Surabian Realty owns a professional office building in Foxborough, Massachusetts. In June, 2009, heavy rains fell in the area of the property. About thirty minutes into the storm, water stopped flowing down a parking lot drain that had become clogged with debris. As a result, rainwater collected in the parking lot and seeped under the door of the building, flooding and damaging the lower level.
Surabian sought coverage from its insurer, NGM. The policy contained an exclusion for loss or damage caused by water "regardless of any other cause or event that contributes concurrently or in any sequence to the loss." The phrase in quotes is called an anti-concurrent causation clause, and is often an issue in coverage for hurricane losses where a policy provides coverage for wind damage but excludes coverage for water damage.
The original water exclusion included surface water and water "that backs up or overflows from a sewer, drain or pump." The sewer, drain or pump clause, however, was replaced by a policy endorsement under which "the most we [the insurer] will pay for loss or damage caused by water that backs up or overflows from a sewer, drain or sump is $25,000."
NGM denied the claim because the damage resulted at least in part from surface water, which was excluded by the policy.
In Surabian Realty Co., Inc. v. NGM Ins. Co., __ N.E.2d __, 2012 WL 2819398, the Supreme Judicial Court of Massachusetts noted that "surface water" has been defined by case law as "waters from rain, melting snow, springs, or seepage, or floods that lie or flow on the surface of the earth and naturally spread over the ground but do not form part of a natural watercourse or lake." Rainwater that collects in a parking lot is surface water. Rainwater that collects on the ground is surface water even if, but for an obstruction, the water would have entered a drainage system.
The court reviewed extrajurisdictional cases that stand for the proposition that water must have "occupied" a pipe or drain in order to have backed up or overflowed from it.
The court held, "Construing these clauses in combination, we interpret the insurance contract, as amended by the indorsement, to exclude damage caused by flood waters that spread over the surface of the ground without having entered a drain, but to cover damage caused by water that backed up after entering a drain."
The parties agreed that the damage at issue was caused both by water that backed up after entering the drain and by water that, as a result of the blockage, never entered the drain. (I'm not an engineer, but I would question why water would have backed up from the drain. What was the force that pushed the water out of the drain? I would think -- again, I'm not an engineer-- that water that entered the drain would stay there, leaving no room for other water to enter it.)
Applying the anti-concurrent causation clause, the court held that because one cause of the damage was covered and another was excluded, there was no coverage for the loss under the policy.
Showing posts with label anti-concurrent causation. Show all posts
Showing posts with label anti-concurrent causation. Show all posts
Wednesday, July 25, 2012
Monday, October 24, 2011
Appeals Court finds duty to defend where loss may have arisen out of use of excluded boat and use of a different boat that was excepted from exclusion
Jeffrey and Nicole Crispo (the Crispos) were aboard their power boat, the MSJC69, and were towing a lobster boat, the Laina Lou, owned by Steven Crispo. Steven and Dana Gagne were aboard the lobster boat. The MSJC69's propeller shaft became entangled on a mooring line. After cutting loose the Crispos were unable to restart the boat because the battery was dead. The Laina Lou dropped anchor and the two boats remained attached by the tow line. The Crispos were unable to use the running lights because of the dead battery.
Approximately ten minutes later a ferry operated by BHC collided with the two vessels.
Steven, Jeffrey, Nicole, and Gagne sued BHC for personal injuries and property damage. BHC asserted claims for indemnification and contribution against the Crispos, alleging that their negligence caused the accident.
The Crispos sought coverage for the counterclaims from Quincy Mutual, their homeowner's insurer, which filed a declaratory judgment action. The policy excluded coverage for losses arising out of use of boats, but the lobster boat fell into an exception to that exclusion.
In Quincy Mut. Fire ins. Co. v. Crispo, 80 Mass. App. Ct 484 (2011), the Massachusetts Appeals Court held that a duty to defend is triggered when a loss "arises out of" both a a use that is excluded from coverage and a use that is excepted from the exclusion.
