Texas Supreme Court Upholds Anti-Concurrent-Causation Clauses in Property Policies

The Texas Supreme Court in JAW the Point, LLC v. Lexington Ins. Co., 460 S.W.3d 597 (Tex. 2015) held, on first impression, that losses incurred in demolishing and rebuilding property damage resulting from Hurricane Ike to comply with city ordinances were excluded under the policy’s anti-concurrent-causation clause. Prior to the Texas Supreme Court’s JAW decision, federal and lower state courts of appeal had interpreted and upheld the applicability of anti-concurrent-causation clauses under Texas law. See, e.g., ARM Props. Mgmt. Group v. RSUI Indem. Co., 400 Fed.Appx. 938, 941 (5th Cir. 2010); Lexington Ins. Co. v. Unity/Waterford-Fair Oaks, Ltd., No. CIV. A. 399CV1623D, 2002 WL 356756, at *4 (N.D. Tex. Mar. 5, 2002); Wong v. Monticello Ins. Co., No. 04-02-00142-CV, 2003 WL 1522938, at *1 (Tex.App.–San Antonio Mar. 26, 2003, pet. denied).

Taking its lead from the United States Circuit Court of Appeals for the Fifth Circuit, the Texas Supreme Court held that a policy anti-concurrent-causation clause together with an exclusion for losses caused by flood, when read together, excluded from coverage any damage caused by a combination of wind and water. Previously, the Fifth Circuit Court of Appeals in Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419, 429-31 (5th Cir. 2007) (interpreting Mississippi law), had concluded in situations involving combinations of covered wind damage and excluded flood damage that “[t]he only species covered under [a policy with an anti-concurrent-causation clause] is damage caused exclusively by wind. But [when] wind and water synergistically cause[ ] the same damage, such damage is excluded.” Leonard, 499 F.3d at 430.

The insured argued that applying the policy’s anti-concurrent-causation clause would conflict with the common-law concurrent-causation doctrine that had previously been recognized under Texas law. Under Texas’s common-law concurrent-causation doctrine, when both excluded and covered events combine to cause a loss and the two causes cannot be separated, concurrent-causation exists and the exclusion is triggered so that the insurance company has no duty to provide the requested coverage. See, e.g., Utica Nat. Ins. Co. of Texas v. American Indem. Co., 141 S.W.3d 198, 204 (Tex. 2004). However, the Texas Supreme Court observed that it is only when a covered event and an excluded event each independently cause the loss that separate and independent causation exists for purposes of applying Texas’s common-law concurrent-causation doctrine. The Texas Supreme Court then found that the evidence conclusively established that Hurricane Ike caused both wind damage and flood damage, in a sequence of events, which combined to cause the city to enforce the ordinances against the insured and, therefore, the common-law concurrent-causation doctrine would not be applicable.

The JAW decision stands for the proposition that Texas courts will enforce anti-concurrent-causation clauses as written in the policy.