Are You Covered When Multiple Perils Cause the Loss?

Property owners can recover for damage stemming from more than one independent cause under the concurrent causation doctrine, the Florida Supreme Court concluded in Sebo v. American Home Assurance Co. The case resolves a split between the state's appellate courts on which theory of recovery to apply when some of the causes are covered and others are excluded under the insurance policy.

Two Doctrines Governing Losses Caused by Multiple Perils
In 1988, the concurrent causation doctrine was endorsed by the Florida Third District Court of Appeal in Wallach v. Rosenberg. The appellate court explained that the property damage at issue was caused by a combination of weather and human negligence. Because the two harms were independent of each other, the court concluded "it seems logical and reasonable to find the loss covered by an all-risk policy even if one of the causes is excluded from coverage." Since Wallach, Florida courts have applied the concurrent causation doctrine.

On the other hand, the efficient proximate cause doctrine specifies that when an injury has multiple causes, the loss is attributable to "the efficient cause—the one that set the other in motion." When applying this doctrine, courts examine the insurance policy to determine if the efficient cause is covered or not. The Florida Supreme Court applied this doctrine in a much older case, Fire Association of Philadelphia v. Evansville Brewing Association, where a fire was the proximate cause of the loss.

A Change in Approach
In Sebo, a combination of "major design and construction defects," rain, and Hurricane Wilma caused severe property damage to the plaintiff's house. His policy insured against "all risks," but it did not cover losses caused by defective planning, design, and workmanship. The plaintiff filed a declaratory action against the insurer, and a jury concluded that the policy provided coverage for his damages.

On appeal to the Florida Second District Court of Appeal, the appellate court rejected the use of the concurrent causation doctrine in a case involving multiple perils and a first-party insurance policy. The Second District explained that "a covered peril can usually be found somewhere in the chain of causation, and to apply the concurrent analysis would effectively nullify all exclusions in an all-risk policy." It reversed and remanded the matter.

Concurrent Causation Can Be Used
The Florida Supreme Court examined the two theories of recovery and held that the concurrent causation analysis should apply, relying upon the reasoning in Wallach. Because it was not possible to determine the proximate cause of the plaintiff's loss, the court concluded that the efficient proximate cause doctrine could not be applied. The court also placed importance on the fact that the language used in the all-risk provision did not explicitly avoid applying concurrent causation. Thus, it quashed the Second District's opinion and remanded.

Case Is Significant for Homeowners and Commercial Property Owners
"The decision is an important one," says Gregory D. Podolak, Naples, FL, cochair of the Emerging Issues Subcommittee of the ABA Section of Litigation's Insurance Coverage Litigation Committee. Sebo will be significant for legal practitioners, because they "will see this fact pattern time and time again," Podolak says.

The Sebo decision "did not really change my view of the law," explains Thomas A. Dye, Miami, FL, cochair of the Property Subcommittee of the Section of Litigation's Insurance Coverage Litigation Committee. But the Florida Supreme Court did "clarify that both principles— concurrent causation and efficient cause—can be applied in Florida" Dye adds.

Now, the Florida Supreme Court has made clear that the concurrent causation doctrine "is the appropriate framework to evaluate construction problems that result from a combination of naturally occurring events and faulty workmanship," Podolak explains. It provides "really strong ammunition to argue that there is coverage" in such cases. Besides homeowners, the case is also "particularly important for commercial property policyholders," notes Jason S. Mazer, Miami, FL, cochair of the Bankruptcy & Insolvency Subcommittee of the Section's Insurance Coverage Litigation Committee.

The Florida Supreme Court's opinion overturning the Second District Court of Appeal will "cut down on litigation, where more than one independent cause results in property damage," predicts Mazer. Frequently, there are multiple causes involved and parties can spend a lot of time litigating about the "efficient proximate cause," observes Mazer.

Changes to Insurance Policies May Result
"The court's reasoning is persuasive. The court did not take an all or nothing approach that could be seen as insurance carrier-friendly or policyholder-friendly. Rather, it used a more fact sensitive legal framework," Podolak believes.

The Sebo court's focus on the language of the insurance policy may, however, lead insurers to take steps to limit the use of the concurrent causation doctrine. "The takeaway for insurance companies is that if they want to exclude the application of the concurrent causation doctrine, they need to include such language in their policies," Dye says. Even so, "you still would need to have the correct fact pattern to apply the efficient cause doctrine," he notes.

Ultimately, "the marketplace will determine how far insurers will go in including anti-concurrent language in their policies," according to Mazer. "Consumers should try to get policies without anti-concurrent language and the broadest all-risk protection that they can reasonably afford," he advises.

Sara E. Costello is an associate editor for Litigation News.

Keywords: insurance coverage, concurrent causation, efficient proximate cause

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