On April 18, 1906, a 7.9 magnitude earthquake struck Northern California,
resulting in the deaths of thousands and extensive damage to San Francisco. Much of the
damage in the city was not directly caused by the earthquake but by fires that started
afterward and burned for days. Property insurance at the time covered damage by fire,
but not damage caused directly or indirectly by earthquake.
The Real Estate Board of the city passed a resolution that the tragedy should
be referred to as "the Great Fire" rather than "the Great Earthquake" to focus attention
on fire, the covered cause of loss under property policies. While some insurers paid
policyholder claims for fire damage, others denied claims, maintaining that the
earthquake started the chain of events leading to the fire damage. Most courts that
heard these cases ruled that damage by fire was covered, and California enacted laws to
prevent insurers from denying future claims for fire damage caused by or following an
earthquake. Insurers added language to their policies to provide such coverage, and the
ensuing loss clause was born.
Ensuing Loss Clauses Explored
In an open perils form, many exclusions include an exception for
damage by an ensuing loss. Some policies use the phrase "ensuing loss," while others
say "resultant loss," "resulting loss," or "results in." The exception can apply
even in the case of exclusions such as water and earth movement, which are typically
prefaced with anticoncurrent causation language. Anticoncurrent causation language
excludes loss caused directly or indirectly by certain perils regardless of any
other cause that contributes concurrently or in any sequence to the loss.
Following are some examples of ensuing loss clauses from the
Insurance Services Office, Inc. (ISO), Causes of Loss—Special Form (CP 10 30 09 17).
The exception to the earth movement exclusion is: "But if Earth Movement … results
in fire or explosion, we will pay for the loss or damage caused by that fire or
explosion." While the exception to the water exclusion is: "But if any of the above
… results in fire, explosion or sprinkler leakage, we will pay for the loss or
damage caused by that fire, explosion or sprinkler leakage."
This ISO language restores coverage only for damage by specific
named perils. The ensuing loss clauses in many policies, though, restore coverage
for loss by any covered cause of loss. It is this type of language that is often an
exception to exclusions involving perils such as faulty workmanship or design and is
most often the subject of court cases involving ensuing loss clauses. An example of
such language is: "This policy does not insure loss or damage caused directly or
indirectly by any peril excluded … unless loss or damage from an insured peril
ensues and then only for such ensuing loss or damage."
What does "ensuing loss" mean, though, and how should these
clauses be interpreted? Using flood as an example, the overflow of a body of water
causes damage to a building. The exclusion states that there is no coverage for loss
caused directly or indirectly by the overflow of a body of water, regardless of any
other cause that contributes to the loss. Electricity to the building was not turned
off before the flood, and a fire breaks out, causing additional damage to the
building. Based on the anticoncurrent causation language that applies to this
exclusion, there should be no coverage for the fire damage, even though fire is a
covered peril. The ensuing loss clause, though, restores coverage for the damage
done by fire, even though the damage done by water remains excluded.
Ensuing loss clauses require damage by the second peril—the
ensuing loss—to be separate and distinct from the damage by the initial excluded
cause of loss. In the flood example above, the fire-damaged property is covered, but
the water-damaged property is not. The word "ensuing," though, is not defined in
policies using this term. One definition of "ensue" is "to take place afterward or
as a result."1 This
could mean that one loss follows another or that
one loss results from another.
Other phrases such as "resultant loss" or "results in" suggest a
causal connection between the first loss and the second. In spite of these
differences, the phrases "ensuing loss" and "resulting loss" have been used
interchangeably to mean a loss that follows chronologically or occurs after an
excluded event.2 Courts,
asked to rule on how these clauses apply, reach different conclusions.
The Second Cause of Loss Must Be Separate and Intervening
Many courts have ruled that, for an ensuing loss clause to apply, a separate
and intervening covered peril must occur after the excluded peril. An example of
this approach is a California case involving a galvanizing plant. A steel kettle
at the insured's plant ruptured, and several tons of molten zinc spilled onto
surrounding equipment. The kettle ruptured due to inadequate welding of a seam
during the manufacturing process. Coverage for damage to the kettle did not
apply due to the policy's inherent vice/latent defect exclusion. The insured
argued that damage done by the molten zinc to other property should apply due to
the ensuing loss clause, which read as "unless loss by a peril not otherwise
excluded ensues and then the Company shall be liable only for such ensuing
loss."
