Property insurance policies vary in their application of coverage and exclusions when it comes to the peril of earth movement. Some may only apply to earthquake and/or other naturally caused movements, whereas others take a broader approach and will include all types of earth movement, even man-made. When negotiating terms of coverage, pursuing the broader definition for affirmative grants of coverage is recommended and conversely, the more narrowed scope should be pursued when dealing with a policy exclusion.
A New York state appellate court recently found against a property owner seeking coverage for building damage caused by nearby construction, finding that the owner’s property policy’s earth movement exclusion applied to both natural and man-made earth movements. The policy exclusion denied coverage for earth movement that “is caused by an act of nature, manmade or is otherwise caused,” according to court documents. The owner had sought coverage for more than $3 million for damage from nearby excavation work.
This case illustrates the need to be vigilant and aware of the application of an earth movement exclusion on a policy. One of the arguments I often encounter, particularly from borrowers challenging a lender insurance requirement, is that a particular location is not in an area prone to earthquakes. Such reasoning is less convincing where the policy exclusion broadly includes any earth movement. A policyholder that is not viewing the exclusion properly, should reconsider their position and determine if they are still willing to take the risk.