Ninth Circuit Finds that “Subsidence Exclusion” Bars Coverage for Landslide Loss

The Ninth Circuit Court of Appeals recently issued an unpublished opinion in Atain Specialty Insurance Company v. JKT Associates, Inc., Case No. 20-16366 (9th Cir., March 11, 2022), finding that a liability policy’s “Subsidence Exclusion” barred coverage for a lawsuit arising out of a landslide. 

In Atain, the insured JKT was hired by a homeowner to perform landscape and hardscape work on her home.  Several years later, a catastrophic landslide occurred,  causing the rear of the property to slide downhill by 15 feet.  Several lawsuits were filed against JKT.  JKT tendered the suits to its insurer, Atain.  Atain agreed to defend JKT under a reservation of rights.   Subsequently, Atain filed a coverage action against JKT, seeking a declaration that there was no coverage as well as reimbursement of the defense costs it had paid.  The district court granted summary judgment to Atain, concluding that JKT’s liability under the suits was not covered by Atain policy because coverage was unambiguously precluded by the “Subsidence Exclusion.”  The Ninth Circuit agreed with the district court, and affirmed the judgment. 

The Subsidence Exclusion provided, in relevant part:   

This insurance does not apply and there shall be no duty to defend or indemnify any insured for any “occurrence”, “suit”, liability, claim, demand or cause of action arising, in whole or part, out of any “earth movement.” This exclusion applies whether or not the “earth movement” arises out of any operations by or on behalf of any insured.

 “Earth movement” includes, but is not limited to, any earth sinking, rising, settling, tilting, shifting, slipping, falling away, caving, erosion, subsidence, mud flow or any other movements of land or earth.

The Ninth Circuit held that landslide is an “earth movement,” and therefore the plain terms of the exclusion barred any coverage for any claim “arising, in whole or part,” from the landslide or from any “settling” or “slipping” that preceded that landslide, regardless of the cause of the landslide.   The Court noted that there could be coverage only if either of the suits sought redress for non-landslide damages, which they did not. 

JKT attempted to point to an allegation that, prior to the landslide, JKT’s negligence “result[ed] in changes in drainage patterns on the Property and the unwanted accumulation of water in the backyard.”  The Court, however, found that there was nothing in that allegation that supported an inference that the accumulation of water itself produced an injury separate from the land movement.   Rather, the complaint stated that the excess water made it more susceptible to failure, which tied it back to the earth movement.  Thus, the Court found there was no possibility of coverage, and no duty to defend or indemnify JKT.  

Although Atain is unpublished, the opinion provides valuable guidance on how courts may analyze this issue in the future. 

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About The Property Insurance Law Observer
For more than four decades, Cozen O’Connor has represented all types of property insurers in jurisdictions throughout the United States, and it is dedicated to keeping its clients abreast of developments that impact the insurance industry. The Property Insurance Law Observer will survey court decisions, enacted or proposed legislation, and regulatory activities from all 50 states. We will also include commentary on current issues and developing trends of interest to first-party insurers.
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