I can't resist reading a decision regarding a dispute over hurricane coverage for property owned by an Alaska Native Corporation. See Arctic Slope Regional Corp. v. Affiliated FM Ins. Co., No. 08-30050, 2009 U.S. App. LEXIS 6900 (5th Cir. April 2, 2009). The Arctic Slope Regional Corporation, one of the few lucrative Native Corporations formed under the Alaska Native Claims Settlement Act of 1971, is based in Barrow, Alaska, the northern most city in the United States. I was in Barrow one December, the time of year when the sun does not crack the horizon for two solid months. But I digress. There are interesting insurance issues in Arctic Slope.
One of Arctic Slope's ventures, an office and construction yard on the coast of Louisiana, was inundated by water after Hurricane Rita's storm surge in September 2005. Coverage was denied under Arctic Slope's all risk policy. The policy covered damage caused by "wind and hail," but not by "flood" in the form of storm surge.
The policy defined "flood" as "surface water; tidal or seismic sea waive; rising (including overflowing or breaking of boundaries) of any body of water . . . whether driven by wind or not . . . ." "Wind/hail" was defined as "direct and/or indirect action of wind and all loss or damage resulting therefrom whether caused by wind, by hail or by an other peril . . . when water . . . is carried, blown, driven, or otherwise transported by wind onto or into said location." Therefore, storm surge was arguably covered by the wind/hail provision, but excluded by the flood provision.
The district court held the wind/hail provision had to be read in light of the entire policy. Arctic Slope Regional Corp. v. Affiliated FM Ins. Co., No. 07-0476, 2007 U.S. Dist. LEXIS 64850 (W.D. La. Aug. 30, 2007). When read in conjunction with the definition of "flood," it was apparent that storm surge was not encompassed by the definition of wind/hail.
The Fifth Circuit affirmed, although on slightly different grounds. Arctic Slope's first argument that the policy was ambiguous because it excluded coverage for storm surge damage within the flood definition while it authorized coverage for the same damage in the wind/hail provision, was rejected. The policy covered all risks of direct physical loss or damage "except as excluded under this policy." Therefore, the exclusion of storm surge as a flood event could not be reversed by its possible inclusion as a wind/hail event.
Arctic Slope also argued there was an ambiguity under the policy's anti-concurrent causation clause preceding the excluded perils:
This policy does not insure against loss or damage caused directly or indirectly or resulting from any of the following. Loss or damage is excluded regardless of any other cause or event whether or not insured under this policy that contributes concurrently or in any sequence to the loss or damage.
Arctic Slope argued the clause was ambiguous because there was only one cause of damage - storm surge - and not separate causes defined as separate perils in the policy. Perhaps the correct analysis at this point would have been to simply state the anti-concurrent causation provision does not come into play until there are two separate causes of the same, identical damage. If two or more forces cause different, distinct damage, only single causation exists and the anti-concurrent causation clause does not apply. Here, as noted by the court, there was one cause of damage - storm surge.
Nevertheless, the court addressed Arctic Slope's argument by determining the anti-concurrent causation clause was unequivocal and unyielding. The storm surge, "whether driven by wind or not," was not covered by the policy. Consequently, the anti-concurrent causation clause precluded coverage of the loss or damages under the wind/hail provision as water "carried, blown, driven or otherwise transported by wind." Although only one peril was in play, the court determined the clause operated exactly as it was intended and was not ambiguous.
