Concurrent Causation And The Insurance Code

When two events combine to cause damage, one being covered and the other not covered, issues arise regarding whether the loss is covered, and who bears the burden of proof to allocate causation between the covered cause and the excluded cause.  In the San Antonio Court of Appeals case, Wallis v. United Serv. Auto. Assoc., the court held that the insurance company will only be liable for that portion of the damage that was caused by a covered event.

When the covered and excluded perils combine to cause injury, the Texas Supreme Court has held that the insured must present some evidence affording the jury a reasonable basis on which to allocate the damages.

Generally, courts have held that if a loss occurs as a result of two concurring perils, one insured and one not, then the loss is covered only to the extent that it can be traced to the covered peril.  Expert testimony allocating damage between covered and excluded causes may satisfy this burden of proof, according the United States 5th Circuit, in Fiess v. State Farm Lloyds.

The Texas Supreme Court has held that expert allocation of damages between covered and excluded risk is not necessarily required; circumstantial evidence may suffice.  This was decided in the in the 1993 opinion, Lyons v. Millers Cas. Ins. Co. of Texas.

From the insured’s perspective, there is an argument that Texas Insurance Code, Sections 554.001 to 554.002 changed the burden in concurrent causation cases.  Before, the insured had to prove coverage and negate exclusions; therefore, a failure to allocate the loss was fatal, because it meant the insured had not successfully negated the exclusion.

Now the statute puts the burden on the insurer to prove an exclusion.  Arguably, once the insured proves the loss is caused in part by a covered cause, the burden is then on the insurer to prove its exclusion.  If the insurer cannot allocate between the covered cause and the excluded cause, then it arguably is the insurer that fails to carry its burden of proof and the loss would remain covered.

In concurrent causation cases where the loss cannot be allocated, the choice is whether a partially-excluded loss must be fully paid, or whether a partially-covered loss may nevertheless be fully excluded.  Insureds argue they are not getting the coverage they paid for, if the loss is wholly unpaid.  Insurers argue they are paying more than the premiums warrant, if the claim is fully paid.

Another argument on the insurer’s side is that the burden of apportioning damages in a concurrent causation case has always been on the insured, and nothing in the statute alters this requirement.  Arguably, once the insurer has proved that an exclusion applies, the burden shifts to the insured to prove that a covered loss caused the damage.  The percentage issue is not “language of exclusion” or an “exception to coverage.”  Also, because the insured has the burden to show that a covered loss caused some damage, insurers will argue that the insured necessarily also has the burden to show what portion of the damage was caused by the covered peril.

The effect, if any, of Sections 554.001 and 542.002 on the burden of proof is concurrent cases has not been definitely addressed by the courts.