Massachusetts' Highest Court Upholds Anti-Concurrent Clause in All Risk Policy


In Surabian Realty Co., Inc. v. NGM Ins. Co., 462 Mass. 715 (2012), the Supreme Judicial Court of Massachusetts held that an "anti-concurrent" clause in an insured's "all risk" policy barred its water loss claim. The insured, Surabian Realty Co., a commercial and residential property owner and operator, sought compensation from its insurer, NGM Insurance Company, following flood damage to one of its commercial properties. In the aftermath of heavy rainfall, water stopped flowing down a parking lot drain, which had become clogged with debris. As a result, water collected in the parking lot and seeped under the door of the building, flooding its lower level.

Surabian's water loss policy contained an "anti-concurrent" clause, which excluded coverage for several events regardless of whether the loss occurred concurrently with a coverable event. Specifically, the policy precluded coverage for water loss caused by "surface water," while a supplement or endorsement to the policy, purchased at an additional cost, covered "water that backs up or overflows from a sewer, drain or sump . . ."

NGM denied Surabian's claim reasoning that the damage was caused in part by surface water, and as a result of operation of the anti-concurrent clause, the entire loss was not covered under the policy. Significantly, the parties stipulated that the damages resulted from the combination of water that backed up after entering the parking lot drain and water that, as a result of the blockage, never entered the drain and remained surface water.

Given the parties' stipulation that the damage "resulted from the combination of a covered peril and an excluded peril," the court's only task was to interpret the anti-concurrent clause. Id., 719. By relying on Massachusetts and extra-jurisdictional sources, the court "interpret[ed] the insurance contract, as amended by the indorsement, to exclude damage caused by flood waters that spread over the surface of the ground without having entered a drain, but to cover damage caused by water that backed up after entering a drain." Id. Moreover, the court noted: "Anticoncurrent cause provisions, which disclaim coverage when damage is caused concurrently by an excluded peril and a covered peril, are valid and enforceable under Massachusetts law... [E]nforcement of anticoncurrent cause provisions is fully consistent with the public welfare and that the vast majority of States have upheld and applied such provisions." Id., 720. Finally, the court also rejected Surabian's argument that there was ambiguity in the clause.

This decision highlights the significance, to both business owners and insurers, of understanding the scope and extent of coverage in complex policies. The full decision may be found here. For more information on issues related to insurance coverage, please contact Bryna Misiura at [email protected], or Monica Fanesi at [email protected].