The court ruled that the ensuing loss clause did not apply as there was no
separate cause of loss. It stated as follows:
Here, there was no peril separate from and in addition to the initial excluded peril of the welding failure and kettle rupture. The spillage of molten zinc was part of the loss directly caused by such peril, not a new hazard or phenomenon. If the molten zinc had ignited a fire or caused an explosion which destroyed the plant, then the fire or explosion would have been a new covered peril with the ensuing loss covered. That did not occur.
Source: Acme Galvanizing Co. v.
Fireman's Fund Ins. Co., 270 Cal. Rptr. 405, 221 Cal. App.3d
170 (1990).
A court, in deciding a Michigan case involving faulty construction, described
the need for a separate and intervening cause this way:
The "ensuing loss" clause also fairly could be construed as a causation-in-fact-breaking link in coverage exclusions, establishing that independent, non-foreseeable losses caused by faulty construction are covered.
Source: TMW Enter. Inc. v. Federal
Ins., 619 F.3d 574, 578-579 (6th Cir. 2010).
There is often a concern that, if a separate cause of loss is not a
requirement for coverage to apply, this first approach to interpreting ensuing
loss clauses can effectively negate the exclusion. One court described the
concern this way:
The exception to an exclusion should not be read so
broadly that the rule, the exclusion clause, is swallowed by the exception
here, the exception for ensuing loss.
Source: Laquila Const., Inc. v.
Traveler's Indem. Co., 66 F. Supp. 2d 543 (S.D.N.Y. 1999).
The requirement for a separate and intervening cause of loss is concerning, particularly in the context of coverage under a builders risk policy. A common cause of loss to a project under construction is an act, error, or omission of a contractor. And, while builders risk policies do not typically intend to cover the cost to repair or replace faulty work, many would expect coverage to apply when the contractor's act, error, or omission causes damage to other work that is not itself faulty.
A case from Connecticut illustrates this point. The companies of 777 Main
Street LLC and 777 Residential LLC ("777") engaged Viking Construction Inc.
("Viking") as a general contractor to renovate a high rise building in Hartford,
Connecticut. Viking hired a subcontractor to clean the concrete façade of the
building. The subcontractor used crushed glass when power washing the concrete
and caused over $4,000,000 damage to 1,800 windows.
Liberty Mutual, the builders risk insurer, denied the claim for damage to the
windows based on the following exclusion in its policy:
c. Defects, Errors, And Omissions
(1) "We" do not pay for loss or damage consisting of, caused by, or resulting from an act, defect, error, or omission (negligent or not) relating to:
a) design, specifications, construction, materials, or workmanship;
b) planning, zoning, development, siting, surveying, grading, or compaction; or
c) maintenance, installation, renovation, remodeling, or repair.
But if an act, defect, error, or omission as described above results in a covered peril, "we" do cover the loss or damage caused by that covered peril.
The insured argued that the damage to the windows was a covered peril that resulted from the faulty work. The insurer argued that the ensuing loss clause did not apply because the negligent spraying did not result in a second cause of loss.
The court ruled in favor of Liberty Mutual, stating as follows:
A loss caused by an act during a renovation will be
covered if the act causes a covered peril, such as a fire, and that latter
peril damages the building. In the present case, there was only one cause of
the 777 entities' loss—the spraying of the building, which caused damage to
the windows—and because that was not a covered peril, the resulting loss
clause does not apply.
Source: Viking Constr., Inc. v. 777
Residential, LLC, 210 A.3d 654, 664–65 & n.9 (Conn. App.
2019).
The Second Cause of Loss Does Not Need to Be Separate and Intervening
In interpreting ensuing loss clauses, some courts have ruled that, for an ensuing loss clause to apply, it is only necessary that the second peril follow as a result of the first. With this approach, the ensuing loss clause can provide coverage even if the second cause of loss is a natural consequence of the first. The following Washington case is an example of this approach.
