In a big victory for a property owner who brought a breach of insurance contract lawsuit against their insurance company (State Farm), New York's highest court held invalid State Farm's disclaimer of coverage for the building owner's claims that they sustained damage to the foundation when improper excavation work that was done on the immediately adjacent lot caused the earth beneath the plaintiff's building to slide away.  In its disclaimer, State Farm argued that they were not required to pay on the claim because the insurance policy contained a provision that excluded coverage for any claim arising out of "earth movement," such as the shifting, contracting or sinking of earth, including from earthquake or erosion. Conversely, the plaintiff apartment building asserted that this exclusion was at best vague, and in any event inapplicable to these facts, because unlike the examples in the policy describing "earth movement," this case involved a contractor's purposeful excavation of property. In affirming the trial and appellate courts' finding for the plaintiff, the Court of Appeals adhered to the general rule that "all ambiguities in a contract must be construed against the drafter," which in this context, is the insurer. Thus, since the specific type of claim in this case was not clearly and unambiguously excluded from coverage, State Farm was obligated to pay the claim. A copy of the Court's opinion can be read by clicking on this link. This story is yet another example of why you should never accept an insurer's disclaimer or denial of coverage at face value; it may pay to fight them.

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