Earth Movement Clause not Ambiguous
The Tenth Circuit has affirmed a summary judgment in favor of State Farm, which held that the earth movement exclusion is not ambiguous. In Davis-Travis v. State Farm Fire & Casualty Co, a pipe in the bathroom had burst and flooded the house. An inspection revealed damage to the flooring and baseboards as well settlement damage to the residence. The settlement damage was determined to have been caused by movement of the clay under the foundation. State Farm covered the portion of the claim related to interior water damage but denied the portion related to the foundation movements caused by settlement. The denial was based on the policy’s earth movement exclusion, which the court called the lead-in clause. The homeowners sued for breach of contract and bad faith, claiming the policy covered the settlement damages. The trial court found that neither the lead-in clause nor the term earth movement was ambiguous, and granted summary judgment to State Farm, which was affirmed by the Tenth Circuit.
The court notes that in Duensing v. State Farm Fire and Casualty Company, 2006 OK CIV APP 15, 131 P.3d 127, the Oklahoma Court of Civil Appeals construed the identical provisions and found the lead-in clause unambiguous, but found the earth movement clause was ambiguous. The trial court found both clauses unambiguous. The Tenth Circuit noted that the opinion of the Oklahoma Court of Civil Appeals is not precedential. On appeal, the homeowners claimed that the earth movement clause was ambiguous, not the lead-in clause, even though the lead-in clause had triple negatives and other courts had found it ambiguous.
The homeowners claimed the earth movement clause was ambiguous because the term “earth” is not defined in the policy and “earth” could be interpreted to mean many different things, citing Duensing. The court disagreed, stating that “A word in an insurance policy is not ambiguous simply because it is undefined.” When read in context, the word “earth” was not ambiguous. The court states:
The evidence in this case shows that water leaked through the slab of the home to the sub-grade, causing it to swell and then shrink. The policy states, “Earth movement [means] the sinking, rising, shifting, expanding or contracting of the earth, all whether combined with water or not.”
The record is clear that the earth supporting the slab expanded and contracted, as a result of water, from whatever the source, and caused settlement damage. Coverage for this damage was unambiguously excluded by the earth movement clause.
Further, because the term “earth movement” is not ambiguous in context, the court did not reach the issue of bad faith, noting that a determination of liability under the contract is a prerequisite to a recovery for bad faith breach on an insurance contract.
