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Insurers' anti-concurrent causation clauses create controversy

With hurricane season looming over Florida homeowners, it may be time for us to learn something from other states with less major storm experience. When Superstorm Sandy hit Mid-Atlantic and New England states last year, homeowners and commercial property owners learned the hard way that anti-concurrent causation clauses in insurance policies are valid and enforceable. At least one of those states has passed a law requiring insurers to explain the ACC clause in a separate notice to each and every new and renewing policyholder.

International Risk Management Institute Inc., an independent research organization, provides a fairly clear explanation of an ACC clause. IMRI also provides an interesting and enlightening history of ACC clauses.

Where is it?

If a policy has an ACC clause, it will likely be in the preamble to the list of exclusions. The language can be tricky and confusing for homeowners who are not steeped in insurance jargon on a daily basis.

One insurer's ACC clause reads as follows:

We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

Assurance Co. of America, Inc. v. Jay-Mar, Inc., 38 F. Supp. 2d 349, 352 (Dist. Court, D. New Jersey 1999)

Most people would skip directly to the list and look for, say, "water" to see if the insurer will pay for damage caused by a burst pipe or a flood. If the cause of the claim is not on the list, the homeowner figures he is covered.

However, because the ACC language is present, that may not be the case. We'll explain more in our next post.

Sources: Insurance Journal, "New Law in Maryland Will Require Insurers to Explain ACC Clause to Homeowners," May 6, 2013

International Risk Management Institute Inc., Glossary of Insurance & Risk Management Terms, "Anti-concurrent cause (ACC) provision," accessed online May 31, 2013