A multiple cause loss is exactly what it sounds like; it is a loss with multiple, or a combination of, causes. An example would be a bursting water pipe that was caused by both cold weather and a homeowner’s negligent failure to maintain above-freezing temperatures in a home. These losses become significant for insurance purposes when one cause of a loss is a covered peril, but another cause is excluded from coverage.
Courts have traditionally applied one of two separate doctrines to determine the existence of coverage for multiple cause losses: the efficient proximate cause doctrine or the concurrent cause doctrine. Under the efficient proximate cause doctrine, when there are multiple causes of a loss, the cause that set the other causes in motion is deemed the cause of the loss for purposes of determining the availability of coverage. In other words, under the efficient proximate cause doctrine, a loss is generally covered if it is caused by a covered peril that sets an uncovered peril in motion; but a loss is not covered if it is caused by an uncovered peril that sets a covered peril in motion. Conversely, under the concurrent cause doctrine, coverage may be available when a covered peril is a cause of the loss even though it is not the primary or efficient cause of the loss.
The concurrent cause doctrine is the more insured-friendly of the two doctrines. To avoid coverage where the concurrent cause doctrine is applicable, an insurer may be required to show that none of the multiple causes of the loss is a covered peril, whereas to avoid coverage where the efficient proximate cause doctrine is applicable, the insurer is only required to show that the primary or efficient cause of the loss is excluded. Because the concurrent cause doctrine increases an insurer’s burden of proof, it likely also will increase the costs to adjust the loss in the form of testing and experts.
A December 2016 Florida Supreme Court decision added clarity to the Florida insurance market with respect to multiple-cause losses. In Sebo v. Am. Home Assurance Co., 208 So. 3d 694 (Fla. 2016), the Florida Supreme Court adopted the concurrent cause doctrine in a case involving an “all risk” homeowners’ policy. The insured property was an $8 million home, and was eventually demolished as a result of extensive water and wind damage. It was undisputed that defective construction combined with rainwater and hurricane winds caused the damage. The policy excluded losses caused by defective construction, but it covered losses caused by weather. Ultimately, the court applied the concurrent cause doctrine and found that the entire loss was covered, reasoning that “where weather perils combine with human negligence to cause a loss, 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.” Sebo reversed a prior Florida Court of Appeals decision that applied the efficient proximate cause doctrine.
The application of the concurrent cause doctrine in Sebo will likely have a significant impact on the Florida insurance market. But, perhaps as importantly, Sebo also highlights the significance of careful drafting of policy language. The court in Sebo applied the concurrent cause doctrine because the policy “did not explicitly avoid applying [the concurrent cause doctrine].” In other words, had the policy excluded coverage for losses when any excluded peril contributes directly or indirectly to a loss – sometimes referred to as an “anti-concurrent causation clause” – the Sebo court likely would have found no coverage. Now more than ever, the inclusion of such clauses in policies issued to Florida insureds will be of utmost importance to insurers doing business in Florida.