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A federal district court in Florida ruled an earth movement exclusion barred insurance coverage for structural damage to a home after about 4,000 gallons of water leaked from a water heater.

The Case

Barbara and Charles Hatch asserted about 4,000 gallons of water flooded their home after the leak. They notified their insurer, GeoVera Specialty Insurance Co., which inspected the property, hired a company to mitigate the damage and issued a payment to the Hatches to repair the property.

When the Hatches began demolition and repairs, they discovered a crack in the floor of the master bedroom closet. They then retained Guardian Inspection & Information Services to perform an inspection, and GeoVera retained Summit Engineering Consulting Inc., to perform its own inspection. Both reported additional damage to the foundation and structure of the home.

GeoVera subsequently denied coverage, concluding the damage was excluded under the earth movement exclusion in its policy.

The Hatches sued GeoVera, and the parties moved for summary judgment.

The Decision

The district court ruled the structural damage to the Hatches' home was excluded as the company claimed and GeoVera was entitled to summary judgment on that portion of the Hatches' claim.

In its decision, the district court explained that, under the policy, any damage caused by the accidental discharge of water from the hot water heater, including the structural damage to the Hatches' home, was covered “unless otherwise excluded.”

The district court added the “logical reading” of the policy was that if coverage was excluded under the earth movement exclusion, it was “otherwise excluded” and, therefore, whether the structural damage was covered turned on the issue of whether it was caused by earth movement.

The district court then pointed out that all of the expert opinions — including the opinions of the Hatches' experts — agreed the structural damage was caused by the movement of the earth beneath the foundation, either by compression or densification of the soil or by the erosion.

The district court ruled water from the hot water heater did not directly cause the structural damage. Rather, there was an “intervening step” — the water caused the earth movement, and “the earth movement caused the structural damage.”

As “clearly set forth” in the policy, the district court said it did not matter whether the earth movement was caused by natural forces or otherwise; the earth movement caused the structural damage and therefore it was not covered.

The district court rejected the Hatches' contention that it should apply the concurrent cause doctrine, which applied where “independent perils” converged and no single cause could be considered the sole or proximate cause of a loss. The district court pointed out that the GeoVera policy contained an anti-concurrent cause provision that stated a loss caused by earth movement was “excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.”

Accordingly, the district court concluded, even if the water from the hot water heater was a concurrent cause of the damage, it was excluded under the policy.

The case is Hatch v. GeoVera Specialty Insurance, No: 6:17-cv-2142-Orl-41DCI (M.D. Fla. June 18, 2019). Attorneys involved include: For the Hatches, Christine Marie Deis, Matthew Struble, Lead attorneys, Struble P.A., Fort Lauderdale. For GeoVera, Burke George Lopez, Emily Chalela Ayvazian, Kristina L. Marsh, Lead attorneys, Hinshaw & Culbertson, Tampa.

Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. Meyerowitz is the Director of the Insurance Coverage Law Center and editor-in-chief of journals on insurance law, banking law, bankruptcy law, energy law, government contracting law, and privacy and cybersecurity law, among other subjects. Contact him at smeyerowitz@meyerowitzcommunications.com.