Federal Judge Holds Up “Earth Movement” Insurance Policy Exclusion

On March 16, 2018, an Illinois federal judge ruled that an “earth movement” exclusion in a commercial building’s insurance policy allowed Acuity Mutual Insurance Company to avoid paying the repair costs for damages to its Insureds’ building.

What was this insurance case about?

Back in August 2013, SSV and Temperature Service performed excavation around their property in order to build detached storage. During this process, they discovered what’s called “urban backfill” in the soil around the property. Urban backfill is manmade debris in the soil, such as concrete or asphalt. This debris was found to have caused damage to the building, including cracks in the foundation, steps, and drywall, as well as damage to the building’s windows and doors.

SSV and Temperature Service requested that Acuity, their insurance provider, cover the costs of repairing the building—stabilization, upgrades, and other repairs. Their request was denied and that February the company sued Acuity in Illinois federal court. The basis of the insurance dispute was over the word “commencing” in the policy.

When did the damage commence? Before the plaintiff bought the commercial insurance policy in January 2013 or after? Acuity argued that they did not have to cover the damage if any of the damage commenced before the policy became was put in place. The Insureds argued that if any of the damage occurred within the policy period, Acuity should be responsible. Judge Durkin ruled that the word “commencing” was ambiguous and that there was insufficient evidence of when the damage occurred.

Judge rules in favor of Acuity

After expert studies were performed, a soil analyst concluded this backfill damage came from “differential soil settlement” caused by “building loads and nonuniform soil conditions,” activated by local weather conditions like rain or snowfall.

Judge Durkin interpreted this to match with verbiage in the insurance policy that reads, “We will not pay for loss or damage caused directly or indirectly by… 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 conclusion was that the property had suffered from “earth movement” and was thus not eligible for insurance coverage.

This case is of interest because it illustrates that damage to a building may not be covered by insurance, even if the soil damage and “earth movement” is caused by human intervention.

If you believe you have been the victim of unfair insurance practices, the team at Gilbert Firm can review your situation and explain your legal remedies going forward. Let’s discuss your complaint. Call Tennessee insurance dispute attorneys Clint Scott, Jonathan Bobbitt, or Brandon McWherter at 731-664-1340, or to fill out our contact form. We maintain offices in Nashville, Chattanooga, Memphis, Jackson and Knoxville.