Concurrent Causation

Concurrent causation is a method of handling losses or damages which occur from more than one cause. The roots of concurrent causation are from legal rulings and opinions, which form a body of precedent and becomes useful when parties in a dispute require the decision of a court. In insurance, concurrent causation happens when a property experiences a loss from two separate causes when one has policy coverage, and the other does not. Depending on the specific situations, the type of policy in effect, and the state court in which disagreements will be heard, the damages from both causes are likely to be covered.

Concurrent causation may also be a factor in liability insurance policies. 

With a concurrent causation loss, the events which cause the loss may happen one after the other or be simultaneous events. Today, most policies will include anti-concurrent causation (ACC) provision. 

A concurrent causation example is when a tropical storm hits a commercial warehouse. Strong winds cause damage to structures while the heavy rain causes flooding. The door leading into the warehouse lobby is blown open by high winds. Flood waters further damaged the floor of the front lobby.  It is impossible to separate the damage caused by the flood from the damage caused by wind. The building has a commercial property policy which covers damage from wind but excludes damage from floodwaters. Under concurrent causation, coverage benefits will be due to the policyholder.

Concurrent causation legal precedents resulted from California lower court decisions in the 1980s. These courts ruled that claims for damages from concurrent events were valid. The judgment said if a covered hazard added to the losses from an excluded risk, the entire loss is claimable by the policyholder. As an example, an earthquake causes a split in the foundation of a home, and a fire begins from a candle which fell onto the floor during the shaking. The property has a policy covering fire damage but excludes damage from an earthquake. According to the court's ruling, the entire claim is valid. 

Insurance providers disagreed with this view, claiming the ruling increased their liability and cost. Also, they argued, the decision ignored the existing exclusion clauses. In response, the Insurance Services Office (ISO) and commercial insurers revised the wording in homeowners and commercial property policies adding anti-concurrent causation.

The added anti-concurrent causation wording would exclude damages from listed perils even if a second, covered peril contributed to the damages. Also, the exclusion applies whether the two hazards happen at the same time or one occurred in sequence. 

Many commercial property policies apply anti-concurrent causation language to specific exclusions including law and ordinance, earth movement, government action, nuclear hazard, utility services, water, and flood or fungus and mold.

Not all state courts will apply concurrent causation. Instead, they determine which peril was the proximate or predominant cause of a loss. Returning to our warehouse example, if the court decides the proximate cause was the wind, then the damage should be covered. 

The doctrine of concurrent causation applies primarily to an all-risk policy, which covers a broader scope of perils than a named perils policy. Named perils policy covers losses from only those perils listed in the policy. However, a named perils policy may still contain wording for anti-concurrent causation.

Liability insurance protects against claims resulting from injuries and damage to people and property and pays legal costs and adjudged payouts for events where the policyholder is found legally liable. Some complaints may have two or more actions by the policyholder, which, by themselves, make them liable. Even if the insurance policy does not include coverage for all of the policyholder's actions the insurance provider must still defend the entire claim.