In Ashrit Realty LLC v. Tower National Ins. Co., the Appellate Division of the New Jersey Superior Court held that an insurer properly denied coverage for a building collapse resulting from soil erosion, following the collapse of a pipe. The Court’s decision reflects its willingness to enforce the plain language of a standard anti-concurrent/anti-sequential causation clause to exclude coverage arising from a non-covered cause, even if a covered cause contributed to the loss.
A rain storm caused damage to a pipe running below the insured property that was followed by Hurricane Irene, which caused the pipe to collapse. As a result of the collapse, a large hole formed. Leaking water eventually led to soil erosion, causing the partial collapse of the insured building. The defendant insurer denied coverage for the collapse, prompting the policyholder to file an action for declaratory judgment and bad faith. The trial court granted summary judgment in the insurer’s favor.
The Appellate Division began its analysis by noting that under the terms of the subject policy, losses caused by soil erosion or water damage were excluded. Soil erosion was excluded under a standard earth movement exclusion that applied to all forms of earth movement other than a sinkhole collapse. The Court also observed that the policy contained an anti-concurrent/anti-sequential causation clause stating that coverage for a claim “caused directly or indirectly” by an excluded cause was excluded “regardless of any other cause or event that contributes concurrently or in any sequence to the loss.”
The Court noted that the policyholder’s expert and the insurer’s expert agreed that the pipe sustained damage during the rain storm and subsequently collapsed during the hurricane. The policyholder contended that the building collapse did not result from soil erosion, but was rather directly caused by the collapse of the pipe. The Court observed that none of the retained experts reached this conclusion, as the pipe did not run under the building’s foundation, and that the pipe collapse was behind rather than underneath the building. Furthermore, all of the experts, including the policyholder’s expert, acknowledged that soil erosion occurred on the property. The Court therefore held that there was no issue of material fact that would preclude the entry of summary judgment.
The Court then turned to the policyholder’s argument that the loss was caused by hidden pipe decay, which is a covered cause of loss under the policy. Turning to the policy language, the Court noted that an insurer is ordinarily required to provide coverage for losses caused in part by a covered cause, even if an excluded cause contributes to the loss. However, the Court emphasized that this rule does not apply to policies that contain an anti-concurrent or anti-sequential clause, such as the subject policy. In reaching this determination, the Court approved of the trial court’s determination that an anti-concurrent causation clause is “not inconsistent with…public expectations, or commercially acceptable standards.” The Court observed that even if hidden pipe decay was a contributing cause of loss, the plaintiffs did not dispute that water leaked from the collapsed pipe, causing soil erosion. As earth movement and water damage were excluded from coverage, the Court held that coverage was barred by the anti-sequential clause. The Court therefore held that the trial court properly granted summary judgment in the insurer’s favor.
The Ashrit court’s enforcement of a standard anti-concurrent causation provision with regard to a building collapse claim bodes well for the enforcement of similar provisions in other claims. For example, an anti-concurrent causation provision is likely to be enforced with regard to Sandy-related claims for damage caused by both wind and water. By recognizing that anti-concurrent causation clauses are not inconsistent with “public expectations” or “commercially acceptable standards,” the Court signaled a willingness to apply anti-concurrent causation clauses whenever justified by the facts.
