Opinion ID: 1759988
Heading Depth: 2
Heading Rank: 2

Heading: All-Risk Insurance Policies and Earth Movement Exclusions

Text: The specific type of insurance policy involved in this case is, as in Castillo and Phoenix, an all-risk policy. Unless the policy expressly excludes the loss from coverage, this type of policy provides coverage for all fortuitous loss or damage other than that resulting from willful misconduct or fraudulent acts. See Sun Ins. Office, Ltd. v. Clay, 133 So.2d 735, 739 (Fla.1961); Wallach v. Rosenberg, 527 So.2d 1386, 1388 (Fla. 3d DCA 1988) (quoting Phoenix, 234 So.2d at 398); Jane Massey Draper, Annotation, Coverage Under All-Risk Insurance, 30 A.L.R. 5th 170, 170 (2004). Although the term all-risk is afforded a broad, comprehensive meaning, see Wallach, 527 So.2d at 1388, an all-risk policy is not an all loss policy, and thus does not extend coverage for every conceivable loss. In deciding whether an all-risk policy excludes coverage for an insured's claimed damages, we are guided by well-established principles of insurance contract interpretation. We begin with the guiding principle that insurance contracts are construed in accordance with the plain language of the polic[y] as bargained for by the parties. Auto-Owners Ins. Co. v. Anderson, 756 So.2d 29, 33 (Fla.2000) (quoting Prudential Prop. & Cas. Ins. Co. v. Swindal, 622 So.2d 467, 470 (Fla.1993)) (alteration in original). However, if the salient policy language is susceptible to two reasonable interpretations, one providing coverage and the other excluding coverage, the policy is considered ambiguous. See Anderson, 756 So.2d at 34; Swire Pac. Holdings, Inc. v. Zurich Ins. Co., 845 So.2d 161, 165 (Fla.2003). Ambiguous coverage provisions are construed strictly against the insurer that drafted the policy and liberally in favor of the insured. See Anderson, 756 So.2d at 34; State Farm Fire & Cas. Co. v. CTC Dev. Corp., 720 So.2d 1072, 1076 (Fla.1998); Deni Assocs. of Florida, Inc. v. State Farm Fire & Cas. Ins. Co., 711 So.2d 1135, 1138 (Fla.1998). Further, ambiguous exclusionary clauses are construed even more strictly against the insurer than coverage clauses. Anderson, 756 So.2d at 34; see also Demshar v. AAACon Auto Transport, Inc., 337 So.2d 963, 965 (Fla.1976) (Exclusionary clauses in liability insurance policies are always strictly construed.). Thus, the insurer is held responsible for clearly setting forth what damages are excluded from coverage under the terms of the policy. With regard to earth movement exclusions, there is a distinction between losses caused by natural events, which are often cataclysmic and widespread, and losses caused by man-made events. When losses are caused by human activity, insurers have the opportunity to recover some of the payments made to their insured by asserting subrogation rights against the entity responsible for the activity. See generally Cas. Indem. Exchange v. Penrod Bros., Inc., 632 So.2d 1046, 1047 (Fla. 3d DCA 1993) (After payment of a loss to its insured, an insurer may be subrogated to `any right of action that the insured may have against the third person whose negligence or wrongful act caused the loss. ') (quoting Indiana Ins. Co. v. Collins, 359 So.2d 916, 917 (Fla. 3d DCA 1978)); Fireman's Fund Ins. Co. v. Rojas, 409 So.2d 1166, 1167 (Fla. 3d DCA 1982) (As a general rule, an insurer which has paid its insured's claim or loss becomes subrogated to the insured's cause of action against the tortfeasor and may file suit to recover the amount paid.). This is in stark contrast to losses that are caused by natural disasters for which there is no responsible third party. In Castillo, the case upon which the trial court relied, the Third District was faced with the question of whether a State Farm earth movement exclusion unambiguously applied to both natural and man-made events. See 829 So.2d at 245. The State Farm exclusion defined earth movement as the sinking, rising, shifting, expanding or contracting of earth, all whether combined with water or not. Earth movement includes but is not limited to earthquake, landslide, mudflow, sinkhole, subsidence and erosion. Earth movement also includes volcanic explosion or lava flow. . . . Id. at 243-44 (emphasis removed). The State Farm exclusion also had a lead-in provision that provided: We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events. We do not insure for such loss regardless of: (a) the cause of the excluded event; or (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss; or (d) whether the event occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these. Id. at 243 (some emphasis removed). The Third District concluded that the exclusion, when read in conjunction with the lead-in provision, expanded the scope of the exclusion to exclude from coverage any loss resulting from earth movement regardless of the cause of the earth movement. See id. at 245. [2] In contrast, the overwhelming majority of courts interpreting earth movement exclusions that do not contain lead-in language precluding coverage for damage from earth movement regardless of its cause have concluded that such exclusions apply only to earth movement that arises from natural events. [3] In fact, in the conflict case, Phoenix, which also involved damage from blasting, the Fourth District interpreted an earth movement exclusion that was broader than Clarendon's but did not have the lead-in provision specifying that the exclusion applied regardless of the cause of the earth movement. The Fourth District concluded that the exclusion applied only to natural events. [4] In line with the majority of courts, we conclude that absent specific language in the policy to the contrary, an earth movement exclusion is limited to damage caused by natural phenomena. This construction is required by principles of insurance contract interpretation and is consistent with the plain meaning of the term earth movement. See Webster's Third New International Dictionary 715 (1971) (stating that earth movement means the differential movement of the earth's crust: elevation or subsidence of the land), quoted in Sentinel Assocs. v. American Mfrs. Mut. Ins. Co., 804 F.Supp. 815, 818 n. 2 (E.D.Va.1992).