On October 8, 2009, the Mississippi Supreme Court issued its highly anticipated decision in Corban v. USAA Insurance Company, holding that the anti-concurrent causation (“ACC”) clause in a homeowners’ insurance policy is inapplicable where both wind and water did not act in conjunction in causing Katrina-related damages.  The Court concluded that where loss was caused separately by wind and water, all loss directly caused by wind damage is covered and all loss directly caused by water damage is excluded.  This case is the first Hurricane Katrina wind v. water insurance dispute heard by the Mississippi Supreme Court.  (Click here for a copy of the Mississippi Supreme Court’s decision).

As discussed here and here, the primary issue in the case is the interpretation of the anti-concurrent causation clause in a homeowners’ insurance policy.  In its decision, the Mississippi Supreme Court considered three issues: (1) whether “storm surge” is included in the “water damage” exclusion in the policy; (2) whether the ACC clause is applicable; and (3) which party bears the burden of proof.

First, the Court concluded that “storm surge” is included in the “water damage” exclusion, affirming the circuit court’s earlier ruling.  Even though “storm surge” was not specifically listed in the exclusion’s definition of “water damage,” the Court determined that “storm surge” is encompassed within the exclusion’s reference to “flood” or “overflow of a body of water.”

Second, the Court reversed the circuit court’s ruling as to the ACC clause.  The Mississippi Supreme Court held that the ACC clause was inapplicable.  The ACC clause provided:

We do not insure for 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.
In reaching its decision, the Court examined the definition of three terms used in the ACC clause: “loss,” “concurrently” and “in any sequence.”  The Court concluded that “loss” occurs at the time when the insured suffers damage to its property, and that an insured’s right to be indemnified for covered loss vests at the time of the loss.  When used in the ACC clause, the Court explained that the term “concurrently” refers to loss occurring at the same time or two forces operating in conjunction to cause the loss.  Finally, the Court found the phrase “in any sequence” to be ambiguous.  Accordingly, the Court reasoned:

The ACC clause applies only if and when covered and excluded perils contemporaneously converge, operating in conjunction, to cause damage resulting in loss to the insured property.  If the insured property is separately damaged by a covered or excluded peril, the ACC clause is inapplicable.  If the damage is caused by a covered peril, the insured is entitled to indemnification for the covered loss, as the insured’s right to coverage for the loss has vested… Conversely, if the damage is caused by an excluded peril, the insured is not entitled to indemnification for that uncovered loss.

As neither party in the Corban case argued that an “indivisible” force (both wind and flood water) occurred at the same time or in conjunction causing the loss at issue, the Court held the ACC clause to be inapplicable, concluding that all loss directly caused by wind damage is covered and all loss directly caused by water damage is excluded.

Finally, the Court considered the burden of proof as to coverage.  With respect to coverage under the insurance policy’s Dwelling and Other Structures coverages, the insured has the burden to prove direct physical loss while the insurer would then have the burden to prove, by a preponderance of the evidence, that the cause of the loss is excluded (e.g. water damage caused or concurrently contributed to loss).  In connection with coverage under the Personal Property coverage section, the insured has the burden to prove by a preponderance of the evidence that the direct loss to the property was caused by wind.  The Court set forth each party’s burden of proof, as questions of fact remain for a jury to determine.  The Court remanded the case for further proceedings.

We will continue to provide updates on this and all Katrina-related coverage litigation on InsureReinsure.com.