Tuepker v. State Farm Fire & Casualty Company

John and Claire Tuepker (defendants) owned a home in Mississippi insured under a homeowner’s insurance policy from State Farm Fire and Casualty Company (State Farm) (plaintiff). The Tuepkers’ State Farm policy included, in relevant part: (1) a water-damage exception, including damage from floods; (2) an anti-concurrent-causation (ACC) clause stating that any damage caused by both a covered peril and an excluded peril, whether concurrently or in sequence, would not be covered; and (3) a hurricane deductible that applied a separate, higher deductible to hurricane-related claims but did not otherwise change any policy terms. The State Farm policy explicitly covered wind damage. In 2005, the Tuepkers’ home was completely destroyed by Hurricane Katrina. The damage was caused by a combination of high winds and storm surge. The Tuepkers submitted a claim for coverage under their State Farm policy. State Farm denied the Tuepkers’ claim, stating that the policy did not cover losses caused, in whole or in part, by water damage. The Tuepkers sued State Farm in district court to enforce coverage, arguing that (1) the hurricane deductible made the water-damage exception ambiguous and unenforceable; and (2) the efficient-proximate-cause doctrine prevented the ACC clause from being used to deny coverage for damage jointly caused by wind and water. State Farm moved to dismiss, arguing that (a) the hurricane deductible only affected the deductible amount for a hurricane-related claim and did not affect, or otherwise render ambiguous, the water-damage exception; and (b) the ACC clause trumps the efficient-proximate-cause doctrine. The district court denied State Farm’s motion to dismiss, holding (i) that the water-damage exception was clear and enforceable; but that (ii) the ACC clause could not be applied to bar coverage for damage concurrently caused by wind, a covered peril, and water, an excluded peril. State Farm filed an interlocutory appeal.