(Article from Insurance Law Alert, February 2021)
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Applying Colorado law, the Tenth Circuit ruled that an earth movement exclusion unambiguously barred coverage for damage caused by a rockfall. Sullivan v. Nationwide Affinity Ins. Co. of Am., 2021 WL 79765 (10th Cir. Jan. 11, 2021).
Homeowners sustained extensive damage when large boulders dislodged from an outcropping and rolled down a hillside. At least one boulder struck the homeowners’ residence. Nationwide denied coverage under an earth movement exclusion that defined “earth movement” as a “[l]andslide” or “[a]ny other earth movement including earth sinking, rising or shifting,” among other things. The homeowners filed suit, asserting claims for breach of contract, bad faith and declaratory judgment. A Colorado federal district court granted Nationwide’s summary judgment motion. The homeowners appealed and moved to certify several questions of law regarding the exclusion to the Colorado Supreme Court. The Tenth Circuit affirmed the district court decision and denied the motion to certify.
The Tenth Circuit rejected the homeowners’ contentions that a rockfall is not a landslide and that the term “earth” refers to soil, not rock. The court noted that courts in several other jurisdictions have concluded that earth movement exclusions bar coverage for damage caused by rockfalls and predicted that the Colorado Supreme Court would find those cases persuasive. The court reasoned that the catch-all phrase “any other earth movement” evidenced an intention for the exclusion to “be broadly inclusive of all natural materials that comprise the surface of the earth, including rocks and soil.” Additionally, applying Colorado’s reasonable expectations doctrine, the court held that “[i]t would be unreasonable for an ordinary reader to think that damage caused by soil-only and soil-and-rock slide events would not be covered but damage caused by a rock-only slide event would be.”
The Tenth Circuit acknowledged that a different Colorado district court ruled that an earth movement exclusion was ambiguous and therefore did not bar coverage for damage caused by a boulder that rolled down a slope and struck a house, but deemed that decision unpersuasive. See Kresge v. State Farm Fire & Cas. Co., 2012 WL 849973 (D. Colo. Nov. 4, 2012).