Imprecise usage of the word “only” in policy language may create ambiguities favorable to policyholders. The Second Circuit recently agreed with policyholders that their homeowners’ policy, which insured for property damage involving the collapse of a part of a building “caused only by one or more of the following” specifically named perils, provided coverage so long as a collapse was caused by one of the enumerated perils, regardless of whether a non-enumerated peril also contributed to the collapse. In an unpublished opinion, the Court rejected the insurer’s interpretation, which the district court had accepted, that coverage was limited to collapses exclusively caused by one of the enumerated perils.
The Court found not only that both interpretations of the plain language were reasonable, which should lead to a resolution of the ambiguity in the policyholder’s favor, but further determined that several considerations supported the homeowners’ interpretation. First, the Court explained that under settled New York case law on insurance contracts, the word “caused” implicates the concepts of proximate causation: if a covered peril is the predominant cause of the loss, the concurrent operation of a non-covered peril will not defeat coverage. (See our recent coverage of the Fifth Circuit’s application of the concurrent-cause doctrine under Texas law.) The policy did not indicate any intent to override this established rule by drafting reasonably clear language. Moreover, the Court pointed out that the insurer obviously knew how to draft language to that effect because another provision in the same policy included a so-called “anti-concurrent cause” claims, which excluded certain perils from coverage “regardless of any other cause or event contributing concurrently.” Additionally, the Court observed that it would be reasonable for a homeowner whose home collapsed predominantly due to a listed peril to expect coverage.
The Court also dismissed the insurer’s contention that the charge from the district court to the jury was proper because the jury instructions used the same “caused only by” language as the policy. Rather, the Court found that the actual use of that phrase in the jury instructions either improperly altered the phase’s context from that in the policy or else preserved the ambiguity and impermissibly relegated the task of contract interpretation to the jury.
This decision reinforces the point that policyholders who pay close attention to the grammatical construction of policy provisions may find the key to obtaining the policy benefits for which they have paid. As the Second Circuit stressed, “most fundamentally, insurance policies are to be construed, and ambiguity assessed, in light of the reasonable expectations of the insured.”