469_C298
EARTH
MOVEMENT EXCLUSION CHALLENGED
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Homeowners
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Earth Movement
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Hidden Decay
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Mary Ann Cali owned a home in Valley
Stream, New York,
which was insured by a Merrimack Mutual Fire Insurance Company homeowners policy. During the policy period, the house was
significantly damaged when its concrete slab foundation settled, sank and
cracked. When Cali filed a claim for her loss,
Merrimack denied coverage, stating that the policy excluded losses due to
"earth movement...earth sinking, rising or shifting" and due to the
"settling, shrinking, bulging or expansion, including resultant cracking
of pavements, patios, foundations, walls, floors, roofs or ceilings."
In 2005, Cali filed a lawsuit against Merrimack
asking the court to declare that Merrimack
was obligated to provide coverage. According to Cali, the collapse
occurred because decayed wood beneath the foundation created an open space in
the soil. This, Cali
argued, constituted "hidden decay," which was a condition covered by
the policy. The lower court agreed with Cali;
Merrimack
appealed.
On appeal, the Supreme
Court, Appellate Division, Second Department, New York, found that the exclusion clearly and
unambiguously applied to Cali's
property loss. According to the court, the exclusion addressed damage caused
directly or indirectly by "[e]arth movement,
meaning earthquake; landslide; mine subsidence; mudflow; earth sinking, rising
or shifting." "Earth movement" was excluded "regardless of
any other cause or event contributing concurrently or in any sequence to the
loss." In the case of Cali's
property damage, even if the wood decay caused the void in the soil, the damage
itself was caused by "earth movement" and was therefore excluded
under the policy.
The decision of the lower
court was reversed, and the case was remanded for entry of judgment in favor of
Merrimack Mutual.
Cali vs. Merrimack Mutual Fire Insurance
Company-Supreme Court, Appellate Division, Second Department, New York-August
14, 2007-43 Appellate Division Reporter 3d 415