Second District Affirms Summary Judgment in Favor of InsurerHWW represented Erie Insurance Exchange in a first-party coverage dispute arising from damage to an in-ground swimming pool. The policy contained an anti-concurrent causation clause that read: “We do not pay for loss resulting directly or indirectly from any of the following, even if other events or happenings contributed concurrently, or in sequence, to the loss.” The insureds argued that two events contributed to the loss. First, the pressure relief valve on the pool failed and, second, hydrostatic pressure from the ground exerted force on the empty pool. The insureds further argued that the policy only excluded loss caused by hydrostatic pressure and did not exclude loss caused by the pressure relief valve failure. The insureds also argued that the term “in sequence” required the excluded cause – the hydrostatic pressure – to occur before the covered cause – the failed pressure relief valve - for Erie to avoid coverage. The insureds asserted that the pressure relief valve failed first which triggered a covered loss.
Erie contended that the failed pressure relief valve was an excluded cause, along with the hydrostatic pressure. Therefore, regardless of which cause occurred first, the policy excluded coverage. Alternatively, Erie argued that the term “in sequence” did not require any particular order of covered and uncovered events. The trial court entered summary judgment in favor of Erie and the insureds appealed.
The Second District affirmed and rejected both parties’ interpretation of the policy in favor of an interpretation that was even narrower than the one Erie proposed. The court stated that the focus should be on the timing of the loss rather than the timing of the events that contributed to the loss. In other words, when the pressure relief valve failed and the exertion of hydrostatic pressure first occurred does not matter. What matters is the what events contributed to the loss at the time it happened. The court stated: “[A]s far as any sort of order, sequence, or timing is concerned, we look to the point in time that the cause contributed to the loss, not the point in time that the cause came into existence.” Under the court’s analysis, therefore, the contributing events occurred concurrently because, at the time the pool heaved out of the ground, the forces from the failed pressure relief valve and the hydrostatic pressure were acting on the pool simultaneously.
The consequence of the court’s interpretation of the anti-concurrent causation clause should significantly favor insurers. Any indivisible loss that involves two causes (one excluded and one not) should be excluded under the anti-concurrent causation clause because an indivisible loss, by definition, occurs at only one point in time. Only when two divisible losses occur should an analysis be necessary to determine whether the events occurred “concurrently, or in sequence, to the loss.” In that case if a covered event causes a loss prior to a second loss that is caused by both a covered and uncovered event, the first loss is covered. The court’s example is that if a policy covers wind damage but excludes flood damage, wind damage that occurs first is covered, but flood damage that occurs later as a result of the combination of wind and water surge is not covered.