In the insurance context, hurricanes, tropical storms and other weather events often raise complex coverage questions that require close examination. In the wake of Hurricane Irene, which was downgraded to Tropical Storm Irene just prior to making landfall in Connecticut, insurance losses are expected to exceed $6.6 billion.1 While Hurricane Katrina left a far bigger mark in 2005, with losses having reached approximately $60 billion, there is no question that Hurricane Irene is at the center of a wealth of insurance claims.2When insurance claims mount, so do coverage disputes, and with this comes lawsuits that present diverse and often complicated issues.

Under a typical homeowner’s insurance policy, damage caused by wind is covered, but, absent additional coverage, damage caused by floods is not. Recently, Hurricane Irene battered nearly the entire east coast of the United States with wind and rain. The substantial amount of rain caused flooding in many inland areas. In addition, coastal areas experienced significant damage that likely resulted from a combination of wind, rain, and surging tidal waters. It is in these situations that coverage becomes murky, and most often the analysis centers around one question: was the damage caused by “wind” or “water”?

Because most homeowner’s insurance policies provide coverage as a result of wind, or “windstorms,” insured homeowners often contend that damage sustained following a hurricane was the result of wind or wind-driven tidal waters and not flooding. Courts have held that the term “flood” is unambiguous, and to be deied a flood, water must have escaped from some definable watercourse. Wallis v. County Mut. Ins. Co., 723 N.E.2d 376, 383 (Ill. App. Ct. 2d Dist. 2000). A federal district court in Mississippi held that a homeowners policy did not provide coverage for flood damage caused by Hurricane Katrina storm surge as the policy’s flood exclusion was clear and unambiguous. Buente v. Allstate Property & Casualty Insurance Co., 2006 WL 980784 (S.D.Miss. 2006). In addition, when rain causes an area to flood, a denial in coverage for water damage as a result of the resulting flooding is generally considered to be proper. See Kish v. Insurance Co. of N. Am., 883 P.2d 308, 313 (Wash. 1994).

In determining whether Hurricane Katrina damage was the result of wind or flood, courts looked to the proximate or efficient cause of the damage, notwithstanding other factors contributing thereto. Thus, “windstorm policies” are frequently held to cover damage from affiliated heavy rains, if the wind was the proximate cause of the damages. SEACOR Holdings, Inc. v. Commonwealth Ins. Co., 635 F.3d 675, 682 (5th Cir. La. 2011). Thus, if rain enters a home or building under a covered cause of loss (i.e. opening caused by wind), the rain becomes a covered cause of loss. Turner Constr. Co. v. Ace Prop. & Cas. Ins. Co., 429 F.3d 52, 55 (2d Cir. N.Y. 2005). Some courts have also held that damage resulting from “wind-driven rain” is not considered flood damage because the water causing the damage has not yet touched the ground. State Farm Fire & Cas. Co. v. Paulson, 756 P.2d 764, 777 (Wyo. 1988).

The “efficient proximate cause” doctrine, which has been followed by many courts, has been explained as the “risk that sets other causes in motion which, in an unbroken sequence, produced the result for which recovery is sought.” Cornhusker Cas. Co. v. Farmers Mut. Ins. Co. of Nebraska, 268 Neb. 168, 177 (2004). This policyholder-friendly definition of “efficient proximate cause” would certainly buttress an argument that, in the case of Hurricane Irene, all subsequent events, including coastal flooding and tidal surge, were set in motion, in an unbroken sequence, by the hurricane. In response, many insurance companies added policy language that purports to limit coverage in such circumstances. These clauses are typically referred to as “anti-concurrent cause” provisions and state as follows:

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.

Causes of Loss—Special Form (CP 10 30 04 02), accompanying ISO’s Building and Personal Property Coverage Form (CP 00 10 04 02).

Coverage provisions of this nature are particularly significant in situations where multiple potential causes exist because they have the ability to significantly limit the scope of coverage under a policy.

These are just some of the many complex and fact-specific questions, ultimately reserved to the trier of fact, which arise in the wake of hurricanes or other large storms. Each of these questions is worthy of a case-by-case analysis, as the existence of coverage (or not) could potentially hinge upon a single fact.

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1Sonja Royst, Insured Loss for Hurricane Irene May Exceed $6B, Business Insurance (October 6, 2011), http://www.businessinsurance.com/article/20110911/NEWS04/309119987#.

2Hurricane Katrina, National Oceanic and Atmospheric Administration, (October 6, 2011), http://www.katrina.noaa.gov.