In Headley v. Stillwater Insurance Group (unreported), the trial court granted summary judgment to an insurer in a case involving coverage for the collapse of a home foundation. The policy at issue contained water and earth movement exclusions with an anti-concurrent clause (“ACC”). Such a clause precludes coverage for losses resulting in any manner from and excluded cause. The lower court held that the water and earth movement exclusions barred coverage for the loss due to the ACC clause. On appeal, the Appellate Division affirmed the decision and the insured’s case was dismissed.
The insured’s home suffered property damage after the foundation of the house collapsed inward, allowing water and earth to enter the basement. The insurer retained the services of and independent engineer to determine the cause of the loss. After inspecting the property, the engineer determined that the foundation wall was displaced inward due to lateral pressure that was the result of both earth pressure and hydrostatic pressure acting on the wall. He also noted that the concrete blocks of the foundation’s walls had a decayed hollow center and lacked any structural reinforcement to protect against the lateral forces acting against it. The insurer denied the claim on the basis that the water and earth movement exclusions barred coverage due to the policy’s ACC.
After the denial, the insured hired a public adjuster, who issued a rebuttal report to the engineer’s findings. He concluded that the collapse was caused by earth pressure along with the hidden decay of the rebar reinforcement inside the block wall of the foundation. He claimed that there was no evidence that hydrostatic pressure contributed to the collapse. He further opined that the loss was a covered event because the lateral soil pressure caused the decayed blocks to fail, resulting in the collapse. The public adjuster was not a licensed engineer.
The insured brought suit against the insurer for breach of contract, bad faith, fraud and negligence, among other counts. During discovery, the public adjuster testified in his deposition that water caused the decay of the concrete blocks. He posited that the moisture from the soil migrated into the blocks and caused the rebar to rust and lose its strength. The weight of the earth pushing against the foundation then overcame the structural inability of the rebar to restrain it. The insurer moved for summary judgment, arguing that the public adjuster admitted that water seepage was a contributing cause of the loss, which strengthened their argument that the water and earth movement exclusions barred coverage due to the ACC.
In a written opinion, the trial court identified that the dispute between the parties focused on whether the experts’ findings fell within the parameters of the language of the policy and its exclusions. The court then found that the policy clearly stated that certain “excluded perils” were not covered and that water and earth movement were both included within these perils. He also noted that both were anti-concurrent perils, so that if either of them contributed to the damages along with covered perils, the claim would be excluded. He went on to hold that even if the experts’ conclusions as to the cause of the collapse differed, there was still no dispute that water seepage into areas of the home was critical in causing the collapse. The court held that the ACC thus precluded coverage and granted summary judgment to the insurer.
On appeal, the Court agreed with the trial court that there was no meaningful difference between the engineer and the adjuster’s view of the cause of the collapse. The Court recognized that both experts identified water as a cause of the foundation’s failure, which caused the earth to breach the foundation wall of the insured’s property. Looking at the facts most favorably to the insured, the Court found that it was clear the policy’s exclusions for water and earth movement applied and that there was no coverage under the ACC. The insured’s argument that decay, a covered cause of loss, provided coverage for the loss was rejected by the Court. While it acknowledged that decay was involved, the Court found that the covered peril did not overcome the fact that there were concurrent uncovered causes of loss.
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