On January 12, 2009, the South Carolina Supreme Court held that the term “cause,” as that term is used in a homeowner’s insurance policy, is not to be equated with legal causation. S.C. Farm Bureau Mut. Ins. Co. v. Durham, No. 26579, S.C. Sup., 2009 S.C. LEXIS 6 (January 12, 2009). Rather, the term should be construed as it would be by the ordinary person. Id.  

Background  

The dispute in this case centered on whether the insureds’ homeowner’s policy covered damage to their swimming pool. The insureds, the Durhams, obtained a homeowner’s policy from South Carolina Farm Bureau Mutual Insurance Co. (Farm Bureau), which covered their home and in-ground swimming pool. The Durhams were in the process of draining their pool when Horry County experienced rainfall over a four-day period. After the rain subsided, the Durhams fully emptied the pool and within two to three days after that, the pool “floated” out of its foundation and rose from the ground, causing damage to the pool and deck.  

Farm Bureau denied coverage for the loss based on two provisions in the policy. The first provision, which appears under the enumeration of covered perils, states that the policy does not cover “loss … caused by … pressure or weight of water … to a swimming pool.” The second provision excludes coverage for “[w]ater damage, meaning … water below the surface of the ground, including water which exerts pressure on or seeps or leaks through a … swimming pool.” The provision further provides that “[s]uch loss is excluded regardless of any other cause ….” Despite these provisions, the circuit court found that the loss was covered, concluding that the term “cause,” which was undefined in the policy, should be construed in a legal, technical sense. Farm Bureau appealed.  

Holding  

The South Carolina Supreme Court reversed the circuit court’s decision that the water damage exclusion did not apply. Central to the Court’s decision was the manner in which the circuit court construed the term “cause,” as that term was used in the insurance policy. The term “cause” was undefined in the policy. In the absence of a definition, the circuit court construed that term according to its legal meaning. The Supreme Court, however, found this to be inconsistent with South Carolina’s rules for the construction of undefined policy terms, which are to be construed according to the usual understanding of the term’s significance to an ordinary person.

The circuit court construed the term “cause” to mean “but for” cause, similar to the meaning attached to the term in tort law, where causation is an essential element of establishing liability. The Supreme Court disagreed with the circuit court’s definition, however, and held that “cause” in the context of the insurance policy was not the same as legal causation. Rather, in the ordinary sense, “cause” does not require that the event giving rise to the loss be the proximate cause of the loss. Instead, the “cause” need merely be something that produces an effect, result or consequence.  

The Court then assessed the factors that led to the pool floating out of the ground, and determined that more than one factor was at issue — both the draining of the pool and underground water pressure. The Court, therefore, looked to the language of the water damage exclusion, which contained a concurrent cause provision. According to the exclusion, loss caused by water “is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.” The Court concluded, therefore, that even if one cause of the loss was the failure to drain the pool properly, the resulting damage still would be excluded because the damage was caused, at least in part, by the exertion of water pressure from the surrounding land. In addition, the Court addressed the circuit court’s finding that the exclusionary provisions could not have contemplated barring coverage for conditions that existed at the time the policy was issued, such as the existence of underground water. The Supreme Court did not agree, reasoning that nothing in the language of the policy suggests a carve-out should exist for conditions that existed at the inception of coverage. Thus, absent specific language in the policy affording such an exception, none would exist.  

Implications  

Farm Bureau confirms that, under South Carolina law, undefined terms in a home-owner’s policy should be construed according to their ordinary meaning. The decision further confirms that undefined terms are not per se construed against the insurer. Rather, they are afforded their ordinary meaning and construed in the context of their policy usage. Farm Bureau further illustrates that concurrent causation provisions will continue to be honored in South Carolina, even in cases in which their application results in a narrowing of coverage.