A federal district court in Illinois has ruled that an "earth movement" exclusion in an insurance policy barred coverage for the insureds' loss even where the soil conditions had resulted from human activity.
The Case
Temperature Service Company, Inc., and SVV Partners, LLC (together, the "plaintiffs"), excavated around their commercial property in Elk Grove, Illinois, to construct a detached storage addition. During the excavation process, the plaintiffs discovered that the soil around the property contained "urban backfill," or manmade debris, such as concrete and asphalt.
The plaintiffs retained a consultant to investigate, and the consultant in turn hired Soil and Material Consultants ("SMC") to perform a geotechnical investigation. This investigation involved taking eight soil samples from the ground around the property at various depths.
Acuity, which insured the plaintiffs' property under an "all risk" insurance policy, hired its own consultant to analyze the same core samples taken by SMC.
The parties' experts agreed that:
- The core samples contained a combination of soil naturally present and "fill soil" (non-synthetic soil transported from a different location to level the height of the bottom of the building);
- The building's foundation, drywall, doorframes, and windows were cracked and otherwise damaged; and
- The presence of fill soil was a cause of the property damage.
The plaintiffs' expert opined that "high moisture content/low-strength fill and natural soil conditions supporting the foundations [were] the cause of excessive building settlement," and that "as to two likely causes of the settlement exhibited by the 'fill' soils: a. Additional load that 'pushe[d] down' on the soil; and b. Consolidation due to improper compaction."
Acuity's expert opined in his report that the most likely cause of damage was "differential soil settlement" "caused by a combination of building loads and non-uniform soil conditions and [] activated by localized concentrations of moisture from precipitation seeping into the ground." According to Acuity's expert, the cause of the differential soil settlement was variability among the natural and fill soils.
Based on its expert's analysis, Acuity denied coverage.
The plaintiffs sued Acuity, and the parties cross-moved for summary judgment on the issue of whether the earth movement exclusion in the Acuity policy barred coverage for the plaintiffs' loss.
Among other things, the plaintiffs argued that the exclusion did not apply to soil conditions resulting from human action.
The Acuity Policy
The Acuity policy provided:
B. EXCLUSIONSThe District Court's Decision1. 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
. . .
(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 underlying the ground surface.
The district court granted Acuity's motion.
In its decision, the district court first said that the facts seemed to fit the plaintiffs' damage "within the plain language of the earth movement exclusion."
It then rejected the plaintiffs' argument that the involvement of human action in creating the soil conditions meant that the earth movement exclusion did not apply. The district court pointed out that the policy listed an event "unambiguously caused by human action" as an example of "Soil Conditions." That is, the district court said, the policy defined "Soil Conditions" to "include contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water underlying the ground surface." (Emphasis added.)
The district court found that the term "improperly compacted soil" was "plain and unambiguous" and necessarily implicated human action. Naturally occurring conditions could not logically be described as "proper" or "improper," the district court reasoned, they happened or existed.
Accordingly, the district court ruled that the earth movement exclusion in the Acuity policy unambiguously included soil conditions resulting from human action, and the presence of fill soil resulting from human action in this case fell within the same class as listed soil conditions excluded under the policy.
The case is Temperature Service Co. v. Acuity, No. 16 C 2271 (N.D. Ill. March 15, 2018). Attorneys involved include: For Temperature Service Company Inc., SSV Partners, LLC, Plaintiffs: John David Hackett, Thomas P. Boylan, William H Schramm, III, Cassiday Schade LLP, Chicago, IL. For Acuity, a Mutual Insurance Company, Defendant: Frederick John Sudekum, III, LEAD ATTORNEY, Andrew Charles Tidwell-neal, Florence M. Schumacher, Sudekum, Cassidy & Shulruff, Chtd., Chicago, IL.