According to a recent ruling by a New York appellate court, coverage for excavation damage is precluded by the policy’s earth movement exclusion. In 3502 Partners LLC v. Great American Insurance Co. of New York, Case No. 2021-03449 (N.Y. App. 1st Dep’t Apr. 21, 2022), an insured sued its insurer under a first-party policy, alleging in its complaint that its property sustained damage as a direct result of excavation work at an adjacent lot.

Based on the allegations in the complaint, the insurer filed a motion to dismiss, asserting that coverage was precluded by the policy’s earth movement exclusion. The exclusion precluded coverage for “earth movement,” including “earth sinking (other than sinkhole collapse), rising or shifting including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty,” and applied “regardless of whether [the earth movement] is caused by an act of nature, man-made or is otherwise caused.” In response to the insurer’s motion to dismiss, the insured filed an affidavit asserting that the property damage was also caused by “the vibrations caused by the construction work,” a covered cause of loss.

The court held that the insured’s allegations placed the damage to its property within the earth movement exclusion. In doing so, the court rejected the insured’s contention that the complaint had to use the words “earth movement” for the exclusion to apply, reasoning that an excavation, by definition, is “the intentional removal of earth by humans.” The court further held that, even if vibrations caused the damage, the excavation was still a contributing cause of the damage, and the policy stated that there would be no coverage for loss or damage caused by earth movement “regardless of any other cause or event that contributes concurrently or in any sequence to the loss.” Given the broad language of the earth movement exclusion, the court held it unambiguously encompassed property damage caused by excavation work.

Based on the court’s holding in 3502 Partners, property damage caused by excavation work is precluded from coverage by the earth movement exclusion. If the exclusion also contains an anti-concurrent causation clause, coverage is precluded, even if a covered cause contributed to the loss.