City Causes Landslide, Appellate Court Holds No Liability Insurance Coverage

January 5, 2010, by Meyers Nave

A common liability insurance policy exemption has barred a city from seeking indemnification for land subsidence damage the city caused. In the case, City of Carlsbad v. Insurance Company of the State of Pennsylvania, the City of Carlsbad paid approximately $12 million to residents whose homes were damaged by a landslide caused by the negligent maintenance of the City's water system.

The City then sought indemnification for the damages it paid from its liability insurer, ICSP . ICSP denied coverage based on a clause in the City's policy which exclud ed coverage for "any property damage arising out of land subsidence for any reason whatsoever." The City then sued ICSP to obtain coverage, but the trial court dismissed the case, and the Court of Appeal reached the same conclusion.

In sum, where a municipality possesses a liability policy with a similar land subsidence damage exclusion, the insurer will probably not cover land subsidence damage caused by the municipality. Read more about the parties' arguments and Court's reasoning here.

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