In Pioneer Tower Owners Assn. v State Farm Fire & Cas. Co. (April 2009), State Farm insured a building against “accidental direct physical loss.”  The building suffered cracks and other damage as a result of an excavation on an adjoining lot.  State Farm refused to pay, relying on an “earth movement” exclusion.  The Court of Appeals held that the “earth movement” exclusion did not unambiguously apply to excavation, and would not apply the exclusion to preclude coverage.

More recently, in Bentoria Holdings, Inc. v. Travelers Indemnity Company (Oct. 2012), the Court of Appeals revisited the issue and came to a different conclusion based on the specific wording of the exclusion.  The facts in Bentoria Holdings were virtually identical to the facts in Pioneer.  However, the “earth movement exclusion” in Bentoria Holdings had one additional sentence that was absent in the Pioneer policy.  The Bentoria Holdings policy stated that it would not pay for loss or damage caused by “earth movement” “whether naturally occurring or due to man made or other artificial causes.”  While the plaintiff in Pioneer successfully argued that the “earth movement” exclusion did not clearly exclude “excavation–the intentional removal of earth by humans,” the same argument could not be made in Bentoria Holdings since the policy specifically excluded “man made” earth movement.

The moral of this case is that even though application of an exclusion may have been shot down by courts in the past, when there is any distinction in the policy language it can make all the difference.

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