Ambiguity, Earth Movement and Fibber McGee's Closet
For reasons I have not fully resolved, courts treat earth movement exclusions much more harshly than flood exclusions (actually, "water damage" exclusions is more precise). Flood exclusions are almost always upheld and invited in for coffee and cookies, while a lot of the time -- I haven't worked out the precise percentage, but it's higher than you might expect -- earth movement exclusions get pimp-slapped.
Courts often find ambiguity about the wording of these exclusions. Sometimes the ambiguity is found in the text of the exclusion. Sometimes it's in something that wasn't stated in the exclusion. Sometimes it's because someone else said the exclusion was ambiguous so that creates a penumbra of ambiguity. Sometimes it seems like the court is confused about what ambiguity is or how to state why something is ambiguous but, like Justice Stewart's famous description of obscenity, they know it when they see it.
So I was interested to see this case, Powell v. Liberty Mutual, from the Nevada Supreme Court. I found it searching for recent cases about anti-concurrent cause language, which is a particular interest of mine. In Powell, the court found an earth movement exclusion ambiguous when a water pipe ruptured and cause, er, earth movement. I guess we could say the water saturated soil in and around a dirt sub-basement, maybe that's another way to put it. Supposedly this led the house to shift and crack, not too hard to believe.
There was a pretty similar case in Nevada 20 years ago, Schroeder, in which a U.S. District Court upheld an earth movement exclusion in a State Farm policy, which has an anti-concurrent cause provision that has proved pretty hard to beat. The Liberty Mutual policy had an anti-concurrent cause provision that is more standard, but still pretty challenging to beat. But the Supreme Court kind of shrugged it off, and the nearest I can come to figuring out why is that, if the earth movement exclusion is out, there is no excluded cause of damage to figure in the mix. OK, but what is the cause of damage, then? A catastrophic, sudden breach of the plumbing? That would be covered as an exception to the water damage exclusion, but it seems like to me the damage is hard to characterize as water damage alone -- the water caused the dirt to shift, and that led to the house getting messed up.
Maybe I'm missing something in the court's opinion that gives a clear justification for the ruling. If so, you can point it out to me. And as an aid to discussion, here's the Liberty Mutual anti-concurrent cause language and earth movement exclusion, followed by the court's penultimate reasoning.
We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss . . . . Earth movement, meaning earthquake, including land shock waves or tremors before, during or after a volcanic eruption; landslide, mine subsidence; mudflow; earth sinking, rising or shifting.
OK, that's the way the anti-concurrent cause language and earth movement exclusion read in the decision. Below is part of the court's analysis.
The [lower state] court granted Liberty Mutual summary judgment under the rationale that there was no reason to depart from the holding in Schroeder, especially because the facts were similar to those in Schroeder.
However, the earth movement exclusion in Schroeder is distinguishable from the earth movement exclusion in Powell's policy. First, the policy in Schroeder was drafted differently than the policy here, and many courts have concluded that certain damage is excluded under earth movement exclusions in policies similar to the one in Schroeder. Schroeder's earth movement definition is not all-inclusive because it contains the language "includes but is not limited to," whereas Liberty Mutual's policy simply states "including." As such, the earth movement exclusion in Schroeder clearly applies to other events than those listed as examples in its earth movement definition and Liberty Mutual's does not.
Second, Schroeder's lead-in clause clearly states that it does not matter what caused the earth to move, if there is earth movement, the damage caused by that movement is excluded. When reading Schroeder's lead-in clause and earth movement definition, one can discern what damage was excluded. Further, Schroeder's earth movement definition includes earth movement combined with water, whereas Liberty Mutual's earth movement definition does not.
The conclusions reached by the court in Schroeder were based on the specific language of the policy at issue in that case. Simply because the damage to Powell's house might be excluded under the Schroeder policy does not mean it is excluded under the Liberty Mutual policy at issue in this case. Thus, we conclude the district court erred in relying on Schroeder.
Um, what? That's not an explanation, that's opening Fibber McGee's closet. I notice on the docket that the insurance company has moved for reconsideration of this decision, and I wouldn't be surprised if this is granted. The Nevada Supreme Court has a neat website, by the way, where you can look up cases, see the docket and access stuff filed in the case.