This reminds me of a well-known phrase my mother used to say to ensure I knew I could never get away with well-organized mischief without her knowing. The saying goes: “You can’t pull the wool over the wool puller’s eyes.” Many carriers try their darndest to do just that: pull the wool over their own policyholders’ eyes without raising an eyebrow. Not that policyholders are the wool pullers, but you catch my drift.
A public adjuster/licensed appraiser whom I’ve come to know and respect, came to me and asked my opinion about the denial of his client’s business interruption claim. Hurricane Florence severely damaged the policyholder’s business property, which resulted in loss of business income. The carrier accepted coverage for the wind damage suffered to the commercial property but denied coverage for flood damages. In addition, the carrier denied the insured’s claim for business interruption based on the following policy language:
1. 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.
. . . .
(1) Flood, surface water, waves, (including tidal wave and tsunami), tides, tidal water, overflow of any body of water, or spray from any of these, all whether driven by wind (including storm surge)
Essentially, the insurance company accepted coverage for wind damages to the building property but denied coverage for loss of business income because the carrier contends the anti-concurrent causation policy language suffices to exclude coverage for loss of business income if flood contributed to the loss.
Coverage for business interruption will be afforded if there was, in part, direct physical damage to the property at the premises described in the policy declarations that was caused by a covered cause of loss. In this case, the business income loss derived from damages to the insured commercial property from Hurricane Florence.
In a prior blog post, North Carolina – Concurrent Causation, I discussed that North Carolina is a concurrent causation state. However, under North Carolina law, where more than one cause contributes to the alleged loss but the insurance policy specifically provides an exclusion applies regardless of any concurrent or sequential causes of loss, the courts will enforce this anti-concurrent causation language and exclude coverage when any one of the multiple concurrent causes is clearly excluded.1 In this case, the insured will likely have to retain an engineer to determine causation on wind versus flood and the most likely cause of the BI loss.
Policyholders and insurance professionals should determine whether anti-concurrent causation language is cited in the policy. It is important to contact a licensed North Carolina attorney regarding multiple causes of loss and the effect on coverage determination.
1Builders Mut. Ins. Co. v. Glascarr Prop., Inc., 688 S.E.2d 508 (N.C. Ct. App. 2010).