Anti-Concurrent Causation Clauses in Insurance Contracts: The State of the Law in 2017

Abstract

Suppose you have a homeowners insurance policy that protects you against wildfires but not mudslides. One day, a wildfire ravages a hillside near your home, but otherwise leaves your home itself unscathed. Months later, heavy rain triggers a mudslide on that same hill that sweeps down and destroys your home. Are you protected by your homeowner's insurance? Under the Efficient Proximate Cause ("EPC") doctrine, the answer is yes. This is because the wildfire proximately caused the mudslide: it annihilated the root networks holding the soil on the hillside together. However, insurance companies are clever, and frequently contract out of the EPC doctrine using Anti-Concurrent Causation Clauses ("ACCs"). These clauses limit the protection of the homeowner's insurance policy to those explicitly listed in your homeowner's insurance. ACCs are thus quite provocative. The debate over whether ACCs should be enforceable wrestles with the classic tension in the law between the desire for freedom of contract on the one hand, and the desire for equity on the other. This Essay presents a 50-state survey on the rule of law on ACC enforceability and how federal courts interpreting state law address the issue as well. While the author believes that freedom of contract should be the predominate principle and ACCs should be enforceable, jurisdictions with high susceptibility to natural disasters can and perhaps should deviate from that norm.

Keywords: insurance, insured, insurer, contract, anti-concurrent causation clause, homeowner's policy, natural disaster

JEL Classification: K12, K22, K41