A current federal determination out of Connecticut, Dalmac Realty LLC v. Scottsdale Insurance coverage Firm, 1 completely captures how fashionable open perils, aka “all threat” property insurance coverage, has drifted from its unique function to broadly cowl towards sudden and unintentional loss. I counsel that for any policyholder attempting to learn the insurance coverage contract, it has grow to be a labyrinth of exclusions that deny protection for exactly these occasions.
Dalmac Realty owned a modest condo constructing in Vernon, Connecticut. A water line burst underneath the construction, flooding the soil round its help columns and inflicting the muse to settle and the principle ground joist to break down. It was, by all accounts, a sudden and catastrophic occasion. The constructing was condemned that very same day. But when the proprietor turned to Scottsdale Insurance coverage for assist, the insurer’s engineers redefined a plumbing failure into “soil consolidation.” From there, it was a brief and predictable leap to invoke the earth motion and settling exclusions and to disclaim protection totally.
The courtroom agreed, granting abstract judgment to Scottsdale. The courtroom’s reasoning was scientific. Each consultants (together with the policyholder’s) agreed that soil consolidation occurred on account of the damaged water pipe. The coverage excluded injury from earth sinking or shifting, together with soil situations attributable to “the motion of water underneath the bottom floor.” And since the coverage contained an anti-concurrent trigger clause, stating the exclusion utilized “no matter another trigger or occasion that contributes concurrently or in any sequence to the loss,” the courtroom discovered that even when a damaged pipe began the chain response, protection nonetheless evaporated.
I’m sure that the policyholder and lots of others would notice that “water injury” is a specified reason for loss underneath the coverage. I’m sure that almost all would say that the busted pipe and ensuing water injury brought about the earth motion. However that worrying anti-concurrent causation language, which was positioned into many insurance coverage insurance policies within the Nineties, appears to be the trump exclusionary language that insurers depend on to keep away from cost.
This ruling is troubling for the explanations famous in a previous weblog, Is Pipe Failure Leading to Basis Harm from Washout Coated? Coverage Type and Jurisdiction is Essential. The undisputed proximate trigger was a burst water pipe. This can be a traditional “specified reason for loss” underneath most insurance policies. But the insurer efficiently pivoted the main focus away from what triggered the injury to what the water later did underground. The regulation, as interpreted right here and adopted in lots of jurisdictions, permits insurers to flee protection just by tracing the mechanics of loss one step additional again into the filth. It’s a triumph of semantics over substance.
We must always pause to ask: If a policyholder can not get better when a typical peril like a burst pipe saturates the soil and causes collapse, what sensible that means does “water injury protection” even maintain? This determination, like comparable ones nationwide, invitations insurers to use anti-concurrent clauses as catch-all shields relatively than as restricted exceptions. It’s yet another instance of how anti-concurrent language, usually buried deep within the advantageous print, can nullify the very protection the policyholder thought they purchased.
But there are classes right here for insurance coverage protection nerds. First, the shape issues. The Dalmac coverage used the ISO business property kind, the place “earth motion” and “settling” are broadly outlined and linked to the anti-concurrent clause. Different kinds, together with some home-owner or surplus strains kinds, deal with these in a different way. Second, claims professionals should doc the sequence of occasions with precision: Was the injury from speedy washout, or from gradual soil consolidation after the water dispersed? The excellence might be the distinction between full restoration and none in any respect. Third, these representing policyholders should push again towards the lazy conflation of “earth motion” with “any motion of earth.” In some insurance policies, that phrase was by no means meant to embody a localized, man-made plumbing failure. It was meant for pure or geological shifts.
The actual instructing second from Dalmac is not only authorized. Insurance coverage guarantees safety within the face of calamity. Insurance coverage educator Invoice Wilson reminds us that the aim of insurance coverage is to supply protection. When that promise dissolves right into a technical debate about how moist filth behaves after water from a burst pipe touches it, the insurance coverage product has misplaced its function. It’s no surprise that individuals are beginning to query whether or not it’s worthwhile to even buy property insurance coverage.
Thought For The Day
“Authorized language must be the servant of justice, not its grasp.”
— Discovered Hand
1 Dalmac Realty v. Scottsdale Ins. Co., No. 3:24-CV-00942 (D. Conn. Oct. 30, 2025).