We are continuing our discussion of anti-concurrent causation clauses in homeowners insurance policies. ACC clauses have garnered attention in the past few months as states less well-versed in insurance than Florida dealt with the aftermath of Superstorm Sandy. Homeowners were surprised to learn that their insurance policies included a kind of all-or-nothing coverage provision.
Those homeowners called their legislators and state insurance offices and complained when they found out that because their policies excluded, for example, wind damage, their policies would not cover any damages caused by the combination of wind and water. One state has already passed a law that requires homeowners insurance companies to explain this to policyholders in a separate notice.
When is coverage denied?
In a policy with an ACC clause, "concurrent" does not always mean concurrent. If the clause looks like the one we quoted in our last post, the insurer will deny coverage if the damage is the result of two events occurring simultaneously -- that is, they are concurrent -- or if the damage is the result of a sequence of events.
It is the latter provision that an insurer could have relied on when denying coverage to a grocery store that lost all of its refrigerated and frozen merchandise in the storm. The insurer would explain that the policy covered losses from electrical failures, but that electrical failure was caused by the water pouring into your basement when the streets flooded. The policy does not cover floods. One strike and you're out.
To understand how ACC clauses came about in the first place, we'll need a little history of concurrent causation -- and we will get into that in our next post.
Sources: Insurance Journal, "New Law in Maryland Will Require Insurers to Explain ACC Clause to Homeowners," May 6, 2013
IRMI, Glossary of Insurance & Risk Management Terms, "Anti-concurrent cause (ACC) provision," accessed online May 31, 2013