Friday, April 17, 2015

U.S. District Court holds that exclusion for earth movement does not apply to damages from burst pipe

A ceiling pipe in a warehouse owned by Espedito Realty burst. The break was not noticed for several days. The water pooled against a wall and eventually seeped down between the concrete floor and exterior wall. As a result, the sub-base below the concrete floor subsided, and the warehouse floor sank.

Espedito's insurer, National Fire Insurance Company of Hartford, paid some of the damages, but it refused to pay for the repair of the sunken floor. It asserted that an exclusion for "earth movement" applied.

The earth movement exclusion excludes coverage for damages arising from earthquake, landslide, mine subsidence, volcanic eruption, and "earth sinking, rising or shifting, including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty."

Espedito's experts opined that water from the broken pipe penetrated the ground underneath the floor, resulting in a subsidence of wasting away of the soil that caused the floor to sink.

National Fire argued that the cause of the earth movement was irrelevant.

In Espedito Realty, LLC v. Nat'l Fire Ins. Co. of Hartford, __ F. Supp. 2d __, 2012 WL 1014176 (D. Mass.) the court held that the exclusion does not apply:

The unavoidable fact is that pipes burst rather frequently. It is a
rare property owner who has not dealt with the problem, or at least suffered
anxiety over the possibility, and it is hardly intuitive that an "earth
movement" exclusion would bar coverage for the homely situation where a pipe
bursts and a floor sinks as a result. No objectively reasonable insured
reading the policy would think so, especially when the only reference to the
impact of water is to "water flowing underground." If the policy truly
intended to cover this commonly recurring situation, it should have said