Appellate ruling upholds State Farm’s ACC policy language

A three-judge panel of the U.S. Court of Appeals for the Fifth Circuit yesterday issued a ruling upholding State Farm’s water damage exclusion and anti-concurrent causation language in our homeowners policies. The original Tuepker v. State Farm ruling by the trial court upheld our water damage exclusion but said our anti-concurrent causation language was ambiguous and unenforceable.

This ruling affirms the clarity of our policy language. While we’re pleased the court resolved these issues, State Farm is working to settle remaining outstanding claims in the Gulf.  As of Nov. 2, an additional $55 million have been paid to State Farm policyholders as part of the Mississippi Insurance Department re-evaluation agreement.

Following the issuance of the ruling, current Insurance Commissioner George Dale said the following to a Mississippi newspaper:

"All these people on the Coast who have criticized me for being in bed with insurance companies and not doing my job only have to look at what the courts have said in the Nationwide case and the State Farm case and see the absolute thousands of claims that were paid that, based on these two cases, were not covered perils."

In arguments for the appeal, attorneys for State Farm urged the judges to follow a September ruling (Leonard v. Nationwide) by a different three-judge panel, which found that similar anti-concurrent cause language in Nationwide policies is not ambiguous and can be enforced.

Anti-concurrent cause language makes clear that there is no coverage when an excluded peril and a covered peril both contribute to the same damage. However, anti-concurrent cause language is not implicated where there is only one cause of damage (e.g. flood) OR where an excluded peril (e.g. flood) and a covered peril (e.g. wind) cause independent damage to separate portions of an insured dwelling, (e.g. shingles are blown off the roof and the first floor is flooded.)

Requiring insurers to pay claims not covered under the policy and for which no premium has been collected seriously jeopardizes insurers’ ability to pay future claims for perils included in the insurance contract.

Read about other court decisions in favor of State Farm or insurers.