In Tuepker v. State Farm Fire & Cas. Co., 2007 WL 3256829 (C.A.5 ( Miss. ), 2007), the insured owners of a house destroyed by Hurricane Katrina brought a diversity action against their insurer, State Farm, after State Farm's denial of their claim for that loss. The United States District Court for the Southern District of Mississippi denied State Farm's motion to dismiss, and State Farm sought interlocutory appeal.
The Court of Appeals affirmed in part and remanded in part the trial court's decision.
First, the court held that under Mississippi law, storm surge accompanying Katrina was within the insurance policy's water damage exclusion, which defined water damage as "flood, surface water, waves, tidal water, tsunami, seiche, overflow of a body of water, or spray from any of these, all whether driven by wind or not."
Next, the court held that the policy's anticoncurrent-causation clause, which excluded coverage for damage caused by the combination of excluded loss (e.g. water damage) and covered loss (e.g. wind damage), if damage would not have occurred but for the excluded loss, was not rendered ambiguous and unenforceable under Mississippi law by the policy's express coverage for wind damage. According to the court, the policy plainly extended coverage for any damage caused exclusively by a nonexcluded peril such as wind.
The court also held that the policy was not rendered ambiguous and unenforceable by the policy's hurricane deductible endorsement. The court stated that the endorsement, which altered deductible for hurricane-caused damage, did not affect the policy's scope of coverage.
Finally, the court held that under Mississippi law, as predicted by federal appellate court, the policy's anticoncurrent-causation (ACC) clause controlled over the efficient proximate cause doctrine. According to the court, under the efficient proximate cause doctrine of Mississippi law, if the insurance policy covers wind damage but excludes water damage, the insured may recover for damage if it can show that wind proximately or efficiently caused the loss, notwithstanding that there were other excluded causes, such as flooding, contributing to that loss.
Editor's Note:
The court explained that although the efficient proximate cause doctrine was the default causation rule in Mississippi regarding damages caused concurrently by a covered and an excluded peril under an insurance policy, the ACC Clause in State Farm's policy overrode the efficient proximate cause doctrine.
Therefore, the court reversed the district court's holding that the ACC Clause in the State Farm policy was invalid to the extent that it conflicted with the efficient proximate cause doctrine.