Written by: Mara E. Michaletz
There is a horror scene in the Hitchcock movie “The Birds” which begins ominously in a restaurant in Bodega Bay, California. Tippi Hedren has driven up from San Francisco to bring a pair of lovebirds to a handsome stranger she met once in a pet store. (I have been told that this is how people “courted,” prior to the internet.) In the restaurant, locals are heatedly discussing the aggressive bird behavior that has been plaguing the town since Tippi’s arrival, but the debate ends when seagulls begin attacking people outside of the restaurant. A gas station attendant is knocked unconscious while filling a car; the gas spills into the street; a man not paying much attention (and you knew this was coming) attempts to light a cigar, and the pool of gas is ignited, ultimately causing the station to explode. The crowd ultimately blames Tippi for the disaster.
Poor Tippi. But imagine that you are the owner of the gas station, and you are trying to explain the sequence of events to your insurer. Does my insurance cover this loss? The answer will be dependent upon the cause of the loss. Was it fire? The inattentive cigar smoker? Or was it . . . the birds? (Alaskans know better than to discount frolicking animals as a source of damage, such as that time the damage was caused by a bear) (or that other time) (and that almost-other time).
The gas station’s insurer might respond that the station’s policy covers one cause, such as fire (a “covered peril”), but not another, such as aggressive bird behavior (an “excluded peril”). And this situation is not all that uncommon. For instance, in the aftermath of Hurricane Katrina, many Gulf Coast residents’ homes suffered damage caused by a combination of wind and water. When they turned to their insurance companies to provide compensation for their losses, some found their policies covered damage caused by wind but excluded damages caused by flooding or water. How is coverage determined in such cases?
Under the efficient proximate cause rule, if a loss is caused by several different perils, the loss will be covered if the efficient proximate cause was a covered peril. How to determine which peril is the efficient proximate cause? Over the course of the last century, courts have used three general tests:
- What was the cause “nearest the loss”? (in Tippi’s case, the fire);
- What was the cause that triggered the loss? (in Tippi’s case, the birds); and
- What was the cause most at fault? (what do you think?)
While states vary widely on which test they use to define the efficient proximate cause, Alaska follows this third test, called the “apportionment test,” to determine the efficient proximate cause of a loss. So, if a policy covers the main (or “predominant”) cause of a loss, then the policy will be deemed to cover the loss, even if another excluded cause is also a contributing factor.
Not every state follows this rule. In response to courts using efficient proximate cause to determine coverage, some insurance companies started incorporating “anti-concurrent clauses” in their policies. These clauses tried to work around efficient proximate cause by excluding coverage of an otherwise covered peril where an excluded peril was also at fault – regardless of which peril was the predominate one. But insureds in Alaska are protected from these anti-concurrent clauses through legislation. Alaska AS 21.36.096 (“Prohibited denial of claim for causation”) provides:
An insurer may not deny a claim if a risk, hazard, or contingency insured against is the dominant cause of a loss and the denial occurs because an excluded risk, hazard, or contingency is also in a chain of causes but operates on a secondary basis.
So, in Alaska, where there are concurrent causes of a loss, an insurance company is not allowed to deny coverage if the predominant cause is covered. More information about insurance coverage limitations and consumer protections for Alaskans can be found at the Department of Commerce, Community, and Economic Development’s Division of Insurance.
Insurance coverage issues can be complicated, particularly when a loss may be attributable to several different factors. But we like working on complicated coverage issues at Birch Horton. So whether you or your company has been affected by a loss attributable to birds, bears, or hurricanes, we are there to help you work through these issues and to achieve the best result for you.
And for more information on Alfred Hitchcock, Bodega Bay, and Hurricane Katrina, I suggest the following:
Sonoma Travel Guide: San Francisco Chronicle
The Great Deluge: Hurricane Katrina, New Orleans, and the Mississippi Gulf Coast, by Douglas Brinkley (2006)