Second Department Finds Earth Movement Exclusion Applicable to Damages from Cliff Collapse

COMMERCIAL PROPERTY – EARTH MOVEMENT EXCLUSION – ROCK TOPPLE
Lordae Realty Corp. v. United States Fire Ins. Co.
(2nd Dept., decided 3/9/2010)

The earth movement exclusion found in the standard Causes of Loss--Special Form, ISO endorsement number CP 10 30 10 00, of a commercial property insurance policy provides, in part:

B.      Exclusions 

1.     We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

b.       Earth Movement

(1)   Earthquake, including any earth sinking, rising or shifting related to such event;

(2)   Landslide, including any earth sinking, rising or shifting related to such event;

(3)   Mine subsidence, meaning subsidence of a man-made mine, whether or not mining activity has ceased;

(4)   Earth sinking (other than sinkhole collapse), rising or shifting including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty. Soil conditions include contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground surface.

But if Earth Movement, as described in b.(1) through (4) above, results in fire or explosion, we will pay for the loss or damage caused by that fire or explosion.

Are damages from a rock topple excluded under the earth movement exclusion?  Must there be seismic activity for the earth movement exclusion to apply?  When huge rocks and car-sized boulders from a cliff immediately behind commercial buildings suddenly move from their previous place of rest and cause damage to those buildings, does the earth movement exclusion apply?   In the opinion of Appellate Division, Second Department, yes, the earth movement exclusion does apply in such a situation to negate coverage. 

From Google research (the Second Department's decision gives no facts or policy language), it appears that on December 20, 2005, plaintiffs' buildings on the east side of Fifth Avenue in Pelham, New York, were severely damaged when when a colossal chunk of a cliff that towered behind a row of shops on Fifth Avenue suddenly gave way.  The collapse sent car-sized boulders and tons of debris tumbling down onto the stores and street.  Plaintiffs and 15 other store owners submitted claims to their commercial property insurers for building damage and business interruption losses.  Nearly all of those insurers, including United States Fire Insurance Company, denied coverage based on their policies' earth movement exclusions.  Plaintiffs commenced this action for breach of contract and a declaratory judgment, seeking coverage for their losses from the cliff's partial collapse. 

Westchester Supreme denied USFIC's motion for summary judgment and it appealed.  In REVERSING the lower court's order, the Appellate Division, Second Department, held:

The Supreme Court erred in denying the defendant's motion for summary judgment. The defendant met its initial burden of establishing its entitlement to judgment as a matter of law by demonstrating that the "earth movement" exclusion in the insurance policy clearly and unambiguously applied to the plaintiffs' losses (see I & R Realty Mgt., Inc. v Transcontinental Ins. Co., 59 AD3d 598; Labate v Liberty Mut. Ins. Co., 45 AD3d 811, 812; Cali v Merrimack Mut. Fire Ins. Co., 43 AD3d 415, 417). In opposition, the plaintiffs failed to raise a triable issue of fact (see Zuckerman v City of New York, 49 NY2d 557, 562). Accordingly, the Supreme Court erred in denying the defendant's motion. 

There is no lower court decision available online, so I cannot report the exact language of the earth movement exclusion upon which USFIC relied to deny coverage.  Nor can I discern the exact argument or arguments plaintiffs raised in opposition to USFIC's motion for summary judgment.  From the local newspaper coverage of the event, however, it appears plaintiffs may have argued that the earth movement exclusion did not apply because: (1) there was no seismic activity at the time of the collapse; and (2) this was not a landslide, but a "rock topple" -- a rupture that was a long-term result of water seepage into crevices along the cliff which, after years of successive freezes and thaws, eventually deepened, allowing rocks to give way.  If those were plaintiffs' arguments, they were unsuccessful.