A View From The Press Box

Creating an ethical issue regarding concurrent causation ignores the fact that it all began when good lawyering exposed loopholes in exclusionary wording.

How can we continue to this day to create "victims" who thought they were getting flood coverage in their homeowners policy? Perhaps the industry should just add flood coverage onto all property forms and charge the appropriate premium.

As an adjuster, the question of ethical claims payment is prefaced by the contractual provisions in place. We survey the damage, provide observations on causation, quantify the damages and forward all to the carrier, who then decides whether to act"ethically" or "contractually."

From a purely "good will" perspective, it appears more could have been done for policyholders. However, are we to expect a favorable variance on contractual agreements every time we feel slighted? The courts are tied up with enough frivolous litigation as it is.

Oh golly! You've hit on my favorite subject again. I am now filled with missionary zeal in defending the anti-concurrent causation clause!

I have laminated a copy of the wording of the ISO HO-3 10-00 edition of the clause (most clauses are similar in intent, but I ONLY address this version in my statements). I keep this card in my wallet, much like other missionaries carry holy pictures.

This clause IS ETHICAL and IS NECESSARY. It does NOT say what some say it does--i.e. 'the coverage grant is voided if a non-covered event occurs at approximately the same time."

What it does say is (capitalization added): "We do not insure for any loss caused directly or indirectly by any of the FOLLOWING. SUCH LOSS is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. THESE EXCLUSIONS apply whether or not the loss results in widespread damage or affects a substantial area."

The policy then goes on to list a number of exclusions, the most notorious of which appears to be "WATER DAMAGE."
The policy then defines what is EXCLUDED.

NOWHERE does it say that previously granted coverage is erased. The coverage grant is "risk of direct physical damage..," except: "We do not insure, however, for loss:
a. Excluded under Section I exclusions."

So the ACC clause DOES NOT take away anything which had been previously granted.

The perception that the ACC clause cheats the insured is a misreading of the policy language. This perception has recently gained some acceptance resulting from the overzealous interpretation of the policy by ONE claims examiner!

Someone asked how this "DIABOLICAL" clause could be accepted by 48 regulatory bodies (talk about hyperbole!!!) While I do not regard the various legislative/regulatory bodies as founts of wisdom, neither do I believe that they are cesspools of ignorance. Hence, acceptance by 48 legislative/regulatory bodies just MIGHT offer a hint that the ACC clause is "legit."

Professional adjusters have ALWAYS addressed the issue of covered vs. non-covered damages resulting from 'mixed perils. Properly allocating compensation under the policy is difficult. We somehow manage to get it done (that's why we make the big bucks!)

I would love to continue this debate, any time, any place!

Many constructs start with one purpose and then generate unintended consequences when circumstances impact their original intent. This is the case with the anti-concurrent-causation clause.

ACC was created as a defensive measure by insurance companies in an era lackng enlightenment for consumer interests.

Now, however, most corporations are embracing a broader concept of corporate responsibility, which includes a higher moral standard. That standard suggests that insurance companies should be on a path to providing complete protection for the assets of consumers, and not attempting to hide from their responsibility.

In sum, ACC is an arcane artifact and a structural impediment to progress. It should be abolished.

On its face it's unethical. How can a loss be excluded not before it's happened, but after it's happened?

It has not been ethically implemented by the industry after the storms. I have no symphathy with anyone who tries to claim they didn't know their homeowners policy excluded flood. After all the years, the publicity, and the notice in large type on the declaration pages--anyone who makes that claim is, quite simply, a moron.

The ACC clause is, however, an entirely different matter. No one would expect such a clause to be in their policy. It's like a little stealth clause that some companies slipped into the policies without telling anyone.

People who are not in a 100-year flood could honestly make the decision not to buy flood insurance, then to have their windstorm damage excluded, after the fact, because they got hit with a tremendous storm surge? No, no, no.

The only thing that would help would be to perhaps train the adjusters more thoroughly in trying to determine the cause of damage when there is wind and flood. But many cases are going to be ambiguous in the extreme. There will be no clear-cut division between the two causes of loss.

The answer? Make flood an optional peril under the homeowners policy, reinsured back to the NFP. That way (as long as flood limits are sufficient, which means increasing the limits available under the NFP) the INSURED will at least be made whole, which is what we are all supposed to be about. The insurer and the NFP can hassle out the division later between themselves.

