Leonard v. Nationwide Mutual Insurance
499 F.3d 419, 2007 WL 2446794 (2007)
Premium Feature
Subscribe to Lexplug to listen to the Case Podcast.
Rule of Law:
An unambiguous anti-concurrent causation (ACC) clause in a homeowner's insurance policy, which excludes coverage for loss caused by the combination of a covered peril and an excluded peril, is enforceable under Mississippi law and effectively contracts around the default efficient proximate cause doctrine.
Facts:
- Paul and Julie Leonard owned a home in Pascagoula, Mississippi, less than two hundred yards from the Mississippi Sound.
- The Leonards held a homeowner's insurance policy with Nationwide Mutual Insurance Co. which covered damage from wind but explicitly excluded damage from water, including 'flood, surface water, waves, tidal waves... whether or not driven by wind.'
- The policy contained an anti-concurrent causation (ACC) clause stating that loss from an excluded peril is not covered 'even if another peril or event contributed concurrently or in any sequence to cause the loss.'
- In conversations years prior, the Leonards' agent, Jay Fletcher, allegedly told Paul Leonard that all hurricane damage was covered and that he did not need separate flood insurance.
- The Leonards never purchased a separate flood insurance policy.
- During Hurricane Katrina, a seventeen-foot storm surge inundated the ground floor of the Leonards' home, causing extensive water damage.
- The home also sustained modest wind damage to its roof and garage.
Procedural Posture:
- Nationwide paid the Leonards for wind damage but denied their claim for water damage caused by Hurricane Katrina's storm surge.
- The Leonards sued Nationwide Mutual Insurance Co. in the U.S. District Court for the Southern District of Mississippi.
- Following a bench trial, the district court awarded the Leonards a small sum for damage determined to be caused solely by wind.
- In its memorandum opinion, the district court held that the policy's anti-concurrent causation (ACC) clause was ambiguous and unenforceable under Mississippi law.
- Nationwide, the defendant, appealed the district court's legal ruling invalidating the ACC clause to the U.S. Court of Appeals for the Fifth Circuit.
- The Leonards, the plaintiffs and cross-appellants, subsequently withdrew their cross-appeal.
Premium Content
Subscribe to Lexplug to view the complete brief
You're viewing a preview with Rule of Law, Facts, and Procedural Posture
Issue:
Is an unambiguous anti-concurrent causation clause in a homeowner's insurance policy, which excludes coverage for damage caused concurrently by a covered peril (wind) and an excluded peril (water), enforceable under Mississippi law?
Opinions:
Majority - Chief Judge Edith H. Jones
Yes. An unambiguous anti-concurrent causation (ACC) clause is valid and enforceable under Mississippi law. The court reasoned that the policy's language was plain and created three distinct categories of damage: 1) damage caused exclusively by wind (covered), 2) damage caused exclusively by water (excluded), and 3) damage caused by the concurrent action of wind and water (excluded by the ACC clause). While Mississippi's default rule is 'efficient proximate causation' (allowing recovery if the dominant cause is a covered peril), parties are free to contract around this common-law doctrine. The court found no Mississippi statute, public policy, or controlling caselaw prohibiting the enforcement of an ACC clause. Therefore, the clause, which unambiguously supplants the default rule, must be enforced as written, precluding coverage for losses where wind and the excluded peril of water combined to cause the damage.
Analysis:
This decision was a landmark ruling in the wave of post-Hurricane Katrina insurance litigation, providing a significant victory for insurers. By making an 'Erie guess' that the Mississippi Supreme Court would uphold anti-concurrent causation clauses, the Fifth Circuit validated a key tool for insurers to limit their liability in catastrophic events where covered perils (wind) and excluded perils (water) are inextricably linked. This precedent established that policyholders bear the heavy burden of proving damage was caused exclusively by a covered peril, dramatically shaping the legal landscape for hurricane-related claims and reinforcing the principle of freedom of contract over default common-law tort doctrines.
Unlock the full brief for Leonard v. Nationwide Mutual Insurance