(Article from Insurance Law Alert, March 2019)
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The Supreme Court of Oklahoma deemed earth movement and water exclusions ambiguous based largely on the absence of verbiage relating to man-made causes. Oklahoma Schools Risk Mgmt. Trust v. McAlester Public Schools, 2019 WL 350385 (Okla. Jan. 29, 2019).
A school sustained property damage resulting from the rupture of an underground water pipe. In turn, an insurance cooperative sought a declaration of no coverage based on exclusions relating to earth movement and water damage. A trial court granted the insurer’s summary judgment motion, and an appellate court affirmed. The appellate court found that the property damage was caused by two excluded risks: water and earth movement.
The Oklahoma Supreme Court reversed, deeming the exclusionary language ambiguous. The court noted that the earth movement exclusion listed several naturally occurring events, such as earthquakes and landslides, but did not include “unnatural events,” such as pipe ruptures. With respect to the water exclusion, the court noted that the language did not address natural vs. man-made causes. Further, the court emphasized that unlike other policy exclusions, the two at issue did not include the phrase “however caused.” The court stated: “[g]enerally when an insurer creates specificity in one clause of a policy and then omits it in a similar context, the omission is considered purposeful and should be given meaning.” Finally, the court relied on cases in other jurisdictions that have deemed earth movement exclusions ambiguous in the absence of references to man-made or universal causation.
In a case that involved a different earth movement exclusion, the Mississippi Supreme Court ruled that the exclusion applied to any earth movement, regardless of cause. In Mississippi Farm Bureau Casualty Ins. Co. v. Smith, 2019 WL 1072117 (Miss. Mar. 7, 2019), the earth movement exclusion expressly applied “regardless of any other cause or event contributing concurrently or in any sequence to the loss,” including earth movement “caused by or resulting from human or animal forces or any act of nature.” Deeming this language unambiguous, the Mississippi Supreme Court reversed the trial court’s decision and granted the insurer’s summary judgment motion.