Since we don't have that yet, I at least try to place the flood policy with the homeowners carrier, so we're only dealing with one company.

Of course the ACC is unethical. The insurers introduced it en mass to an unsuspecting public--who, year after year, pay their premiums and expect that their insurers will care for them, not fake them out.

Few read the policy and few of those that even tried to would understand the ACC, which is intellectually ambiguious. No consumer expects the insurer they trust that sells them a coverage to institute a trap door escape clause like the ACC.

The ACC was intended to decieve and it achieved its goal. Wait for fire after earthquake and the claimed exclusion of the fire cover. What else will drop out of the coverage we consumers thought we bought?

Here's an idea for the ISO to try on its collusive members: How about if two covered events occur in a short time, say a year...why not no coverage then? OOOps, I made a mistake putting this idea out there, I can see the minds churning.

As one of the principal drafters of the "anti-concurrent causation" language at ISO in 1983 (we didn't use the "anti" back then), I think I can confidently relate that the intent of the initiative was always to restore the effect of various critical exclusions (e.g., flood, earthquake), which creative judges threatened to erode by finding coverage where clearly none was intended merely because a contrived causational trail could be traced to some other element we hadn't already thought to exclude.

The original Sabella case, and most of the other subsequent cases that created the concurrent causation crisis, are archetypes of judicial malfeasance.

If the courts took a reasoned approach to the impact of their contract interpretations, the industry wouldn't have to apply so much armor plate around its contracts.

In my opinion as a risk manager, loss control executive and a private investigator, the ACC would be ethical IF the insured knew what they had in their hand when they bought the policy!

Most have not a clue what they purchased, and when the loss occurs, dig out the policy, if it's still intact, and try to make sense of it. They still can't decipher it and expect the insutrer to pay for all the damage.

Then the insurer has the issue of deciding what came first, the proverbial "chicken or the egg," and as you well know, neither party will ever agree it was the one that affords the other the most leeway in coverage.

Bill Brauer has an interesting concept above. How about taking that a step further and inserting plain English language in every policy that clearly states what concurrent causation is?

What WE think is clear and defined policy language is NOT clear and defined to the public. Katrina and other disasters should have taught us that by now.

Bravo John Reiner! More from you PLEASE.

If the ACC really reads the way that Mr. Riley spells out in his earlier posting, then I think this issue has been unreasonably blown out of proportion, and the insurance press would be largely to blame for not more carefully inspecting and reporting on the issue.

However, perhaps other companies with their own non-ISO policy language may actually have more restrictive ACC clauses that are worded more closely to what has been reported in the press, and if so, this would justifiably be an issue for debate.

If carriers are interpreting and citing the ACC clause incorrectly to deny coverage where it should exist, that is a separate ethical issue. The problem would not be with the clause itself, but the company's interpretation.

If it really reads as clearly as stated by Mr. Riley, claimants should have relatively strong bad-faith arguments against their insurers, which should act as an incentive for the insurers to apply the ACC as it is worded/intended.

I agree with Rossmiller that this is not an ethical, but a public policy issue.

Mr. Reiner correctly points out that this, and many other policy provisions can be traced to previous outcome determinative judicial "interpretations."

Here's the pattern:

1) Draft a simple, reasonable and clear provision.

2) In desparate, high-stakes litigation, courts "construe" the provision out of existence. "...if only the policy had been clearer, included a definition, explained its meaning, etc..."

3) Insurers react with more restrictive versions of provision.

4 )Insureds cry foul--"more or same premium charged for restricted coverage"--shocked that what was previously covered is now excluded.

5) Insurers draft lengthy provisions restoring original intended coverage. (The original one-sentence provision is now a three-page endorsement.)

6) Insureds react as expected: "Why can't you just use plain English and not be so complicated?

7) Insurers try plain English.

8) Return to # 1 above, 0 rinse, repeat.

Wow, what a lot of blogging that all completely misses the whole point, which is:

Insurance companies will do whatever they can whenever they can to avoid paying off on any loss.

Insurance companies are in business to make as much money as possible by any means ethically or unethically. They do this by selling a product that they try to make nonexistent.

They are treated by law as an institution instead of what they are--a vendor hawking a bad product.

The business model they use is merely a variation on the pyramid or Ponzi scheme: Use other people's money to pay their clients until they are allowed by the courts to default on their obligations.