Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—Mont. Sup. Ct.: Damage caused by boulder fell within policy’s ‘earth movement’ exclusion, (Jul 20, 2016)

By John W. Scanlan, J.D.

Damage caused by a falling boulder to a Montana vacation cabin was properly excluded by an express policy exclusion for "earth movement," the Montana Supreme Court ruled in affirming a trial court decision. In addition, the insurer’s denial of coverage did not constitute an unfair or deceptive trade practice (Parker v. Safeco Insurance Co. of America, July 19, 2016, McGrath, M.).

A Safeco expert found a "significant amount of soil remnants" in the place where the boulder dislodged from the cliff, and opined that expansion of soil and water in cracks in the rock caused it to fall. An expert for the insured agreed that the fall was caused by the freeze-thaw process, but observed "infilling from weathered granitic gneiss" rather than soil at the site. Safeco notified the insured that it was denying his claim under the policy’s exclusion for "earth movement." He brought claims for breach of contract and for damages under Montana’s Unfair Trade Practices Act against Safeco. The district court granted Safeco’s motion for summary judgment, determining that the policy language was not ambiguous and that it clearly excluded coverage for this incident. The insured appealed.

Earth movement. The claim was properly denied based upon the policy’s express exclusion for "earth movement." The term "earth" includes more than just garden soil, and reasonable people recognize that rocks comprise part of the Earth’s surface. There was no basis in the policy language drawing a distinction between rocks and soil. The exclusion, which was contained in a section of the policy entitled "BUILDING PROPERTY LOSSES WE DO NOT COVER," defined "earth movement" as the "sinking, rising, shifting, expanding or contacting of earth," and stated that this term included but was not limited to events such as earthquake, mudslide, subsidence, erosion, lava flows, and others. Although the insured argued that there had been no "earth movement" because the damage was caused by a large rock, the clear intent of the policy was to broadly exclude coverage for any and all types of earth movement. The fact that the district court had to consider the terms of the policy in reaching its decision did not mean that the policy language was ambiguous.

Unfair/deceptive trade practices. The denial of coverage under the policy’s earth movement exclusion was not an unfair and deceptive practice. The insurer’s expert promptly investigated the incident and the company gave the insured all the information it had as it became available. It properly denied the claim based upon an express policy exclusion and notified the insured of its determination, and did not change its initial statement to him regarding the exclusion of coverage.

The case is No. DA 15-0528.

Attorneys: Jory C. Ruggiero (Western Justice Associates, PLLC) for J. Russell Parker. Brooke B. Murphy (Matovich, Keller & Murphy, PC) for Safeco Insurance Co. of America.

Companies: Safeco Insurance Co. of America

Cases: StateUnfairTradePractices MontanaNews