New York Appellate Court Finds that Earth Movement Exclusion Does Not Apply to Third Party Excavation
10/31/2006
New York (Oct. 3, 2006) The New York Appellate Division, Second Department has dealt a blow to the property insurance industry's campaign to expand the scope of the "earth movement" exclusion contained in most first-party property insurance policies. Deborah Lee v. State Farm Fire & Casualty Co., No. 16316/03 (Sept. 19, 2006).
The insurance industry has repeatedly interpreted this provision, which typically excludes coverage for damage caused to property by 'sinking, rising, shifting, expanding, or contracting of earth, all whether combined with water or not', to exclude coverage for a wide range of occurrences, including damage caused to a property by human activity rather than by an act of nature.
In the case in question, Deborah and Sutin Lee own a three story building in Corona, New York, that suffered physical damage when an adjacent property owner removed the lateral support of the Lees' building during construction. Specifically, excavation at the adjacent property below the Lees' foundation caused damage to their property and impaired its structural integrity, causing a collapse. The Lees' building was insured under an all-risk Rental Dwelling insurance policy sold by State Farm.
The Lees provided State Farm with notice of the collapse and requested coverage. State Farm denied coverage based on the "earth movement" exclusion policy. After the Lees filed a lawsuit to secure their rights to insurance coverage, the trial court granted State Farm summary judgment, finding it properly denied the Lees insurance coverage for the collapse of their building based on the "earth movement" exclusion.
On appeal, the appellate court reversed, holding that the "earth movement" exclusion does not exclude coverage for earth "excavated from underneath the [policyholder's] dwelling":
We disagree with State Farm's contention that the earth movement exclusion clearly and unambiguously applies to the Lees'] loss at issue. The exclusion defines 'Earth Movement' as 'sinking, rising, shifting, expanding, or contracting of earth, all whether combined with water or not.' Here, the record establishes that the earth underneath the Lees'] dwelling did not sink, rise, shift, expand, or contract. Rather, earth was excavated from underneath the plaintiff's dwelling.
The appellate court further limited the "earth movement" exclusion's application and held:
The facts of this case, however, involving the physical removal by
excavation of earth from underneath the Lees'] dwelling, does not fall
squarely within the language of the exclusion, which defines 'Earth
Movement' as 'sinking, rising, shifting, expanding, or contracting of earth.'
For further information please contact:
Finley Harckham
(212) 278-1543
fharckham@andersonkill.com
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