katrina victims without flood insurance, that meant insurers wouldn't pay for losses to their homes caused by wind if flooding from surge tides or broken levees also contributed to the destruction.

Policyholders and insurance companies have ended up in court over the anti-concurrent clause. Insurers, reeling from their Katrina losses, used every legal means possible to avoid paying claims. According to the Insurance Information Institute, Hurricane Katrina remains the largest single loss event in the insurance industry's history. It caused an estimated $41.1 billion in insured damage and resulted in 1.7 million claims across six states. Policyholders argued that the anti-concurrent clause was not clear; insurers insisted it was part of the contract they had agreed to.

The outcomes of the Katrina court battles were mixed, but most courts with the notable exception of the Mississippi Supreme Court) upheld the right of home insurance companies to apply the anti-concurrent clause. Some of the legal arguments revolved around proving when the damage was done. But in the aftermath of a storm like Katrina, few policyholders had witnesses who could testify that the winds caused destruction to a home before floods swept it away, according to the Insurance Journal.

Although Katrina was an extreme case, similar situations could arise during any severe storm that carries high winds and causes flooding. The only thing that home insurance policyholders can do is talk with their insurance agents about the anti-concurrent clause and ask how to protect themselves with additional insurance policies or riders flood insurance, for example). Or they might consider moving to California and Washington, which have laws that make anti-concurrent clauses difficult to enforce, according to the American Risk Management Network.

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