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Landslide Exclusion Bars Coverage For Property Damage Caused By City’s Negligence
Insurance Law Update
California Court of Appeal, Fourth Appellate District
In City of Carlsbad v. Insurance Co. of the State of Pa., 180 Cal.App.4th 176 (November 20, 2009), the California Court of Appeal, Fourth District, affirmed a trial court's summary judgment for an insurer that an exclusion in a general liability policy for land subsidence – which was defined to include landslides – was applicable regardless of whether the cause of the subsidence was man-made or otherwise.
Insurance Company of the State of Pennsylvania (ISOP) issued to the City of Carlsbad a general liability insurance policy with a land subsidence exclusion. This exclusion provided that ISOP would defend or pay any claims under the policy “[f]or property damage arising out of land subsidence for any reason whatsoever.” (Italics added). The policy further defined “land subsidence” to mean “the movement of land or earth, including but not limited to, sinking or settling of land, earth movement, earth expansion and/or contraction, landslide, slipping, falling away, caving in, eroding, earth sinking and earth rising or shifting or tilting.” (Italics added).
In March 2005, a hillside adjacent to a condominium complex became saturated with water and failed due to the city’s negligent maintenance of a fire hydrant and waterline. The hillside failure resulted in a landslide that caused extensive damage to the condominium. After the homeowners association of the complex sued the city for the property damage and emotional distress suffered by the residents, the city tendered this matter to ISOP, which undertook the defense of the city under a reservation of rights.
The city settled the lawsuit for $12.6 million and sought indemnity from ISOP. While ISOP reimbursed the city for the personal injury claim, it denied coverage for the property damage claim on the basis of the land subsidence exclusion. The city filed suit and asserted that ISOP should have afforded coverage because the landslide exclusion was ambiguous as to whether it applies to man-made occurrences such as negligent maintenance because the definition for “land subsidence” only lists “natural phenomena.”
In affirming the superior court’s summary judgment in favor of ISOP, the appellate court found that the exclusion, which bars losses for landslides “for any reason whatsoever,” plainly and precisely communicated to the city that the perils of land subsidence, regardless of the cause, excluded coverage under policy.
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