Court Finds Question of Fact on Coverage for Sinkhole Collapse

SPECIAL MULTI-PERIL POLICY – WATER DAMAGE EXCLUSION – SINKHOLE COLLAPSE – EFFICIENT PROXIMATE CAUSE
Simmons v. Dryden Mut. Ins. Co.
(Sup. Ct., Rensselaer Co., decided 1/21/2009)

Would you know a sinkhole if your house fell into one? 

Plaintiffs owned a rental property in Rensselaer, New York.  A nearby city water main ruptured, leaking very large quantities of water into the subsurface soils around plaintiffs' property. The massive amount of water caused a large area of ground to collapse into what the court thought "would likely be considered by most people to constitute a sinkhole."  The erosion and "sinkhole" undermined the foundation of the house causing a portion of the foundation to collapse. The water also infiltrated plaintiffs' basement causing significant water damage.

Plaintiffs had a special multi-peril policy with Dryden Mutual which afforded named or enumerated perils property coverage, not all-risk coverage.  The subject policy provided insurance coverage only for losses caused by fire or lightning, removal, explosion, windstorm or hail, riot or civil commotion, aircraft, vehicles, smoke, vandalism, sinkhole collapse and volcanic action. The relevant policy form also contained an exclusion for water damage caused by flood, surface water, waves, tides, tidal water or overflow of a body of water, water which backs up through sewers or drains, and water below the surface of the ground pressing on or flowing or seeping through foundations or basements. Shortly after plaintiffs notified Dryden Mutual of their loss, it disclaimed coverage on the ground that water damage was excluded by the policy.

Plaintiffs commenced this breach of contract action, and both parties moved for summary judgment.  In DENYING both motions, Rensselaer County Supreme Court Justice Michael Lynch held:

(1)  the water damage exclusion did not apply because that exclusion has been held to exclude only damage from natural causes or phenomenon, and not damage caused by defective municipal water supply systems; 

(2)  the policy was ambiguous as to coverage for "sinkhole collapse"; the policy definition required a subterranean void caused by the action of water on a limestone or similar rock formation; it did not limit covered sinkholes to natural phenomena or the action of water to chemical dissolution; Dryden's geologist did not offer any opinion as to where the earth that washed away went, did not state how deep the bedrock or other rock formations that were beneath the subject property, and did not exclude the possibility that the water released from the city water system was sufficient to physically create a subterranean void within or upon a rock formation allowing the supporting earth to collapse into such void;

(3)  partial summary judgment was granted to Dryden Mutual, dismissing plaintiffs' claims for damages to the property's driveway, trees, shrubs, plants and lawn, which were not not covered; and 

(4)  the affidavit of plaintiffs' construction engineering expert failed to set forth all of the facts upon which the expert's opinions were  based and, therefore, was without probative value; moreover, it failed to address or exclude a likely cause of the collapse and was "excessively conclusory".