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Exclusion for Earth Movement Does Not Apply to Excavation

May 18, 2009

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In Pioneer Tower Owners Assn. v. State Farm Insurance, plaintiff, a condominium apartment building, brought a breach of contract action against its carrier to recover for losses resulting from damage sustained to the foundation of its building, which was caused by excavation work done on an adjacent parcel of land.
The defendant carrier contended that coverage was excluded under the policy’s “earth movement” exclusion, which precluded coverage for “earth movement, meaning the sinking, rising, shifting, expanding or contracting of earth, all whether combined with water or not. Earth movement includes but is not limited to earthquake, landslide, erosion, and subsidence but does not include sinkhole collapse.” Both parties moved for summary judgment.
Plaintiff argued that the exclusion was ambiguous because the intentional excavation of property by humans is different from the examples mentioned in the policy. In contrast, the carrier contended that the exclusion applied because the loss was caused by the “sinking” and “shifting” of earth beneath plaintiff’s building. The Supreme Court, granted plaintiff’s summary judgment motion and the Appellate Division affirmed.
On a further appeal, the Court of Appeals affirmed. Although the Court described the controversy as a "close question", the Court found that the carrier’s disclaimer was invalid, as the type of loss was not unambiguously excluded. The Court of Appeals also notes that neither it nor the parties could find any case citation applying an earth movement exclusion to intentional earth removal, such as excavation work.
Thanks to Robin Green for her contribution to this post.
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