Opinion ID: 2460220
Heading Depth: 2
Heading Rank: 2

Heading: Because the earth movement exclusion is ambiguous and must be interpreted against Liberty Mutual, the district court erred in granting Liberty Mutual summary judgment

Text: Powell contends that the district court erred by deciding that the earth movement exclusion applied here. We agree and conclude that not only is the earth movement exclusion ambiguous and must be interpreted against Liberty Mutual, but also, if Liberty Mutual had intended for the earth movement exclusion to exclude damage caused by soil movement from a ruptured pipe, then it would have had to clearly include that in the earth movement definition and show that the earth movement exclusion unmistakably applied to the damage here. Thus, the district court erred in granting Liberty Mutual summary judgment. If a provision in an insurance contract is unambiguous, a court will interpret and enforce it according to the plain and ordinary meaning of its terms. Neal, 119 Nev. at 64, 64 P.3d at 473. The question of whether an insurance policy is ambiguous turns on whether it creates reasonable expectations of coverage as drafted. United Nat'l Ins. Co. v. Frontier Ins. Co., 120 Nev. 678, 684, 99 P.3d 1153, 1157 (2004). Because the insurer is the one to draft the policy, an ambiguity in that policy will be interpreted against the insurer. National Union Fire Ins. v. Reno's Exec. Air, 100 Nev. 360, 365, 682 P.2d 1380, 1383 (1984). While clauses providing coverage are interpreted broadly so as to afford the greatest possible coverage to the insured, clauses excluding coverage are interpreted narrowly against the insurer. Id. Ultimately, a court should interpret an insurance policy to effectuate the reasonable expectations of the insured. Id.
Earth movement exclusions were historically included in insurance policies to protect insurance companies from having to pay out on policies when a catastrophic event caused damage to numerous policyholders. Peters Tp. School Dist. v. Hartford Acc. & Indem., 833 F.2d 32, 35-36 (3d Cir.1987). Quoting Wyatt v. Northwestern Mutual Insurance Co. of Seattle, 304 F.Supp. 781, 783 (D.Minn.1969), the Peters court noted that the reason for the insertion of the exclusionary clause ... in all risk insurance policies is to relieve the insurer from occasional major disasters which are almost impossible to predict and thus to insure against. There are earthquakes or floods which cause a major catastrophe and wreak damage to everyone in a large area rather than an individual policyholder. When such happens, the very basis upon which insurance companies operate is said to be destroyed. When damage is so widespread no longer can insurance companies spread the risk and offset a few or the average percentage of losses by many premiums. Id. at 35 (alteration in original). In considering earth movement exclusions, other jurisdictions have concluded that there is often an ambiguity as to what type of damage earth movement exclusions apply because such exclusions typically only list naturally occurring events in their definitions of what constitutes earth movement, but earth movement can be caused by unnatural events as well. See Sentinel Associates v. American Mfrs. Mut. Ins., 804 F.Supp. 815, 818 (E.D.Va.1992); Fayad v. Clarendon Nat. Ins. Co., 899 So.2d 1082, 1088 (Fla.2005); Henning Nelson Const. Co. v. Fireman's Fund, 383 N.W.2d 645, 653 (Minn.1986); United Nuclear Corp. v. Allendale Mut. Ins., 103 N.M. 480, 709 P.2d 649, 652 (1985). Therefore, these courts interpret earth movement exclusions broadly and in favor of the insured party. See, e.g., Sentinel Associates, 804 F.Supp. at 818. Using the rule of construction ejusdem generis [4] as a guiding principle, these courts have construed earth movement exclusions as referring only to naturally occurring events because the examples included in the definitions of earth movement are only natural events. See, e.g., id. The earth movement exclusion in Liberty Mutual's insurance policy lists mine subsidence, [5] and earth sinking, rising, and shifting as examples of earth movement. Because mine subsidence is caused by human intervention from previous years, [6] and a generalized reference to earth sinking, rising, and shifting without clarifying the cause for such sinking, rising, or shifting could include both natural and human-caused events, not all