Even when claims are within the scope of coverage, insurers often rely on exclusions in an attempt to avoid coverage for wildfire claims. In this post in the Blog’s Wildfire Insurance Coverage Series, we discuss the interplay between coverage grants and exclusions, and the “anti-concurrent cause” provision.

Insurers may cite exclusions in an attempt to reduce or avoid liability. The insurance industry has long relied on the Insurance Services Office (ISO) to draft standard form policy language and secure approval as required by state regulatory agencies. ISO Form HO 00 03 10 00 (Section I—Exclusions, Part B) provides the following form exclusionary language:

We do not insure for loss to property described in Coverages A and B caused by any of the following. However, any ensuing loss to property described in Coverages A and B not precluded by any other provision in this policy is covered.

  1. Weather conditions. However, this exclusion only applies if weather conditions contribute in any way with a cause or event excluded in A. above to produce the loss.
  2. Acts or decisions, including the failure to act or decide, of any person, group, organization or governmental body.
  3. Faulty, inadequate or defective:

a. Planning, zoning, development, surveying, siting;

b. Design, specifications, workmanship, repair, construction, renovation, remodeling, grading, compaction;

c. Materials used in repair, construction, renovation or remodeling; or

d. Maintenance of part or all of any property whether on or off the “residence premises.”

Other form exclusions may exclude “landslides, mudslides or mudflows” (ISO form Section I—Exclusions, Part A(2)), “settling, shrinking, bulging or expansion” of pavement or foundations (ISO form Section I—Perils Insured Against, Part A(2)(c)), or for water damage (ISO form Section I—Exclusions, Part A(3)).

As a general rule, where there are multiple causes of a loss, some that are covered and others that are not, the loss is deemed covered. To avoid this outcome, many insurers insert in their policy what is referred to as an “anti-concurrent cause” provision barring coverage wherever at least one of the causes of a loss is not covered. This issue presents in the wildfire context in various ways. For example, after a wildfire, there can be mudslides, building collapses, water damage, smoke or soot damage or other sorts of damage.

“Landslides, mudslides or mudflows” occurring because of the wildfire should not constitute a “concurrent cause” and should not affect the availability of coverage. However, to the extent they arise from independent climatic conditions, 15 insurers may argue that they are “concurrent causes” limiting their obligations. For example, in Miller v. American Family Mutual Ins. Co. [6](Waldo Canyon Fire), firefighters used 20,000 to 30,000 gallons of water to extinguish a house fire; this water seeped into the ground and damaged the home’s foundation. The insurer argued that the earth movement exclusion barred coverage regardless of whether the loss was caused in whole or in part by the firefighters’ efforts. The court rejected this argument, holding the exclusion was ambiguous as to whether it barred for earth movement caused solely by an otherwise covered man-made event. As for the insurer argument that the anti-concurrent cause provision barred coverage, the court held that it would only bar coverage if the earth movement was caused in part by natural causes unrelated to the fire. (See also Stankova v. Metro. Prop. & Cas. Ins. Co.[7] where mudslide occurring one month after wildfire was deemed caused by the wildfire).

Similarly, it is not uncommon for policies to exclude “settling, shrinking, bulging or expansion” of pavement or foundations or water damage. Encompass Ins. Co. v. Berger addressed availability of coverage for fire and settling losses in the context of a Santa Barbara wildfire (Jesusita Wildfire).[8] Rather than view the loss as an all-or-nothing, the wildfire was determined to be the efficient proximate cause of much of the insured’s loss, with several aspects of foundation damage emanating from preexisting soil conditions excluded.

This is the third post in the Blog’s Wildfire Insurance Coverage Series.