Gardens Condominium ("Gardens") sustained water damage to its roof due to inadequate ventilation caused by faulty design and construction of the roof. Its property policy with Farmers Insurance Exchange ("Farmers") excluded coverage for faulty, inadequate, or defective design, specifications, workmanship, repair, construction, or renovations. It included the following exception, though: "[I]f loss or damage [caused] by a Covered Cause of Loss results, we will pay for that resulting loss or damage."
Farmers argued that the resulting loss exception does not apply to natural consequences of an excluded peril, and that condensation is the "natural and unavoidable byproduct of the faulty lack of ventilation."
The court ruled in favor of Gardens, stating as follows:
The resulting loss exception to the faulty workmanship exclusion states that Farmers will pay for loss or damage caused by a covered cause of loss resulting from faulty workmanship. It does not state that the covered cause of loss must be independent from the faulty workmanship or that it cannot be a natural consequence of faulty workmanship. Because the language of the exception is clear, we will not rewrite it by adding requirements.
When an ensuing loss clause, such as that found in the ISO earth movement or
water exclusion, applies to specific named causes of loss, such as fire or
explosion, it is easy to see that a separate cause of loss needs to occur for
coverage to apply. When the ensuing loss clause refers to covered causes of
loss, though, the intent of the clause is less clear.
A New Jersey case, deciding that the ensuing loss clause applied after faulty materials used in a project led to damage to other property, compared the broad ensuing loss language that applied to the defective materials exclusion with the narrower ensuing loss language used elsewhere in the policy.
The ensuing loss provision [in another policy exclusion]
explicitly states that the clause applies only to loss "caused by resulting
fire or explosion." In that section, the language definitively requires an
intervening fire or explosion as a precursor to applying the ensuing loss
exception. Here, the ensuing loss provision includes no such language.
Accordingly, the Court finds it unlikely that an intervening event was
contemplated by the parties, and that, in any event, reading such a
requirement into the clause would be inconsistent with the insured's
reasonable expectations.
Source: Spiniello Cos. v. Hartford
Fire Ins. Co., No. 07-CV-2689 (D.N.J. July 14, 2008).
Ensuing Loss Clauses Are Ambiguous
Lastly, some courts have found the language in ensuing loss clauses to be ambiguous, resulting in coverage decisions in favor of the policyholder. These decisions are based on contra proferentem, a rule of contract interpretation that requires ambiguous terms to be interpreted in favor of the party that did not draft the contract, most commonly the insured.
In this Colorado case, Jack and Michelle Kesling filed a claim with their
insurer, American Family Mutual Insurance Company, after discovering several
conditions, defects, and damages in their home. The deck, roof, and crawlspace
were not properly designed or constructed, and water entered the home, causing
additional damage.
American Family denied coverage for the water damage, citing various
exclusions, including wear and tear, deterioration, and faulty construction,
materials, and design. The exclusions included the following ensuing loss
clause: "We do cover any resulting loss to property described … not excluded or
excepted by this policy."
The court ruled in favor of the insured, finding the policy language
concerning resulting loss to be ambiguous. The court stated as follows:
The Court concludes that the exception to the exclusion is ambiguous, because it is reasonably susceptible to at least two meanings … it can rationally be interpreted to mean precisely what the words say: "any resulting damage" could include damage to parts of the home other than the defective construction resulting from water or moisture infiltration resulting from the defective construction. Or, "any resulting damage" can rationally be limited to damage that is 'separate and independent" from that which is directly caused by the defective construction.
Source: Kesling v. American Family Mut. Ins. Co., 861 F. Supp. 2d 1274 (D. Colo. 2012).
In describing an ensuing loss clause as ambiguous in a case involving
mechanical breakdown, one court went as far as to say as follows:
At first glance, the exclusion at issue here appears to be
self-contradictory gibberish—it begins by excluding mechanical breakdowns
from coverage, yet concludes by allowing compensation for all risks that
ensue from such a breakdown.
Source: Lake Charles Harbor &
Terminal Dist. v. Imperial Cas. & Index. Co., 857 F.2d
286 (5th Cir. 1988).
