Understanding N.Y.’s proposed anti-concurrent causation clause legislation

May 21, 2024

The New York state Senate is considering a bill, introduced by Sen. Neil Breslin, D-46, which would amend the Insurance Law concerning anti-concurrent causation clauses (S.9421). These clauses often create confusion and frustration for policyholders during claim settlements.

What is an anti-concurrent causation clause?

An anti-concurrent causation clause is a provision in an insurance policy that allows insurers to deny coverage if a loss is caused by both covered and excluded perils. For example, if a storm causes both wind damage (a covered peril) and flood damage (an excluded peril), an ACC clause might enable the insurer to deny the entire claim.

Key provisions of the proposed bill

The bill would add coverage clarity for water damage. Specifically, the bill addresses situations in which water or water-borne material backs up through sewers or drains, or overflows or is discharged from a sump, sump pump, or related equipment.

The bill would mandate that if a policy covers such water damage, it cannot exclude coverage on the basis that an excluded peril also contributed to the loss—either concurrently or in sequence. The legislation would target policies covering real property used predominantly for residential purposes, with no more than four dwelling units.

The pros …

The legislation would provide increased policyholder protections. Homeowners would benefit from greater certainty regarding their coverage. If their property is damaged by water backup or discharge, they would be able to expect coverage without the risk of denial due to the involvement of an excluded peril. This change could potentially reduce the financial burden on homeowners during complex claim situations involving multiple causes of damage.

In addition, the removal of ACC clauses for specific water-damage scenarios would simplify the claims process. Agents and policyholders wouldn’t need to navigate the complexities of determining which peril caused the damage and how it might affect their coverage.

… and the cons

The impact on insurers could be dramatic. Carriers may need to re-evaluate their risk assessments and pricing models to account for the increased coverage obligations. It would almost certainly lead to higher costs for insurers, which might experience increased claim payouts. This could, in turn, result in higher premiums for policyholders as insurers adjust to the new risk landscape.

Bill status

S.9421 has been reported out of the Senate Insurance Committee, and it is now on the Senate calendar for a vote. 

Same-as legislation (A.10343, sponsored by Assemblyman David Weprin, D-24) was reported out of the Assembly Insurance Committee earlier this week.

Bradford J. Lachut, Esq.
PIA Northeast

Bradford J. Lachut, Esq., joined PIA as government affairs counsel for the Government & Industry Affairs Department in 2012 and then, after a four-month leave, he returned to the association in 2018 as director of government & industry affairs responsible for all legal, government relations and insurance industry liaison programs for the five state associations. Prior to PIA, Brad worked as an attorney for Steven J. Baum PC, in Amherst, and as an associate attorney for the law office of James Morris in Buffalo. He also spent time serving as senior manager of government affairs as the Buffalo Niagara Partnership, a chamber of commerce serving the Buffalo, N.Y., region, his hometown. He received his juris doctorate from Buffalo Law School and his Bachelor of Science degree in Government and Politics from Utica College, Utica, N.Y. Brad is an active Mason and Shriner.

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