The court noted that the underlying complaints did not distinguish between the use of the two vessels with respect to which caused the accident. Therefore, the allegations of the underlying complaints "raise the possibility that the claims against the Crispos arose from their use of the Laina Lou."
The court also noted that no anti-concurrent causation clause applies to the exclusion, although such a clause does apply to other parts of the policy. Under Massachusetts law, where an anti-concurrent cause provision is included with reference to exclusions in one part of the policy and omitted with reference to other parts of the policy, the absence of such a provision means that a loss caused by a risk excluded in the section without the provision will be covered if a covered risk also contributed to the loss.
Quincy Mutual argued that the phrase "arising out of" in the exclusion conveyed the same limitation on coverage as an anti-concurrent causation provision. While noting that "arising out of" denotes an intermediate level of causation, the court held that its use in an exclusion, without more, could not reasonably be understood as denying coverage for damages connected to the insured's simultaneous undertaking of an excluded risk and a risk specifically excepted from the exclusion, where both caused the injury.
Approximately ten minutes later a ferry operated by BHC collided with the two vessels.
Steven, Jeffrey, Nicole, and Gagne sued BHC for personal injuries and property damage. BHC asserted claims for indemnification and contribution against the Crispos, alleging that their negligence caused the accident.
The Crispos sought coverage for the counterclaims from Quincy Mutual, their homeowner's insurer, which filed a declaratory judgment action. The policy excluded coverage for losses arising out of use of boats, but the lobster boat fell into an exception to that exclusion.
In Quincy Mut. Fire ins. Co. v. Crispo, 80 Mass. App. Ct 484 (2011), the Massachusetts Appeals Court held that a duty to defend is triggered when a loss "arises out of" both a a use that is excluded from coverage and a use that is excepted from the exclusion.
The court noted that the underlying complaints did not distinguish between the use of the two vessels with respect to which caused the accident. Therefore, the allegations of the underlying complaints "raise the possibility that the claims against the Crispos arose from their use of the Laina Lou."
The court also noted that no anti-concurrent causation clause applies to the exclusion, although such a clause does apply to other parts of the policy. Under Massachusetts law, where an anti-concurrent cause provision is included with reference to exclusions in one part of the policy and omitted with reference to other parts of the policy, the absence of such a provision means that a loss caused by a risk excluded in the section without the provision will be covered if a covered risk also contributed to the loss.
Quincy Mutual argued that the phrase "arising out of" in the exclusion conveyed the same limitation on coverage as an anti-concurrent causation provision. While noting that "arising out of" denotes an intermediate level of causation, the court held that its use in an exclusion, without more, could not reasonably be understood as denying coverage for damages connected to the insured's simultaneous undertaking of an excluded risk and a risk specifically excepted from the exclusion, where both caused the injury.
Tuesday, October 4, 2011
U.S. District Court interprets earth movement exclusion
Habit OPCO leased a building that was damaged by construction at an adjacent site owned by the Greater Boston Food Bank.
The building rested on concreted piles and on fill. On December 7, 2007 GBFB began construction of a new building on the adjacent property. It drove concrete piles to a depth of almost 190 feet. Within a couple of weeks Habit employees noticed damage to its building such as cracked door frames. By mid-February the building had floor heaves, its ceiling tiles were shifting, and walls were cracking.
Habit's insurer, Philadelphia Indemnity, hired an expert who opined that the damage was caused by vibrations from the pile driving on the GBFB property.
Philadelphia Indemnity denied the claim for structural damage, citing the policy's earth movement exclusion. Habit argued that the earth movement exclusion bars coverage only for damage from naturally occurring earth movements and not from man-made events.
In Mulhern v. Philadelphia Indem. Co., __ F. Supp. 2d __, 2011 WL 3563126 (D. Mass.), the United States District Court for the First Circuit noted that the exclusion includes loss from "improperly compacted soil," which is a man-made condition. The court held that Philadelphia Indemnity was entitled to judgment to the extent that Habit is precluded from arguing that the policy covers damages caused by defects in the fill.