of the examples listed are naturally occurring events. Therefore, the earth movement exclusion in the Liberty Mutual policy is even less clear than most earth movement exclusions regarding what is excluded because earth movement exclusions have historically applied to natural catastrophic events, but the Liberty Mutual policy includes a list of examples of mostly naturally occurring events as well as possibly human-caused events. Thus, the Liberty Mutual policy is ambiguous as to what precisely earth movement is when it is not a type of widespread, calamitous event. Liberty Mutual argues that the settling clause would exempt coverage here. However, the district court based its decision on the earth movement exclusion, not the settling clause. Further, the ambiguity in the earth movement exclusion is not clarified by the language in the settling clause. Other jurisdictions have interpreted similar settling clauses that exclude damage caused by settling, shrinking, bulging, or expansion of soils as referring to gradual, natural processes that cause damage. See Boston Co. Real Estate Counsel v. Home Ins. Co., 887 F.Supp. 369, 373 (D.Mass.1995); Winters v. Charter Oak Fire Ins. Co., 4 F.Supp.2d 1288, 1295 (D.N.M.1998); Holy Angels Academy v. Hartford Ins. Group, 127 Misc.2d 1024, 487 N.Y.S.2d 1005, 1007 (N.Y.Sup.Ct.1985). Thus, in accordance with other jurisdictions' interpretation of similar settling clauses, the language of the settling clause in Powell's policy would seem to support an interpretation that the earth movement exclusion only applies to naturally occurring events, instead of clarifying that it applies to both naturally occurring events and man-made events. Yet, Liberty Mutual's earth movement exclusion lists both naturally occurring events and man-made events as examples. We conclude that not only is the earth movement exclusion ambiguous and must be interpreted against the insurer, Liberty Mutual, but the settling clause does not help clarify that ambiguity.
Because ambiguities in insurance policies must be interpreted against the insurer, if an insurer wishes to exclude coverage by virtue of an exclusion in its policy, it must (1) write the exclusion in obvious and unambiguous language in the policy, (2) establish that the interpretation excluding covering under the exclusion is the only interpretation of the exclusion that could fairly be made, and (3) establish that the exclusion clearly applies to this particular case. See Alamia v. Nationwide Mut. Fire Ins. Co., 495 F.Supp.2d 362, 367 (S.D.N.Y.2007). This is especially important in policies that include anti-concurrent clauses, such as the one included in Powell's policy, because anti-concurrent clauses are often broad and used to deny coverage in numerous different instances. While such clauses are valid, they require sufficient clarity as to what is specifically excluded from the policy. Because the anti-concurrent clause in Powell's policy is not sufficiently clear, it does not clear up the ambiguity of the earth movement exclusion. If Liberty Mutual had wished to exclude damage sustained as a result of soil movement from a burst pipe under its earth movement exclusion, it should have drafted a more explicit exclusion. Some insurance policies have clarified exactly what is excluded by their earth movement exclusion. These policies specify that earth movement can be due to either natural or unnatural causes. See Alamia, 495 F.Supp.2d at 365; Liebel v. Nationwide Ins. Co. of Florida, 22 So.3d 111, 113 (Fla.Dist.Ct.App.2009). Some insurance policies have also specified that earth movement is not limited to a list of examples, and that no matter what causes the earth movement, if the earth moves, the damage is excluded. See Chase v. State Farm Fire and Cas. Co., 780 A.2d 1123, 1126 (D.C.2001); Boteler v. State Farm Cas. Ins. Co., 876 So.2d 1067, 1068-69 (Miss.Ct.App.2004); Alf v. State Farm Fire and Cas. Co., 850 P.2d 1272, 1273 (Utah 1993). Because the Liberty Mutual policy does not include clear and unambiguous language, subject to only one interpretation, that clearly excludes the damage here, Liberty Mutual is unable to deny coverage of the claim if the district court determines that the claim stems from damage caused by soil movement as a direct result of the ruptured pipe. Thus, we conclude the district court erred in granting Liberty Mutual summary judgment. [7]