EARTH MOVEMENT EXCLUSION APPLIED TO DAMAGED BUILDING

Commercial Property	Sinkhole Collapse
Earth Movement	Building Collapse

Rick and Rebecca Ruede owned West Coast Auto Body, Inc. (West Coast) and their building was insured with Truck Insurance Exchange (TIE). Heavy rains in 2006 caused significant rain pooling in a culvert running near the building. A variety of actions taken by the city of Florence to remove water from the culvert resulted in sand and earth being washed away from the Ruede’s building. This caused voids under the building slab. The slab sank seven inches into the void causing the walls to separate from the foundation.

The Ruede’s filed a claim with TIE requesting that it not only repair the building but also cover the cost to repair the underground portion of the culvert, excavate and refill the voids beneath the building, and install piers and support beneath the building to prevent it from further settling and shifting. TIE denied the claim because of the Earth Movement exclusion in the policy.

The Ruede’s then brought suit against TIE and others. They argued that the exclusion did not apply. The court agreed with TIE that the earth movement exclusion applied to this loss.

Ruede’s appealed the case arguing that coverage was available in three parts of the policy. First they argued that the earth movement exclusion did not apply because the earth movement was the result of human actions and not natural actions. Next they argued that if the earth movement exclusion was found applicable, that the sinkhole collapse exception applied to their loss. Their final argument was that the collapse additional coverage in their policy should cover the loss.

The appellate court determined that none of the Ruedes’ arguments were valid. It noted the following:

• Human-activity earth movement is part of the earth movement exclusion.
• The sinkhole collapse exception is limited to earth sinking into underground empty spaces created by the action of water on limestone or dolomite so it did not apply.
• The additional coverage for collapse did not apply because there was no abrupt falling or caving in as required in the coverage definition.

The appellate court affirmed the trial court’s grant of summary judgment in favor of TIE.

Court of Appeals of Oregon. Rick L. Ruede and Rebecca Ruede, husband and wife; and West Coast Autobody, Inc., an Oregon corporation, Plaintiffs-Appellants v. City of Florence, a municipal corporation; Kalberer Properties, LLC, an Oregon limited liability corporation; Abre, LLC, an Arizona limited liability company; Abby’s, Inc., an Arizona corporation, Defendants, and Truck Insurance Exchange, a Farmers Insurance Company, Defendant-Respondent. 160704170; A137660. Argued and Submitted June 30, 2009. Decided Oct. 28, 2009. 231 Or.App. 435, 220 P.3d 113