The “Ensuing Loss” Clause in Insurance Policies: The Forgotten and Misunderstood Antidote to Anti-Concurrent Causation Exclusions

As a result of the 1906 earthquake and fire in San Francisco which destroyed the city, a clause known as the “ensuing loss” clause was created to address concurrent causation situations in which a loss follows both a covered peril and an excluded peril. Ensuing loss clauses appear in the exclusions section of such policies and in essence they provide that coverage for a loss caused by an excluded peril is nonetheless covered if the loss “ensues” from a covered peril. Today, ensuing loss clauses are found in “all risk” property and homeowners policies, which cover all losses except for losses caused by perils that are expressly excluded. A century after its creation, the clause often has been overlooked in cases in which it may have been applicable, and when it has been considered, it has confused and divided the courts. The courts’ inconsistent interpretation and application of the clause creates inefficiencies in the legal system because it is harder to settle cases that have: (1) unpredictable outcomes and (2) factual disputes regarding causation that must be resolved by juries at trial instead of judges as a matter of law. Thus, the parties and courts unnecessarily spend more time and resources on such cases. This Article claims: (1) the ensuing loss clause overrides anti-concurrent causation exclusions and (2) the courts’ confusion in interpreting and applying the clause has arisen due to the courts’ misunderstanding of the origins and purpose of the clause and their mistaken incorporation of theoretical tort causation concepts such as “efficient proximate cause” into the clause instead of applying the contractual rules of policy interpretation to the clause. The Article then proposes an interpretation of the clause that should lead to more predictable, consistent outcomes and the efficient resolution of claims