Opinion ID: 2460220
Heading Depth: 3
Heading Rank: 1

Heading: The earth movement exclusion is ambiguous

Text: 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.