Defining Occurrence – When Policy Definitions Do Not Apply To All Coverages
September 24, 2020
Property policies typically include an exclusion for loss caused by or resulting from earth movement. Some insurers will provide coverage for the earth movement, but that coverage will usually have a sub-limit. For years, courts across the country have considered whether an earth movement exclusion in a policy applies only when the earth movement losses are caused by or stem from natural causes or phenomena, or whether it applies to earth movement losses from both natural and man-made causes. Insureds typically argue that the policy language is ambiguous and that the earth movement exclusion applies only when the movement was from natural causes.
On June 8, 2017, the Michigan Court of Appeals in Home-Owners Insurance Company v. Dominic F. Andriacchi, 2017 WL 2491886 (Mich. App. 2017) was the most recent court to address this issue. The insured operated a law firm. The floor slab in the building was damaged by earth movement beneath the slab. The earth movement was caused by a major street repair project that had just been completed. The policy contained an earth movement exclusion which read:
* * *
b. Earth Movement.
(1) Any earth movement (other than sinkhole collapse), such as an earthquake, landslide or earth sinking, rising or shifting. But if loss or damage by fire or explosion results, we will pay for that resulting loss or damage.
The insured argued that the term “earth movement” was ambiguous, and was limited to naturally occurring events. The insured contended that since the earth movement was caused by construction activities, the exclusion did not apply.
The trial court disagreed, and granted summary judgment to the insurer. The Court of Appeals affirmed. As the trial court concluded: “[a]ny earth movement means any earth movement. And I don’t need Latin rules of statutory construction to turn that into anything else other than what it says.” 2017 WL 2491886 at *2. The Court of Appeals agreed:
Again, the earth movement exclusion refers to “any earth movement.” The word “any” is not defined in the insurance policy, “but is commonly understood to be all-encompassing, meaning ‘every’ or ‘all,’ and can be ‘used to indicate one selected without restriction’ or ‘to indicate a maximum or whole.’” [Citations omitted.] Thus, “any earth movement means “every” or “all” movement of the earth without restriction or distinction as to the type (i.e., natural or man-made). Id. at *4.
The Court also found support in the lead-in clause in the policy, which contained anti-concurrent cause language. As the Court explained: “[a]nd there is certainly no limitation on what can cause the concurrent cause or event. Hence, as these and other courts have recognized, the plain language of the lead-in clause makes clear that the exclusion applies regardless of whether it occurs because of a concurrent event or cause, including a manmade occurrence.” Id. at *8.
The opinion of the Michigan Court of Appeals is similar to, and in fact, relied upon, the 2014 opinion from the North District of Illinois in the case of One Place Condominium, LLC et al. v. Travelers Property Casualty Company of America, 2014 WL 4977331 (N.D. Ill. October 6, 2014). This author represented Travelers in the One Place case.
One Place involved the construction of a 10-story condominium building. During the early part of the project, there was damage to an earth retention system and frost wall that were part of the foundation. The damage was from the movement of the earth which was caused by construction activities.
The policy provided coverage for the earth movement, with a $2.5 million sublimit. The insured contended that the earth movement sublimit did not apply (the insured was seeking more than $2.5 million). The insured argued that the policy language was ambiguous and earth movement included only earth movement losses from natural causes.
The Court disagreed with the insured, and granted summary judgment to the insurer. The policy defined “earth movement” as “any movement of the earth (other than ‘sinkhole collapse’), including but not limited to: a. earthquake; b. landslide; c. earth sinking rising or shifting; d. volcanic eruption, explosion or effusion.” The policy also contained anti-concurrent cause lead-in language.
The Court held that the “‘earth movement’ provisions unambiguously covered any movement of the earth, regardless of any other cause or event, which clearly encompasses both natural and man-made events.” Id. at *18. The Court explained:
[T]he language is clear in stating that the limitation applies to losses from any earth movement regardless of the cause. According to the Definitions section, “[e]arth movement” is “any movement of the earth (other than ‘sinkhole collapse’), including but not limited to: a. earthquake; b. landslide; c. earth sinking, rising or shifting; d. volcanic eruption, explosion or effusion.” (Doc. 1-1, at 27) (emphasis added). Given each term its plain and ordinary meaning, the word “any” means exactly that: any movement of the earth without distinction as to the type (i.e., natural or man-made). The phrase “including but not limited to” similarly conveys that the cited examples are not all-inclusive or restrictive in nature, and thus do not serve to narrow the types of earth movement covered under the Policy. Moreover, these cited examples are not of one type or other since landslides certainly can occur naturally or be caused by man, as can “sinking, rising or shifting” of earth.Id. at *6.
The Court also relied upon the anti-concurrent cause language, noting that “this provision limits the amount Travelers will pay for a loss that in any way involves earth movement, whether directly or indirectly, and regardless of any other cause that may contribute to the loss.” Id.
Takeaway: If you have a loss which appears to have been caused in part by earth movement, and you have an earth movement exclusion, carefully examine the policy language, as the exclusion may be broader than you think.