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Anti-concurrent causation clause law signed in Maryland - so?

We are continuing our discussion of a new law that will affect every Maryland resident with homeowners insurance. Superstorm Sandy is part of the reason legislators decided to require insurers to mail a notice regarding anti-concurrent causation clauses to policyholders.

Since the storm slammed into the East Coast last fall, homeowners have been surprised to find themselves involved in insurance disputes over property damage caused by Sandy. The insurers are pointing to ACC clauses as the reason for partial or total claim denials.

According to the International Risk Management Institute Inc., an independent insurance research firm, ACC clauses allow property insurers to deny coverage for damage caused by a combination of covered and excluded causes. As IRMI explains it, the events can occur in sequence, as a chain of events that result in damage, or at the same time.

An ACC clause is a "one strike and you're out" provision. If one cause is covered but the other is not, the insurer may deny the entire claim. No recovery is possible.

Say a windstorm hit Annapolis. The storm blows open the back door to the kitchen, where the homeowner is boiling water on a gas burner. The wind blows a dish towel onto the burner, the towel catches fire and the kitchen is destroyed.

The homeowner's property insurance covers fire but it does not cover windstorms. The policy includes an ACC clause, so the claim is denied in full.

It is easy to understand how homeowners could be confused, if not infuriated, about the insurer's response. The fact is, though, that the clause is part of the insurance contract, the contract has been approved by the state, and, so, the clause is valid and enforceable.

For those reasons, lawmakers thought it important that policyholders understand the full implications of ACC clauses. The new law requires that insurers explain the clause clearly and in a timely manner to new or renewing policyholders.

The law also calls for the General Assembly to study ACC clauses in general. The report is to be delivered by the end of 2013 and must include Maryland-specific data on complaints related to ACC clauses.


Source: Insurance Journal, "New Law in Maryland Will Require Insurers to Explain ACC Clause to Homeowners," May 6, 2013