A latest federal choice out of Connecticut, Dalmac Realty LLC v. Scottsdale Insurance coverage Firm, 1 completely captures how trendy open perils, aka “all threat” property insurance coverage, has drifted from its unique function to broadly cowl in opposition to sudden and unintended loss. I recommend that for any policyholder making an attempt to learn the insurance coverage contract, it has change into 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 beneath the construction, flooding the soil round its help columns and inflicting the inspiration to settle and the principle flooring 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 fully.
The court docket agreed, granting abstract judgment to Scottsdale. The court docket’s reasoning was medical. Each specialists (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 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 court docket 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 word that “water injury” is a specified reason for loss beneath the coverage. I’m sure that the majority would say that the busted pipe and ensuing water injury triggered 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 Lined? Coverage Kind and Jurisdiction is Essential. The undisputed proximate trigger was a burst water pipe. It is a traditional “specified reason for loss” beneath 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 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 that means does “water injury protection” even maintain? This choice, like related ones nationwide, invitations insurers to take advantage of anti-concurrent clauses as catch-all shields quite than as restricted exceptions. It’s yet one more instance of how anti-concurrent language, usually buried deep within the fantastic 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 industrial 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 a different way. Second, claims professionals should doc the sequence of occasions with precision: Was the injury from fast washout, or from gradual soil consolidation after the water dispersed? The excellence will 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 true instructing second from Dalmac isn’t just 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 function. It’s no surprise that persons 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).
