Business Law Civil Litigation Legal Topics

Loose Language Sinks Coverage

Most of us never think about the distinctions between words like “mudflow” and “landslide” until a storm hits, damaging our home or business, and we are frantically trying to decipher our insurance policy. That’s when we learn how critical policy wording can be — so critical that it can mean the difference between a covered claim and no coverage at all.

Here’s the thing we usually don’t know until it happens to us: Flood policies cover mudflow, but exclude landslide or land subsidence, saturated soil mass, or slope failure. It is the nature of the event and appearance of the damaging material that usually determines coverage. Yet, the words can often get in the way.

The Standard Flood Insurance Policy (SFIP) covers mudflow, defined as (44 CFR pt 61, App A(1), Sect II.B.19)

[a] river of liquid and flowing mud on the surface of normally dry land areas, as when earth is carried by a current of water. Other earth movements, such as landslide, slope failure, or a saturated soil mass moving by liquidity down a slope, are not mudflows.

The SFIP also covers “collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of water exceeding anticipated cyclical levels that result in a flood” (as defined in 44 CFR pt 61, App A(1), Sect II (Definitions) A.1.a).

By contrast, the SFIP specifically excludes coverage for other types of land movement, including earthquakes and landslides. 44 CFR pt 61, App A(1), Sect V (Exclusions) C.

What all this language means is that coverage comes down to the consistency of the flow: Fast moving mud that is flowing like a “river” is covered, but a slower landslide moving by force of gravity is not. Also, a slide movement that moves and comes to rest will generally not be covered under the SFIP.

Counsel for both the insured and the insurer need to have a conceptual grasp of the difference between these occurrences, and possibly some informed expert guidance, to argue coverage for or against mudflow, as opposed to landslide losses.

It is very important that both sides always speak carefully with words that do not undermine their position. The lax usage of language in letters or speech of the terms “landslide” or “mudflow,” or descriptions such as “mud flowed into the house” or “river of earth,” can affect the ultimate determination of coverage.

For everything you need to know about flood insurance, check out CEB’s new book California Property Insurance: Law and Litigation. My discussion of this new book with its contributing editor, Tim Sullivan, is now up on YouTube. On remedies for landslide and subsidence, go to CEB’s California Real Property Remedies and Damages, chap 12.

© The Regents of the University of California, 2011. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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