Conclusion
As demonstrated in this commentary, there are various approaches to interpreting how ensuing loss clauses operate. Policy language is paramount, but how that language is interpreted varies depending on the details of the claim and the jurisdiction.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.
Footnotes
1 "Ensue," Merriam-Webster Dictionary, accessed on September 26, 2025.
2Platek v. Town of
Hamburg, 26 N.E.3d 1167 (N.Y. App. Div. 2015).
On April 18, 1906, a 7.9 magnitude earthquake struck Northern California, resulting in the deaths of thousands and extensive damage to San Francisco. Much of the damage in the city was not directly caused by the earthquake but by fires that started afterward and burned for days. Property insurance at the time covered damage by fire, but not damage caused directly or indirectly by earthquake.
The Real Estate Board of the city passed a resolution that the tragedy should be referred to as "the Great Fire" rather than "the Great Earthquake" to focus attention on fire, the covered cause of loss under property policies. While some insurers paid policyholder claims for fire damage, others denied claims, maintaining that the earthquake started the chain of events leading to the fire damage. Most courts that heard these cases ruled that damage by fire was covered, and California enacted laws to prevent insurers from denying future claims for fire damage caused by or following an earthquake. Insurers added language to their policies to provide such coverage, and the ensuing loss clause was born.
Ensuing Loss Clauses Explored
In an open perils form, many exclusions include an exception for damage by an ensuing loss. Some policies use the phrase "ensuing loss," while others say "resultant loss," "resulting loss," or "results in." The exception can apply even in the case of exclusions such as water and earth movement, which are typically prefaced with anticoncurrent causation language. Anticoncurrent causation language excludes loss caused directly or indirectly by certain perils regardless of any other cause that contributes concurrently or in any sequence to the loss.
Following are some examples of ensuing loss clauses from the Insurance Services Office, Inc. (ISO), Causes of Loss—Special Form (CP 10 30 09 17). The exception to the earth movement exclusion is: "But if Earth Movement … results in fire or explosion, we will pay for the loss or damage caused by that fire or explosion." While the exception to the water exclusion is: "But if any of the above … results in fire, explosion or sprinkler leakage, we will pay for the loss or damage caused by that fire, explosion or sprinkler leakage."
This ISO language restores coverage only for damage by specific named perils. The ensuing loss clauses in many policies, though, restore coverage for loss by any covered cause of loss. It is this type of language that is often an exception to exclusions involving perils such as faulty workmanship or design and is most often the subject of court cases involving ensuing loss clauses. An example of such language is: "This policy does not insure loss or damage caused directly or indirectly by any peril excluded … unless loss or damage from an insured peril ensues and then only for such ensuing loss or damage."
What does "ensuing loss" mean, though, and how should these clauses be interpreted? Using flood as an example, the overflow of a body of water causes damage to a building. The exclusion states that there is no coverage for loss caused directly or indirectly by the overflow of a body of water, regardless of any other cause that contributes to the loss. Electricity to the building was not turned off before the flood, and a fire breaks out, causing additional damage to the building. Based on the anticoncurrent causation language that applies to this exclusion, there should be no coverage for the fire damage, even though fire is a covered peril. The ensuing loss clause, though, restores coverage for the damage done by fire, even though the damage done by water remains excluded.
Ensuing loss clauses require damage by the second peril—the ensuing loss—to be separate and distinct from the damage by the initial excluded cause of loss. In the flood example above, the fire-damaged property is covered, but the water-damaged property is not. The word "ensuing," though, is not defined in policies using this term. One definition of "ensue" is "to take place afterward or as a result." 1 This could mean that one loss follows another or that one loss results from another.
Other phrases such as "resultant loss" or "results in" suggest a causal connection between the first loss and the second. In spite of these differences, the phrases "ensuing loss" and "resulting loss" have been used interchangeably to mean a loss that follows chronologically or occurs after an excluded event. 2 Courts, asked to rule on how these clauses apply, reach different conclusions.
