A current federal resolution 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 authentic objective to broadly cowl in opposition to sudden and unintended 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 residence constructing in Vernon, Connecticut. A water line burst beneath the construction, flooding the soil round its assist 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 medical. Each specialists (together with the policyholder’s) agreed that soil consolidation occurred because of the damaged water pipe. The coverage excluded harm from earth sinking or shifting, together with soil situations brought on by “the motion of water beneath the bottom floor.” And since the coverage contained an anti-concurrent trigger clause, stating the exclusion utilized “no matter some other 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 plenty of others would be aware that “water harm” is a specified reason for loss beneath the coverage. I’m sure that almost all would say that the busted pipe and ensuing water harm 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 Injury from Washout Coated? Coverage Type and Jurisdiction is Necessary. The undisputed proximate trigger was a burst water pipe. This can be a basic “specified reason for loss” beneath most insurance policies. But the insurer efficiently pivoted the main focus away from what triggered the harm 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 dust. It’s a triumph of semantics over substance.
We should always pause to ask: If a policyholder can’t get better when a typical peril like a burst pipe saturates the soil and causes collapse, what sensible which means does “water harm protection” even maintain? This resolution, 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, typically buried deep within the positive 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 varieties, together with some house owner or surplus strains varieties, deal with these in another way. Second, claims professionals should doc the sequence of occasions with precision: Was the harm from instant 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 in opposition to 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 dust behaves after water from a burst pipe touches it, the insurance coverage product has misplaced its objective. It’s no marvel 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.”
— Realized Hand
1 Dalmac Realty v. Scottsdale Ins. Co., No. 3:24-CV-00942 (D. Conn. Oct. 30, 2025).