Court Can’t Rewrite Insurance Policy

A Rockfall is Earth Movement

Bad facts create litigation. When a 2,700 ton mass of rock and earth fell 1,000 feet onto a house killing the occupants and totally destroying the house, garage and a car, insurance coverage was required to ease the pain of the survivors and the bank that issued the mortgage on the house. However, the homeowners policy contained an earth movement exclusion that included landslide.

In Western United Insurance Company, dba AAA Insurance Company v. Janelle Heighton; PHH Mortgage Corporation, and cross claims, United States District Court, D. Utah., 2016 WL 4916785, Case No. 2:14CV435DAK (Filed 09/14/2016), the insurer denied the claim for the replacement of the house and garage.

BACKGROUND

AAA brought this declaratory judgment action regarding insurance coverage for a property destroyed by a rockfall/landslide. In November 2006, AAA had issued a homeowners insurance policy to the property owner, Maureen Morris (Morris). The mortgage Morris secured from Defendant PHH required that she buy and maintain first party property insurance coverage and that the policy name PHH as “loss payee” so that PHH would be paid alongside the named insured in the event of damage to the property.

Morris’ property was located in Rockville, Utah, near Zion National Park. The property sits at the base of a steep slope known as the Rockville Bench, which rises approximately 1,000 feet above the house. On December 12, 2013, a large rock mass detached from the Shinarump Conglomerate cliff capping the Rockville Bench and fell onto the steep slope below the cliff, where it shattered into massive fragments and then rolled and bounced downslope until the rockfall debris reached Morris’ home, totally destroying the home, detached garage, and a car parked in the driveway. Tragically, Morris and her husband were in the home at the time and were killed.

Following the loss, Morris’ daughter and heir, Janelle Leighton, submitted an insurance claim to AAA under the homeowners’ policy. AAA investigated the loss and concluded that, with the exception of some limited personal property coverage, the policy excluded coverage for the remainder of the damage due to an exclusion for earth movement.

The policy’s “earth movement” exclusion is defined in relevant part to include a “landslide, mudslide, or mudflow.” The policy also provides that “earth movement” can include “any other earth movement including earth sinking, rising or shifting, including any natural or artificially created loss of any kind attributable in whole or in part to any movement of the earth or soil, whether on or off of the ‘residence premise,’ that is caused by, resulting from, contributed to or aggravated by rain or snow, including run-off from same.”

There are also policy provisions regarding coverage in the event of collapse. The parties agree that the house and garage collapsed when they were hit by the rockfall/landslide. However, AAA declined coverage under the collapse provisions because that type of coverage does not apply when the collapse results from earth movement.

After AAA denied the claim, PHH challenged the decision. AAA then filed the present declaratory relief action.

DISCUSSION

It is undisputed that a rockfall destroyed the property. However, the parties dispute whether the rockfall in this case is a landslide. Landslide damage is specifically excluded from coverage under the “earth movement” exclusion in the policy. The parties agree that the terms of an insurance policy are construed according to their “plain and ordinary meaning.” The individual provisions of the insurance policy are construed in light of the policy as a whole. Insurers may only exclude from coverage certain losses by using language which clearly and unmistakably communicates to the insured the specific circumstances under which the expected coverage will not be provided.

Utah courts have consistently enforced earth movement exclusions in homeowners’ insurance policies. No Utah appellate court has specifically addressed whether naturally occurring rockfall damage is excluded earth movement under an earth movement exclusion in an insurance policy. However, in Dupps v. Travelers Ins. Co., 80 F.3d 312 (8^th Cir. 1996), the Eighth Circuit held that the ordinary meaning of the term “landslide” includes rocks falling down a bluff.  Relying on the Random House Dictionary, the court stated that “‘landslide’ is defined as the downward falling or sliding of a massive soil, detritus, or rock on or from a steep slope.” The Dupps court held that the policy was not ambiguous as a matter of law because “the only reasonable interpretation of the policy prohibits recovery for rocks which have fallen on the Duppses’ property.”

To assert that a rockfall cannot be considered a landslide, PHH relies on Morris’ application for insurance which asked whether there were “any hazards present [on the property] including flooding, brush, forest fire hazard, landslide, etc.,” or whether there had “been any slipping, sinking or shifting of land, or other earth movement in the area.” Morris answered “no.” PHH surmises that this answer means that Morris did not understand rockfalls to be a type of landslide or that the provision was not clear. However, why Morris answered the question the way she did is unknowable. PHH’s position is pure speculation since she probably would not have stayed in the house had she thought tons of rock would fall on her house from the cliff 1,000 feet above the house.

PHH further asserts that the fact that AAA inspected the property as part of the underwriting process and was aware that the property was located in a high rockfall zone demonstrates that AAA did not believe that the terms rockfall and landslide were synonymous. However, this argument assumes that AAA would not have issued the policy in a high rockfall zone, which is not the case. Insurers frequently issue policies for homeowners insurance in areas where multiple exclusions could apply.

The common understanding of the term landslide includes rocks and soil falling down a slope. The court found nothing ambiguous about the policy’s use of the term “landslide” as an example of earth movement. The court also found nothing ambiguous about whether the term “landslide” would apply to the situation before the court. This is not a case where a single 2,700 ton rock broke off of an overhang and fell directly onto a house below without coming into contact with any other soil or organic materials. The 2,700 ton piece of the bluff broke off, hit a steep slope, and triggered a downward shifting of a mass of rocks and soil toward Morris’ house. This case involves a plain and ordinary example of a landslide.

Ambiguity can only be found in Utah if the plain wording of the policy does not resolve the coverage questions. While this court agrees that insureds should receive as much coverage as possible under an insurance policy, the court cannot, should not, and did not rewrite the policy.

The policy excludes coverage for a landslide and the loss of Morris’ house was caused by a landslide. AAA’s Motion for Summary Judgment was granted.

ZALMA OPINION

It is understandable with such serious damage and death of the insureds that someone, whether heirs or mortgage, would think they have a right to indemnity from the homeowners policy. An insurance policy is a contract where the insurer promises to indemnify its insureds for losses caused by certain enumerated fortuitous risks of loss not excluded. Courts must apply the contract language and should never be tempted, regardless of the needs of the insureds, to rewrite the policy to create coverage that was not purchased.