The Ninth Circuit finds that “drop-out” cover bars for landslide loss

The Ninth Circuit Court of Appeals recently issued an unpublished opinion on Aten Professional Insurance Company v. JKT Associates, Inc. , Case No. 20-16366 (9th Cir., March 11, 2022), finding that the “support exclusion” liability policy prevented coverage of a lawsuit arising from a landslide.

in comeInsured JKT was hired by the homeowner to perform landscaping and hardscape works in her home. Several years later, a catastrophic landslide occurred, causing the back of the property to slide 15 feet down the hill. Several lawsuits have been filed against JKT. JKT provided the allowances to its insurance company, Atain. Aten agreed to defend JKT under reservation of rights. Subsequently, Atain filed a coverage suit against JKT, seeking a declaration of no coverage as well as reimbursement for its defense costs. The District Court issued a summary judgment to Atain, concluding that JKT’s liability under the claims was not covered by Atain’s policy because coverage was unequivocally excluded by the Landing Exclusion. The Ninth Circuit agreed with the District Court and confirmed the ruling.

Introduce the landing exception, in the relevant part:

This insurance does not apply and there will be no duty to defend or indemnify any Insured from any “event,” “claim,” liability, claim, demand or cause of action arising, in whole or in part, from any “ground movement.” This exclusion applies whether The “Land Movement” arose out of any operations by or on behalf of any Insured or not.

“Earth movement” includes, but is not limited to, any ground sinking, rise, settling, tilt, shift, slip, fall, hollow, erosion, subsidence, mudflow, or other ground or ground movements.

The Ninth Circuit considered a landslide to be “ground movement,” and thus the explicit terms of the exclusion preclude any coverage of any claim “arising, in whole or in part,” from a landslide or from any “settlement” or “slip” that preceded such a landslide, regardless About the cause of the landslide. The court noted that there could only be coverage if either lawsuit sought compensation for damages not caused by landslides, which it did not.

JKT attempted to point to the claim that JKT’s negligence, prior to the landslide, was “the result of[ed] in changes in drainage patterns on the property and unwanted accumulation of water in the backyard.” However, the court found that there was nothing in this claim to support the inference that the accumulation of water itself resulted in injury separate from the movement of the land. Instead, the complaint indicated It concluded that the excess water made it more vulnerable to failure, linking it to the movement of the earth.The court thus found that there was no possibility of coverage, and no duty to defend or compensate the JKT.

despite come Unpublished, the opinion provides valuable guidance on how courts can analyze this issue in the future.

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