Many insurance policies specifically exclude earth movement and if the facts permit, the insurance company may raise this exclusion when a claim is asserted. This issue is currently being litigated in Superstorm Sandy cases in both New York and New Jersey. A recent Eastern District of New York federal court decision discussed the earth movement exclusion in a case involving an auto parts company warehouse in New York which sustained significant damage when a portion of the concrete floor collapsed.1 The auto parts company had stored steel racks with auto parts that weighed about 2 to 3 tons. Therefore, when the loss occurred, the policyholder asserted that the loss was covered under the policy provision which covered damage from a collapse caused by the “weight of people or personal property.”
The insurer disagreed and denied the claim relying on the policy’s earth movement exclusion:
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss ….
b. Earth Movement
(1) Any earth movement (other than “sinkhole collapse”) whether natural or man made, including but not limited to earthquake, mine subsidence, landslide, or earth sinking, rising or shifting. But if earth movement results in fire, or explosion, we will pay for the loss or damage caused by that fire or explosion.
The policy also provided that loss or damage due to earth movement was not covered:
[R]egardless of any other cause or event that contributes concurrently or in any sequence to the loss.
The insurer determined that the earth movement exclusion barred coverage because the insurer’s structural engineer retained to investigate the claim stated that he observed that one of the concrete floor slabs in the front half of the building had collapsed and dropped approximately 10 to 14 inches. In his report, the engineer stated the building had “pre-existing construction flaws and settlement” dating back to its original construction in 1987:
The front section of this building was constructed over the foundation of a previous building. The foundation had been filled with soil and the concrete filled sonotube extends down to a stable and/or an undisturbed base. Over time the uncompacted soil settled and created a void under the concrete slab. The poured concrete slab was installed without reinforcing throughout and was unable to resist the stress developed as an unsupported concrete slab.
On a summary judgment motion, the Eastern District of New York federal court ruled in favor of the insurer, stating the earth movement exclusion “clearly and unmistakably” barred coverage for the insured’s claimed losses :
The provision states that the Policy does not cover loss or damage resulting from “[a]ny earth movement … whether natural or man made, including but not limited to earthquake, mine subsidence, landslide, or earth sinking, rising or shifting.” Gill Decl., Ex. A, at ECF 28. All of the engineers who investigated the collapse at the Pitkin Avenue Premises found that the concrete floor was built over improperly compacted soil that settled over time. McEvoy, who initially investigated the claim for defendant, stated in his report that the “uncompacted soil settled and created a void under the concrete slab.” Gill Decl., Ex. D, at ECF 3. Defendant’s expert found that the soil underneath the concrete slab subsided over time, likely “because it was not properly compacted,” and the concrete “failed because it lost the soil support from below.” Gill Decl., Ex. O, at 6, ECF 8. Plaintiff’s own expert, Alauddin, found that “unsuitable, fine uncontrolled soil fill with debris” was “poorly compacted in place,” then moisture and sub-surface water pressure “reduced soil density and created voids and pockets below the slab underside surface.” Grossman Decl., Ex. I, at 4. While the experts use different terminology, they all agree that the soil settled and created “voids” under the concrete floor. Since soil settlement is a type of “sinking, rising or shifting” of the earth, it falls within the unambiguous terms of the exclusion. See Alamia v. Nationwide Mut. Fire Ins. Co., 495 F.Supp.2d 362, 367 (S.D.N.Y.2007) (finding that soil erosion or settlement “indisputably involves the ‘movement,’ or more precisely, the ‘shifting’ or ‘sinking’ of the earth”).
The Court also pointed out that because the policy contained an anti-concurrent clause, the insurer only had to show that soil settlement was at least a contributing cause of the damage and if so, this would bar coverage for the insured. Here, both the insured and insurer’s experts agreed that soil settlement was a contributing factor to the loss.