It was undisputed and supported by studies and reports by consulting engineers that foundation settlement and damage to a large office building were caused by a compressible peat and organic deposit under a wing of the building. Treatment of the building site, prior to construction, including filling, led to conclusions that further settlement would be minimal. Accordingly, the building was constructed.

An investment group purchased the property after inspections by engineers, whom it had hired, reported the building to be "well designed and constructed." However, the management company that operated the building for the new owner encountered serious settlement damage several years later. Despite repairs and engineering reports suggesting that the situation was "in hand," settlement damage that was noted in subsequent engineering reports resulted in claim under successive policies carried by the owner during the period involved. The insurer denied liability on the basis of exclusions for "....damage caused by or resulting from:

• Faulty workmanship, material, construction, or design from any cause, unless physical damage not otherwise excluded from this policy results, in which event this policy will cover only such resulting damage;
• Settling, cracking, shrinking, bulging, or expansion of pavements, foundations, walls, floors or ceilings."

The insured brought an action against the insurer alleging breach of contract, whereupon the insurer moved or summary judgment. Stating that settlement damage exclusions of this type are generally construed to preclude coverage for gradual foundation damage, the federal court cited LaSalle National Bank of Chicago v. American Insurance Company, 14 Ill.App.3d 1027, 1031, 303 N.E.2d 770,774 (1973).

The court found the facts in that case "strikingly similar" to those in the case at hand. It said that. . . . "the one story commercial building in LaSalle suffered serious, gradual settlement damage as a result of underlying soil compression. Based on the gradual nature of the damage in LaSalle, the court characterized the insured's loss as settlement (excluded) rather than sudden collapse (covered)."

The United States District Court for the District of Massachusetts, with respect to the matter under review and the settlement damage provisions in the applicable policies, said that "....the undisputed evidence demonstrates that the damage to the building was caused by factors such as gradual soil compression and/or design defect rather than sudden forces." Accordingly, the court concluded that the insured's settlement loss fell within the pertinent policy exclusions.

The insured maintained that the earth movement endorsements in its policies extended coverage to the damage for which it made claim. The endorsements provided coverage for "Earth Movement, including but not limited to earthquake, landslide or subsidence."

The court said: "There is no Massachusetts precedent on whether earth movement clauses include settlement damage, but a clear majority of other jurisdictions reject such a notion. Most courts have confined the meaning of 'earth movement' to its commonplace usage - referring only to sudden, cataclysmic events (e.g., earthquakes)." It found that the damage suffered by the insured in this case was "neither sudden nor caused by non-natural forces and, accordingly, was not covered by the earth movement endorsements."

The insurance company's motion for summary judgment (in its favor) was allowed.

(BOSTON COMPANY REAL ESTATE COUNSEL, INCORPORATED, Plaintiff v. THE HOME INSURANCE COMPANY, INCORPORATED, Defendants. United States District Court for the District of Massachusetts. Civ. A. No. 93- 11122-PBS. May 8, 1995. CCH 1995 Fire and Casualty Cases, Paragraph 5417.)