Forest Fire Insurance Coverage Series Part 3: Standard Form Policy Exclusions

Even when claims are covered by coverage, insurers often rely on exclusions to try to avoid coverage for wildfire claims. In this article in the blog’s wildfire insurance coverage series, we discuss the interplay between subsidies and coverage exclusions, and the “anti-competitive cause” provision.

Insurers may cite exclusions for the purpose of reducing or avoiding liability. The insurance industry has long relied on the Insurance Services Office (ISO) to draft standard policy language and obtain the required approval from state regulators. ISO form HO 00 03 10 00 (Section I—Exclusions, Part B) provides the following form exclusion language:

We do not insure loss of property described in Coverage A and Coverage B caused by any of the following. However, any subsequent loss to property described in coverages A and B not excluded by any other provision of this policy is covered.

  1. Weather situation. However, this exclusion only applies if the weather conditions contribute in any way to a cause or event excluded in A. above to produce the loss.
  2. Acts or decisions, including failure to act or decide, of any person, group, organization or government agency.
  3. Faulty, Inadequate or Defective:

a. Planning, zoning, development, surveying, layout;

b. Design, specification, manufacture, repair, construction, renovation, remodeling, grading, compaction;

vs. Materials used for repair, construction, renovation or remodeling; Where

D. Maintenance of part or all of any property, whether on or off the “Residence Premises”.

Other form exclusions may exclude “landslides, mudslides or mudslides” (ISO Form Section I—Exclusions, Part A(2)), “settling, shrinking, bulging or expanding » pavement or foundation (ISO Form Section I—Perils Insured Against, Part A(2)(c)), or for water damage (ISO Form Section I—Exclusions, Part A(3)).

As a general rule, when there are several causes of loss, some covered and others not, the loss is deemed to be covered. To avoid this result, many insurers include in their policy what is called an “anti-competing cause” clause prohibiting coverage when at least one of the causes of a loss is not covered. This problem presents itself in the context of wildfires in various ways. For example, after a forest fire, there may be mudslides, building collapses, water damage, smoke or soot damage or other types of damage.

“Landslides, Mudslides, or Mudslides” Occurring due to the wildfire must not be a “competing cause” and must not affect the availability of coverage. However, insofar as they result from independent climatic conditions 15 , insurers can argue that these are “competing causes” limiting their obligations. For example, in Miller v. American Family Mutual Ins. Co. [6](Waldo Canyon Fire), firefighters used 20,000 to 30,000 gallons of water to put out a house fire; this water seeped into the ground and damaged the foundation of the house. The insurer argued that the earth movement exclusion prohibited coverage whether the loss was caused in whole or in part by the efforts of the firefighters. The court rejected this argument, finding that the exclusion was ambiguous as to whether it prohibited earth movements caused uniquely by an otherwise covered man-made event. As for the insurer’s argument that the anti-competitive provision prohibited coverage, the court held that it would only prohibit coverage if the movement of the earth was caused in part by natural causes. unconnected fire. (See also Stankova v. Subway. Prop. & Case. Ins. Co.[7] where a landslide that occurred a month after a wildfire was found to be caused by the wildfire).

Similarly, it is not uncommon for policies to exclude “settling, shrinking, bulging or expanding” of pavement or foundations or water damage. Includes Ins. Co. c. Shepherd discussed the availability of fire coverage and the settlement of losses in the context of a Santa Barbara wildfire (Jesusita Wildfire).[8] Rather than viewing the loss as all or nothing, the forest fire was determined to be the effective immediate cause of much of the insured’s loss, with several aspects of the foundation damage emanating from pre-existing soil being excluded.

This is the third blog post in the series on wildfire insurance coverage.

Source link

Justin D. O'Neill