Chances are there's a clause buried in your home insurance policy which, in certain catastrophic circumstances -- such as a hurricane combined with a flood, or an earthquake compounded with a fire -- could let your insurer completely off the hook and leave your home without protection just when you need it most.
The tongue-twisting "anti-concurrent causation clause," or ACC for short, stipulates that when damage to your home is caused by a combination of hazards, and some are covered but others are not, your entire claim can be denied.
Home insurers maintain that the clause helps keep premiums in check. Consumer groups say it runs contrary to what we reasonably expect of insurance and should be banned. Court rulings have been mixed, tending to either uphold the contract language or reject it in the public interest.
A standard clause in most home insurance
Let's look at the origins of the ACC, how it comes into play, why it has sparked consumer outrage and what you can do to keep your home insurance from suddenly being pulled out from under you.
The anti-concurrent causation clause began to turn up in home insurance contracts in the late 1980s after court decisions forced some insurers to pay for claims they did not anticipate covering, says Chris Hackett, director of personal lines policy for the Property Casualty Insurers Association of America, a Chicago-based trade group.
Where do you find the clause in your policy? "Normally, it comes in the form of what is called 'lead-in language,' which is a paragraph that precedes a whole list of exclusions," Hackett says.
Today, it's a standard part of most home policies, he says. The list of insurers who have had their ACC clauses tested in court includes The Hartford, Nationwide, State Farm and USAA.
A history reaching back to 1906
But the legal battling that gave way to anti-concurrent causation dates back more than a century, according to Rene Siemens, a partner in the Pillsbury law firm in Los Angeles who co-authored a brief history of the issue.
Prior to 9/11, Siemens writes, the largest casualty loss in the United States was the 1906 San Francisco earthquake and fire, which destroyed some 28,000 buildings. The city's Real Estate Board promptly passed a proclamation that the disaster be referred to as "the great fire," for which most residents had coverage, as opposed to an earthquake, for which most did not.
San Francisco, 1906 © CORBIS
If that sounds familiar, it should: In 2012, East Coast states in the path of what had been Hurricane Sandy seized on its change in status to "Superstorm" Sandy in the hope of retaining wind and water coverage for homeowners whose policies excluded hurricane damage.
Courts divided over the ACC clause
In both catastrophes, as well as following Hurricane Katrina in 2005, policyholders who were denied coverage sued, prompting courts in the affected states to weigh the insurers' right to define covered perils against the public's reasonable expectation of insurance.