Copyright (c) 2012 Nevada Law Journal
Nevada Law Journal
ARTICLE: The "Ensuing Loss" Clause in Insurance Policies: The Forgotten and Misunderstood Antidote to Anti-Concurrent Causation Exclusions
Nevada Law Journal
13 Nev. L.J. 215
By Christopher C. French*
At 5:12 a.m. on Wednesday, April 18, 1906, "a deafening rumble filled the air" in San Francisco as "buildings swayed" and then crumbled to the ground. 1 A massive earthquake had struck, but the real catastrophe was still to come. 2 The earthquake caused gas-fed fires to erupt, which were magnified by the fire department's ill-fated attempts to stop the spreading blaze by using dynamite to create areas where the fire could not pass, which are known as firebreaks. 3 With water mains broken, firefighters could not stop the inferno, and the largest city west of the Mississippi River was destroyed in three days. 4 Thousands of people were killed and most of the residents were left homeless. 5 The damage caused by the earthquake and fire cost billions in today's dollars. 6
At that time, most property policies in the U.S. covered losses caused by fire, but also contained an "anti-concurrent causation" 7 exclusion that barred coverage for losses caused "directly or indirectly" by earthquakes. 8 Not surprisingly, when the massive loss claims were presented, many insurers refused to pay. They argued the losses were not covered because the earthquake set in motion the chain of events that led to the fires and destruction. 9 The highest courts that heard the cases, the Supreme Court of California 10 and the Ninth Circuit, 11 held the losses were covered notwithstanding the anti-concurrent causation language contained in the earthquake exclusion.
In the wake of these decisions, the California ...
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