The latest Hurricane coverage case issued by the Louisiana Supreme Court had the potential to be another block-buster on the anti-concurrent causation clause we have discussed in prior posts here. See Mark Landry v. Louisiana Citizens Property Ins. Co., No. 2007-C-1907 (La. May 21, 2008). The Court of Appeal had determined the anti-concurrent causation clause was not applicable, instead relying on the efficient proximate cause doctrine to find coverage for a total loss where a covered peril is shown to be the dominant cause. The Supreme Court, however, found the Court of Appeal's discussion of efficient proximate cause inapplicable because the case could be decided on the basis of the Valued Policy Law. Therefore, while not addressing the anti-concurrent causation clause, the decision is important in regards to the Valued Policy Law utilized in some states (although not in Hawaii). Valued Policy Laws were enacted by many states in the late 1800's and early 1900's because insurers were profiting by selling policies with inflated face values, and then, after the building suffered a total loss, litigating the actual value of the insured structure.
When Hurricane Rita hit, the Landrys suffered a total loss of their home from an alleged combination of wind and flood damage. The policy covered loss caused by wind and rain, but specifically excluded damage caused by flood waters. The twist arose in this case because every policy in Louisiana is required by statute to include a provision obligating the insurer to pay the face value of the policy in case of a total loss. The statute was amended in 1991, however, allowing the insurer to determine a loss by a different calculation than that contained in the statute, as long as the new calculation was stated in the both the policy and the application.
The argument in Landry focused on whether the insurer had adequately included a different calculation in the policy and application. The homeowners argued the Valued Policy Law applied because the insurer had not inserted a valid re-calculation in the policy and application. The homeowners therefore argued the statutory obligation to pay face value applied. The trial court agreed after finding the insurer had not set forth an alternative method of loss computation in the application. The Court of Appeal reversed and remanded the case for a determination of whether the insurer could prove that flood water was the efficient or proximate cause of the loss.
On appeal to the Louisiana Supreme Court, the homeowners argued Valued Policy Law was still applicable because the insurer did not provide a different method of computing a total loss caused concurrently by wind and water. The Supreme Court disagreed. The insurer set forth a different method for settling covered property losses, which clearly indicated that only covered losses were to be settled. Whether the statutory valuation provisions would require an insurer to pay the face value of the policy when a total loss was caused concurrently by a covered and non-covered losses was irrelevant because those provisions no longer applied once a different method of loss computation was validly set forth.
In the end, Landry did not teach us much about the anti-concurrent causation provision, but it did enlighten us on the Valued Policy Law.
