The Supreme Court of Appeals of West Virginia has ruled that the earth movement exclusion in an insurance policy unambiguously precluded coverage for earth movement caused by natural or man caused events. The case is Erie Ins. Property and Cas. Co. v. Chaber, No. 16-0490 (W.Va. June 1, 2017).
Dimitri and Mary Chaber owned property in St. Albans West Virginia, which they leased to a motorcycle shop. Soon later, soil and rock slid down a hill behind the property and damaged the motorcycle shop. The Chabers filed a claim with their insurance company, Erie Insurance Property and Casualty Company for the damage caused by the mudslide. The policy specifically said that there was no coverage for buildings loss or damaged caused directly or indirectly by . . . landslide, including any earth sinking, rising, or shifting related to such an event. The policy goes on to state: "This exclusion applies regardless of whether any of the above, in Paragraphs 5.a through 5.d is caused by an act of nature or is otherwise caused." And "But if Earth Movement, as described in 5.a through 5.d above, results in fire, explosion, sprinkler leakage, volcanic action, or building glass breakage, we will pay for the "loss" or damage caused by such perils.
The Chabers met with an adjuster from Erie and discussed the exclusions in the applicable policy. Erie then denied the claim based on its conclusion that the loss was not covered due to the earth moving exclusion. Erie concluded that the broken glass resulting from the landslide would be covered due to the ensuing loss exception to the earth movement exclusion, but replacement of the broken glass only amounted to one-third of the policy deductible.
The Chabers filed suit against Erie and Mr. Myers asserting several claims including breach of contract, breach of covenants of good faith and fair dealing, violation of the West Virginia Unfair Trade Practices Act, and fraud or fraudulent misrepresentation. The trial court found in favor of the Chabers finding that coverage existed under the policy based on evidence that the landslide was caused by an improperly excavated hillside. Further, the trial court found that the policy was ambiguous when it came to the exclusion of damage caused by rockfall due to man-made events, and the Chabers were reasonable in their expectation of coverage for the damaged building.
The Supreme Court of Appeals reversed the lower court's decision and ruled that a provision in an insurance policy excluding a loss regardless of whether the loss was "caused by an act of nature" or was "otherwise caused" was not ambiguous language, and that it excluded coverage for the loss even if it was caused by a man-made event. The court then ruled that the trial court erred in finding the policy's ensuing loss provision ambiguous and construing it to provide coverage for the entire loss rather than just the damage caused by the broken glass.
Editor's Note: The court pointed out that the ensuing loss provision in the Erie policy (The portion of the policy that provided for coverage in the event that a described Earth Movement results in fire, explosion, sprinkler leakage, volcanic action, or building glass breakage) was a narrow exception to the widely applying exclusion. The court found that the earth movement had resulted in the glass breakage, and the glass breakage was covered. Other damage caused by the earth movement, though, was not covered.