Having experienced an earthquake of 6.8 magnitude in October 2006, resulting in extensive property damage, many Big Island homeowners would appreciate a policy offering coverage for loss due to earthquake. Earthquake coverage is hard to come by, however, and when it is available, it is expensive.
I recently reviewed an all risk policy purporting to extend coverage for property damage to a development caused by earthquake and other perils on the Big Island. The policy limits were $15,000,000, but the deductible for earthquake damage was $750,000. It was questionable whether loss due to earthquake would ever be covered by the policy, however.
Although the policy covered loss caused by earthquake, it did not cover loss caused by "earth movement." "Earth movement" included loss caused by "landslide, mudslide, mudflow, rockslide, and earth sinking, rising, shifting or settling." How could damage caused by earthquake not include earth sinking, rising, shifting or settling? The policy also included anti-concurrent cause language. If the loss was caused concurrently or sequentially by both a covered peril (i.e., earthquake) and a non-covered peril (i.e., "earth movement"), the loss attributable to the non-covered peril was not insured. Therefore, if an earthquake caused property damage, the insurance company would undoubtedly argue some, or most, of the loss was caused by "earth sinking, rising, shifting or settling," thereby eliminating coverage for such loss.
My research uncovered only a couple of cases addressing policies that excluded "earth movement" other than earthquake. The policy in a California case, Strubble v. United Services Automobile Assoc., 110 Cal. Rptr. 828 (Cal. Ct. App. 1973), excluded loss due to earth movement, other than earthquake. In Strubble, an earthquake caused a landslide, which damaged the policyholder's home. The insurance company argued even though an earthquake occurred, loss caused by the landslide was not covered. The California Court of Appeal relied on the efficient proximate cause doctrine and found coverage because the cause of the landslide that destroyed the home was the included peril of earthquake.
The Big Island policy I reviewed would not have allowed the same result as in Strubble. Under the Big Island policy, damage due to a landslide would not be covered, even if the earthquake caused the landslide. To the extent possible, an apportionment would have to be made between damage caused by the landslide and damage caused by the earthquake.
The Big Island policy also excluded loss caused by fire, weather, subsidence, flood, leakage of water, and the negligent act or omission of any. Further, coverage for such things as walks, walkways, foundations of buildings below ground surface, and retaining walls were excluded.
Therefore, Hawaii residents are in need of earthquake coverage, but finding a comprehensive, affordable policy is not easy.
