N.Y. Court of Appeals rejects insurance co.'s use of "earth movement," settling and cracking exclusions

According to Lawrence Kushnick, Esq., of Kushnick & Associates, P.C., in an "earth moving" decision, on April 30, the New York Court of Appeals unanimously affirmed the Appellate Division Second Departments decision which upheld the lower court's decision directing a national insurance company to provide coverage to a condominium apartment building. The condominium, located in the booming construction zone of Flushing, had been severely damaged by improper excavation and underpinning activity from a construction project on a lot next door. The condominium board placed a claim with the insurance who denied coverage citing the policies "earth movement" exclusion which excludes from coverage damage caused by "earth movement, meaning the sinking, rising, shifting, expanding or contracting of earth." The policy defined earth movement as "including but not limited to earthquake, landslide, and erosion." The insurance company also cited the policies "settling and cracking" exclusion. The condominium's attorney argued that the literal reading of the words in the exclusion did not give the meaning that an ordinary reader would assign to the exclusionary clauses. The insurance company denied coverage, attempting to claim that no matter what the cause that any time a building moved, settled or cracked, coverage would be excluded and denied. The condominium's attorney argued that such a view was an attempt to twist a pure earthquake and other natural disaster occurrence exclusion, to exclude man made damage, which is not the wording nor the intent of the insurance policy. In agreement, the Court of Appeals recognized that if the insurance company's reasoning was followed, the exclusion would apply "where a refrigerator fell over and cracked a wall," which as obviously not the intent of the policy. The court held that as to the "earth movement" exclusion, there was no mention of excavation or other man made causes of earth removal. As to the "settling and cracking" exclusion," the ordinary reader would not consider that the exclusion would apply for such things as the intentional removal of earth in the vicinity of the covered building. The decision has a wide spread impact on insurance coverage throughout the U.S. as many courts have been waiting for direction from the New York Court of Appeals. There has been a divergent view as to the allowance of the expansion of the earthquake earth movement exclusion to also exclude man made earth movements, which issue the New York Court of Appeals has now put to rest. It is believed that the insurance company and other carriers have denied 100's of millions of dollars of claims using the "earth movement" and "settling and cracking exclusions." Insured's may have as little as two years from the date of loss to demand coverage for claims that have been denied under these exclusions. Kushnick is a member of the Melville litigation Law Firm Kushnick & Associates, P.C. The firm handles complex state and federal Court litigation and arbitrations involving construction and insurance coverage issues throughout New York City, Queens, Brooklyn, Nassau, Suffolk and Westchester Counties.