New Jersey Court Holds Anti-concurrent / Anti-sequential Damages Clause Bars Coverage for Hurricane Irene Damages
New Jersey’s Appellate Division recently held that an anti-concurrent / anti-sequential causation clause in a property insurance policy precluded coverage for damage to a gas station and convenience store caused by Hurricane Irene. Ashrit Realty, LLC v. Tower National Ins. Co., A-1647-13T4 (N.J. App. Div. Jan. 20, 2015).
Tower National Insurance Company (“Tower”) issued an insurance policy covering a gas station and convenience store owned by Plaintiff Ashrit Realty, LLC (the “Property”). The Property initially sustained damage during a storm on August 14, 2011. Two weeks later, on August 28, 2011, during Hurricane Irene, a decaying pipe running underneath the Property partially collapsed, causing the rear portion of the Property to collapse and form a large hole.
Although the Tower policy covered damage caused by hidden pipe decay, it also contained exclusions for loss caused by earth movement and water and an under the anti-concurrent / anti-sequential causation clause which stated:
We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
As a result, Tower denied coverage for the loss and the trial court granted summary judgment in its favor.
In affirming the trial court’s decision, the Appellate Division first noted that there was no issue of material fact as to the cause of the damage, as experts for both parties agreed that the cause of damage was the result of progressive soil erosion arising from the partial failure of the buried pipe and from water under the ground’s surface. The Appellate Division also determined that contrary to the plaintiff/insured’s assertions, its expert never challenged the argument that soil erosion occurred.
The Appellate Division then ruled that even though hidden pipe decay is a covered loss under the Policy, soil erosion is not. Because both causes happened sequentially, the anti-concurrent / anti-sequential causation clause precluded coverage. In so holding, the Appellate Division noted that such a clause is not inconsistent with New Jersey public policy or commercially acceptable standards.