FEDERAL DISTRICT COURT GRANTS INSURER’S MOTION FOR SUMMARY JUDGMENT FINDING EARTH MOVEMENT AND WATER EXCLUSIONS UNAMBIGUOUSLY APPLIED TO CLAIM

June 28, 2012

Last Monday, Judge David Hittner of the Southern District of Texas, granted Hartford Lloyd’s Insurance Company’s motion for summary judgment on all claims brought by its insured, Texas Renegade Construction Company, Inc., in Texas Renegade Construction Company, Inc. v. Hartford Lloyd’s Insurance Company, C.A. No. H–11–1730 (S.D. Tex. June 18, 2012) (Hittner, J.).

Hartford insured a commercial building owned by Plaintiff Texas Renegade. A leak was discovered in an underground water pipe connected to a city main and leading to the building that had caused a large pooling of water on the property grounds near the building. Repairs were made and the water leak ceased. Nearly two years later, Plaintiff began noticing foundation and structural damage, which Plaintiff attributed to the underground water leaks. Plaintiff made a claim. Hartford’s outside claims representative inspected the building and concluded that the damages were consistent with and caused by a leak under the ground in the main water supply, which had caused the surrounding soil to heave. Consequently, Hartford denied Plaintiff’s claim, citing various exclusions under the Hartford policy.

On the same day as the inspection of the building by Hartford’s outside claims representative, Plaintiff sued Hartford in state court alleging various claims, including breach of contract and violations of the Texas Deceptive Trade Practices Act and the Texas Insurance Code.  Hartford removed the case to federal court and moved for summary judgment on all contractual and extra-contractual claims.  Plaintiff filed its own motion for partial summary judgment on coverage, which the court denied.

The court found that two of the exclusions Hartford relied upon - the Earth Movement and Water exclusions – unambiguously excluded coverage.  Specifically, the claimed foundation and structural damage to the building was caused by an underground water leak that oversaturated the soil surrounding the building causing it to heave, which then resulted in the claimed foundation and structural damage. The court concluded this series of events fell within the plain language of the Earth Movement and Water exclusions. The court rejected Plaintiff’s contention that these exclusions only applied when the damage is the product of natural events rather than man-made or artificial events such as leaking water pipes. Relying on the exclusions’ lead-in statement that states such losses were excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss, the court found the plain language of the Earth Movement and Water exclusions, combined with the lead-in statement, unambiguously and independently operated to exclude coverage. The court also ruled Plaintiff’s DTPA and Texas Insurance Code causes of action, as well as its other causes of action, failed as a matter of law.

Editor’s Note:  MDJW congratulates Hartford on this summary judgment. Robert Dees, Julie Kirkendall, and Leslie Pitts of MDJW represented Hartford in this matter.