New York’s highest court recently held that an exclusion for “earth movement” in a property policy did not exclude coverage for damage to the policyholder’s building that resulted when excavation of the adjacent lot caused earth to slide away beneath the insured building. Pioneer Tower Owners Assoc. v. State Farm Fire & Cas. Co., 12 N.Y.3d 302, ___ N.E.2d ___, 2009 N.Y. Slip Op. 03409 (April 30, 2009).
In reaching its decision, the court applied New York law regarding the construction of insurance policy exclusions, which the court characterized as “highly favorable to insureds.” The exclusion in question stated that “earth movement,” which is an “excluded event,” means the “sinking” and “shifting” of earth, and it includes but is not limited to “earthquake, landslide, erosion and subsidence.” The insurer argued that the literal language of the exclusion applies to the event that affected the insured property, because the property was damaged by the movement of earth. The policyholder countered that excavation, being the intentional removal of earth by humans, is different in kind from the examples of earth movement provided in the text of the exclusion. Finding both readings of the exclusion to be reasonable, the court affirmed an award of summary judgment in favor of the policyholder granted by the trial court.