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 quite provocative. The debate as to the propriety of ACCs is tied to the tension between the desire for freedom of contract on the one hand, and that for equity to ameliorate the power asymmetry in contract negotiations between insureds and insurers on the other. This Essay surveys the state of the law in the United States with respect to ACCs, and discusses the normative dimensions of ACC enforceability.

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

JEL Classification: K12, K22, K41