Philadelphia Indemnity argued that the anti-concurrent causation clause in the earth movement exclusion precluded coverage under Habit's theory that shock waves generated by the pile driving caused the structural damage to the building. The court denied summary judgment on that issue because there was a disputed issue of fact as to whether improperly compacted soil was a cause of damage or whether vibrations emanating from the pile driving were the exclusive cause.
Finally, the court held there was no coverage under the collapse clause of the policy because the damage to the building was not "an abrupt falling down or caving in of a building or any part of a building with a result that the building cannot be occupied for its intended purpose, because the claim was the the roof split, leaving a gap of .75 inches, and then cracked.
The building rested on concreted piles and on fill. On December 7, 2007 GBFB began construction of a new building on the adjacent property. It drove concrete piles to a depth of almost 190 feet. Within a couple of weeks Habit employees noticed damage to its building such as cracked door frames. By mid-February the building had floor heaves, its ceiling tiles were shifting, and walls were cracking.
Habit's insurer, Philadelphia Indemnity, hired an expert who opined that the damage was caused by vibrations from the pile driving on the GBFB property.
Philadelphia Indemnity denied the claim for structural damage, citing the policy's earth movement exclusion. Habit argued that the earth movement exclusion bars coverage only for damage from naturally occurring earth movements and not from man-made events.
In Mulhern v. Philadelphia Indem. Co., __ F. Supp. 2d __, 2011 WL 3563126 (D. Mass.), the United States District Court for the First Circuit noted that the exclusion includes loss from "improperly compacted soil," which is a man-made condition. The court held that Philadelphia Indemnity was entitled to judgment to the extent that Habit is precluded from arguing that the policy covers damages caused by defects in the fill.
Philadelphia Indemnity argued that the anti-concurrent causation clause in the earth movement exclusion precluded coverage under Habit's theory that shock waves generated by the pile driving caused the structural damage to the building. The court denied summary judgment on that issue because there was a disputed issue of fact as to whether improperly compacted soil was a cause of damage or whether vibrations emanating from the pile driving were the exclusive cause.
Finally, the court held there was no coverage under the collapse clause of the policy because the damage to the building was not "an abrupt falling down or caving in of a building or any part of a building with a result that the building cannot be occupied for its intended purpose, because the claim was the the roof split, leaving a gap of .75 inches, and then cracked.
Wednesday, March 17, 2010
The effect of global warming on insurance coverage issues
Mike Tracy of Rudolph Friedmann LLP forwarded a copy of this interesting article by Robert Redfearn, Jr. of Simon, Peragine, Smith & Redfearn about the likely effects that global warming will have on the insurance industry.
The article talks about claims alleging that corporations are liable for damages because their practices have contributed to global warming.
More broadly, global warming has already begun to impact insurance coverage litigation. As just one example, litigation arising out of Hurricane Katrina led to extensive interpretation of "anti-concurrent causation" or ACC, clauses in insurance policies. Those clauses exclude coverage whenever an excluded peril and a covered peril combine to damage a dwelling or personal property. Insurers denied coverage under homeowner's policies on the basis of those clauses where damage was caused by a combination of wind (a covered peril) and water (an excluded peril).
The article talks about claims alleging that corporations are liable for damages because their practices have contributed to global warming.
More broadly, global warming has already begun to impact insurance coverage litigation. As just one example, litigation arising out of Hurricane Katrina led to extensive interpretation of "anti-concurrent causation" or ACC, clauses in insurance policies. Those clauses exclude coverage whenever an excluded peril and a covered peril combine to damage a dwelling or personal property. Insurers denied coverage under homeowner's policies on the basis of those clauses where damage was caused by a combination of wind (a covered peril) and water (an excluded peril).
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