Concurrent Causation – When Two Causes Contribute to a Loss
You’ve worked hard to protect your clients with robust insurance policies. Yet, they may still face confusing situations when a loss occurs due to multiple causes and not all of the causes are covered by the policy. This often leads to a complex insurance issue known as concurrent causation.
TL;DR
- Concurrent causation is when multiple causes – at least one covered and one not – contribute to a single loss.
- It matters as it affects claim outcomes, policy interpretation, and risk advice.
- A common misunderstanding is that if one cause of a loss is covered, the entire loss is covered – which often isn’t true.
- Understanding and explaining concurrent causation correctly can help agencies reduce client misunderstandings and E&O exposures.
What Is Concurrent Causation in Insurance?
To a client, concurrent causation is when two or more events occur at about the same time and combine to cause a single loss.
In technical terms, concurrent causation refers to a specific scenario where a loss has occurred due to multiple causes that occur simultaneously, and at least one of those causes is a covered risk while others may not be. These scenarios can lead to complex question when handling insurance claims and interpreting policy language. It can become even more complicated when different courts interpret these situations differently or when policy language aimed to limit some scenarios is introduced, like the anti-concurrent causation clause.
Key Related Terms to Know
- Anti-Concurrent Causation – A policy language restricting coverage when a covered risk and an excluded risk act together to cause a loss.
- Predominant Cause – The main cause leading to a loss, which could influence how concurrent causation scenarios are assessed.
- Causal Chain – A sequence of events in which one event causes the next one.
- Indivisible Injury – A single loss caused by multiple causes that cannot be separated.
- Multiple Causes – When a loss occurs due to more than one event or phenomenon.
- Covered Risk – An event or condition that is insured under the terms of an insurance policy.
- Excluded Risk – An event or condition that is not covered by an insurance policy.
Common Questions About Concurrent Causation
How does concurrent causation influence insurance claims?
Concurrent causation substantially impacts claims adjusting. Suppose the insurance policy doesn’t have clear language about concurrent causes. In that case, it can be challenging to decide if the entire loss is covered, part of it, or none at all. This will often hinge on the specifics of the concurrent causation law of the jurisdiction.
What is the role of court rulings in concurrent causation cases?
Court rulings in concurrent causation cases are crucial because they set a legal precedent. Depending on the jurisdiction, courts may handle concurrent causation differently, either using the efficient proximate cause doctrine or the doctrine of concurrent causation. If a case goes to court, the jury instructions on assessing concurrent causes also have an important bearing on the outcome.
Can anti-concurrent causation language protect insurance companies from covering certain losses?
Yes, the anti-concurrent causation language in insurance policies is designed to limit insurers’ liability when a covered and non-covered risk occur together causing a loss. However, its enforceability may vary between jurisdictions and policy language.
How does concurrent causation affect commercial property insurance?
Concurrent causation is a commonly significant issue in commercial property claims, specifically those for property damage and business interruption. For instance, a company might believe their policy covers a flood (covered risk) that damaged a warehouse. Still, if an earthquake (excluded risk), which happened almost simultaneously, also helped cause the damage, the claim could get significantly more complex due to concurrent causation.
Concurrent Causation vs. Predominant Cause
It’s easy to confuse concurrent causation with the concept of the predominant cause. The fundamental difference lies in how causation is assessed.
Comparison Area | Concurrent Causation | Predominant Cause
|
Primary use case | Multiple simultaneous causes of a loss | Identifying the main cause of a loss |
Coverage / concept type | Influences defining policy coverage | Used by some courts interpret coverage |
Typical exclusions | Depends on individual policy terms | No typical exclusions |
Who is most affected by errors | Both policyholders and insurers | Policyholders |
Common mistakes | Misunderstanding how excluded risks can still affect a loss | Misinterpreting policy language |
Real Claim Examples Involving Concurrent Causation
Scenario 1:
In a hospitality business, a backed-up sewer line (excluded peril) leads to flooding within the property during a heavy rainstorm (covered peril). The business owner files a claim for the damages. But due to the concurrent causation, combined with unclear policy language, it becomes a contentious process of deciding if and how much should be covered.
Scenario 2:
A homeowner’s basement is flooded due to simultaneous occurrence of a thunderstorm (covered peril) and dam failure from lack of maintenance (excluded peril). The policy includes an anti-concurrent causation clause leading to the claim denial which gets challenged in court bringing up concurrent causation issues.
Scenario 3:
A manufacturing plant has serious fire damage. While the fire (covered peril) was ignited by a faulty machine (also covered), an investigation finds the sprinkler system failed to operate because it had been tampered with (excluded peril), allowing the fire to spread. The concurrent causation of the loss leads to tricky claim settlement negotiations.
Limitations and Common Mistakes
Concurrent causation won’t apply if:
- All causes are covered perils based on policy language.
- Only one cause could reasonably have led to the loss.
- The causes didn’t occur approximately simultaneously.
Common mistakes include:
- Not recognizing the implication of policy language on concurrent causation.
- Overlooking the influence of court rulings and local legal precedent.
- Not correctly explaining the concept and implications to the client, leading to misunderstandings.
How to Explain Concurrent Causation to Clients
Personal Lines client – “Think of it like this. If a storm we’re covered for and vandalism we’re not covered for both damaged your fence at the same time, concurrent causation comes into play. It can get complex so let’s review your policy to understand how it could affect you.”
Small Business owner – “Concurrent causation means that if an excluded risk like an earthquake and a covered risk like a fire occur at the same time causing damage to your business, we have a complex claim situation. Let’s make sure you understand how your policy language handles situations like this.”
CFO or Risk Manager – “In our risk review, let’s pay special attention to concurrent causation scenarios. That’s when multiple causes, not all of which are covered, contribute to a single loss. Your policy’s language can significantly impact how claims from these situations get handled.”