The Second Cause of Loss Must Be Separate and Intervening
Many courts have ruled that, for an ensuing loss clause to apply, a separate and intervening covered peril must occur after the excluded peril. An example of this approach is a California case involving a galvanizing plant. A steel kettle at the insured's plant ruptured, and several tons of molten zinc spilled onto surrounding equipment. The kettle ruptured due to inadequate welding of a seam during the manufacturing process. Coverage for damage to the kettle did not apply due to the policy's inherent vice/latent defect exclusion. The insured argued that damage done by the molten zinc to other property should apply due to the ensuing loss clause, which read as "unless loss by a peril not otherwise excluded ensues and then the Company shall be liable only for such ensuing loss."
The court ruled that the ensuing loss clause did not apply as there was no separate cause of loss. It stated as follows:
A court, in deciding a Michigan case involving faulty construction, described the need for a separate and intervening cause this way:
There is often a concern that, if a separate cause of loss is not a requirement for coverage to apply, this first approach to interpreting ensuing loss clauses can effectively negate the exclusion. One court described the concern this way:
The requirement for a separate and intervening cause of loss is concerning, particularly in the context of coverage under a builders risk policy. A common cause of loss to a project under construction is an act, error, or omission of a contractor. And, while builders risk policies do not typically intend to cover the cost to repair or replace faulty work, many would expect coverage to apply when the contractor's act, error, or omission causes damage to other work that is not itself faulty.
A case from Connecticut illustrates this point. The companies of 777 Main Street LLC and 777 Residential LLC ("777") engaged Viking Construction Inc. ("Viking") as a general contractor to renovate a high rise building in Hartford, Connecticut. Viking hired a subcontractor to clean the concrete façade of the building. The subcontractor used crushed glass when power washing the concrete and caused over $4,000,000 damage to 1,800 windows.
Liberty Mutual, the builders risk insurer, denied the claim for damage to the windows based on the following exclusion in its policy:
The insured argued that the damage to the windows was a covered peril that resulted from the faulty work. The insurer argued that the ensuing loss clause did not apply because the negligent spraying did not result in a second cause of loss.
The court ruled in favor of Liberty Mutual, stating as follows:
The Second Cause of Loss Does Not Need to Be Separate and Intervening
In interpreting ensuing loss clauses, some courts have ruled that, for an ensuing loss clause to apply, it is only necessary that the second peril follow as a result of the first. With this approach, the ensuing loss clause can provide coverage even if the second cause of loss is a natural consequence of the first. The following Washington case is an example of this approach.
The court ruled in favor of Gardens, stating as follows:
When an ensuing loss clause, such as that found in the ISO earth movement or water exclusion, applies to specific named causes of loss, such as fire or explosion, it is easy to see that a separate cause of loss needs to occur for coverage to apply. When the ensuing loss clause refers to covered causes of loss, though, the intent of the clause is less clear.
A New Jersey case, deciding that the ensuing loss clause applied after faulty materials used in a project led to damage to other property, compared the broad ensuing loss language that applied to the defective materials exclusion with the narrower ensuing loss language used elsewhere in the policy.
Ensuing Loss Clauses Are Ambiguous
Lastly, some courts have found the language in ensuing loss clauses to be ambiguous, resulting in coverage decisions in favor of the policyholder. These decisions are based on contra proferentem, a rule of contract interpretation that requires ambiguous terms to be interpreted in favor of the party that did not draft the contract, most commonly the insured.
In this Colorado case, Jack and Michelle Kesling filed a claim with their insurer, American Family Mutual Insurance Company, after discovering several conditions, defects, and damages in their home. The deck, roof, and crawlspace were not properly designed or constructed, and water entered the home, causing additional damage.
American Family denied coverage for the water damage, citing various exclusions, including wear and tear, deterioration, and faulty construction, materials, and design. The exclusions included the following ensuing loss clause: "We do cover any resulting loss to property described … not excluded or excepted by this policy."
The court ruled in favor of the insured, finding the policy language concerning resulting loss to be ambiguous. The court stated as follows:
In describing an ensuing loss clause as ambiguous in a case involving mechanical breakdown, one court went as far as to say as follows:
Conclusion
As demonstrated in this commentary, there are various approaches to interpreting how ensuing loss clauses operate. Policy language is paramount, but how that language is interpreted varies depending on the details of the claim and the jurisdiction.
Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.