Property damage is not always caused by only one peril. For example, wind or hail damage (covered perils) may occur to a roof that already has some age or deterioration (excluded perils). So, now what?

Tennessee’s “substantial-factor” rule answers that question—and the Tennessee Court of Appeals recently applied it in Little v. United Services Automobile Association, Inc., No. E2024-01434-COA-R3-CV (Tenn. Ct. App. Sept. 28, 2026).

Here’s the quick version: when a covered cause is a substantial factor in producing the damage, the insurer may still owe coverage. This may be true even if an excluded cause also contributed to the loss.

The Little Facts in a Nutshell

James Little’s home was insured by USAA with a specific earthquake endorsement that provided coverage for “direct physical loss” that is “caused by earthquake including land shock waves or tremors before, during or after a volcanic eruption.”. After seismic activity near Signal Mountain in December 2018, Mr. Little’s home started experiencing serious problems—cracks, uneven floors damage to the driveway—and eventually became unsafe for his family to live in.

USAA’s engineer, however, attributed the damage to construction deficiencies and earth movement, which is excluded under the USAA Policy. In contrast, Little’s geotechnical engineer said the earthquake disrupted the soil, and the heavy rainfall that followed simply contributed to the movement. Thus, there were concurrent causes of loss under the policy—one covered (earthquake) and one excluded (earth movement).

This situation implicates what insurers call “anti-concurrent causation” or ACC language, which is language in an insurance policy that purports to exclude coverage when any excluded peril contributes to a loss, “regardless of … whether other causes or events act concurrently or in any sequence with the excluded event.” The purpose of ACC language is to eliminate coverage whenever an excluded cause is in the mix, even if a covered peril also contributed.

However, as the Tennessee Supreme Court recognized in Allstate Insurance Co. v. Watts, 811 S.W.2d 883 (Tenn. 1991), where no ACC provision applies—or where, as in Little, a specific endorsement takes precedence over the general ACC clause—Tennessee courts apply the substantial-factor test: coverage exists if a non-excluded cause was a substantial factor in producing the loss, even if an excluded cause also contributed.

The Substantial-Factor Rule and Allstate v. Watts

At trial, the jury was instructed that coverage could exist if a non-excluded cause was a substantial factor in producing the damage—even if an excluded cause also contributed to the ultimate result. Indeed, the Little court aptly explained the dispute: “In its most basic form, this disagreement involves whether the damages must have immediately manifested following the earthquake and whether any other contributing cause existed.”

This jury instruction comes straight from the Tennessee Supreme Court’s decision in Allstate Insurance Co. v. Watts, 811 S.W.2d 883 (Tenn. 1991). In Watts, the Supreme Court adopted what it called the “concurrent causation doctrine,” which means that an insurance company “should not be excused from its obligation under a homeowner’s policy unless it has been determined that the loss being complained of did not result in substantial part from a risk for which it provided coverage and collected a premium.”

The Court of Appeals in Little approved the trial court’s use of the Watts instruction. The jury found that the earthquake substantially contributed to Little’s loss, and the court affirmed the resulting $2 million verdict.

Why This Matters

In property claims, carriers frequently point to contributing conditions, i.e., wear and tear, deterioration, faulty construction, earth movement, or water, as reasons to deny coverage. But the presence of one of those conditions doesn’t necessarily resolve the coverage question if the evidence shows that a covered cause substantially contributed to the loss.

That’s the core takeaway from Little: identifying more than one possible cause does not automatically mean a denial is proper. The question is whether the covered cause was a substantial factor in producing the damage.