In Bentoria Holdings, Inc. v Travelers Indem. Co., 2012 N.Y. LEXIS 3087 (N.Y. Oct. 25, 2012), Travelers denied first-party property coverage for cracking to the insured’s property that occurred due to excavation on an adjacent property. The policy excluded coverage for earth movement as follows:
1. We will not pay for loss or damage caused directly or indirectly by any of the following. . . .
b. Earth Movement
(4) Earth sinking (other than sinkhole [*2] collapse), rising or shifting including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty. Soil conditions include contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground surface;
All whether naturally occurring or due to man made or other artificial causes.
Id. at * 2 (emphasis added). Travelers denied coverage based on the earth movement exclusion. The insured filed a lawsuit against Travelers and other defendants who performed the construction work. The trial court denied Travelers’ motion for summary judgment based on the earth movement exclusion. Travelers appealed (in New York, denial of summary judgment is appealable as of right pursuant to NY CPLR § 5701[a][iv] and [v]). The appellate division affirmed, finding the earth movement exclusion ambiguous as applied to this loss because “[e]xcavation was not expressly set forth in the exclusion, while other, less common causes of earth movement were.” Bentoria Holdings, Inc. v Travelers Indem. Co., 84 A.D.3d 1135 (N.Y. App. Div. 2d Dep’t).
Travelers appealed to New York’s highest court. Robinson & Cole LLP filed an amicus brief on behalf of the American Insurance Association, Property Casualty Insurers Association of America and New York Insurance Association, Inc. The New York Court of Appeals held that the earth movement exclusion was unambiguous as applied to a loss caused by excavation, reversing the lower court decisions. The Court of Appeals first reviewed its decision in Pioneer Tower Owners Assn. v. State Farm Fire & Cas. Co., 12 NY3d 302 (2009), where it had determined that the earth movement exclusion was ambiguous with respect to intentional earth movement, such as excavation. The court determined that Pioneer was correctly decided, but that Bentoria compelled a different result because of the language “All whether naturally occurring or due to man made or other artificial causes,” which was included in the Travelers policy, but not in the State Farm policy in Pioneer. Based on this language, the court concluded
By expressly excluding earth movement “due to man made or artificial causes,” the policy contradicts the idea that “the intentional removal of earth by humans is not an excluded event. This policy cannot reasonably be read to cover the damage on which plaintiff’s claim is based.
Id. at *3.
Historically, the earth movement exclusion has been the source of many litigated issues, including whether the exclusion should apply to non-natural sources of earth movement. The insurance industry has revised the language of standard earth movement exclusions on several occasions in response to court decisions that construed the exclusion more narrowly than intended. This decision demonstrates that the standard ISO exclusionary language currently in use by many insurers should apply to excavation-related losses.
SPECIAL DISCLAIMER: Because the Bentoria case is one in which Robinson & Cole LLP filed an amicus brief, we reiterate that the intent of this blog is to serve as an informational resource, not advertising for our legal services. Every case is different and the result achieved in the case described above may differ from the result in some other case, which may involve different facts, different applicable law or a different jurisdiction. Past results do not guarantee future results, and you should always consult your own lawyer about your own case.