196 F. Supp. 3d 587
E.D. Va.2016Background
- Taja Investments/Taja Construction was renovating a D.C. rowhouse, excavating a crawlspace to create a deeper basement and was required by structural plans to underpin in stages.
- Multiple project participants (engineer, neighboring contractor, excavation subcontractor) warned Taja that underpinning was necessary; the excavation contractor's contract disclaimed responsibility for collapse from lack of underpinning.
- On June 10, 2014 the building’s east wall collapsed; no underpinning had been installed. Taja spent about $142,275 on emergency shoring and estimated repairs at ~$408,000 (excluding new foundation work).
- Peerless (insurer) inspected, retained an engineer who concluded over‑excavation plus lack of underpinning destabilized soil and caused the collapse, and denied coverage asserting two policy exclusions: a workmanship exclusion and an earth‑movement exclusion.
- Taja sued for breach of the insurance policy; both parties filed cross‑motions for summary judgment. The court granted Peerless’s motion and denied Taja’s.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the policy’s workmanship exclusion bar coverage for the wall collapse? | Taja contended the collapse (a covered peril) is distinct from the excluded defective workmanship, so the ensuing‑loss clause restores coverage for collapse damage. | Peerless argued the collapse was caused by Taja’s own excavation and failure to underpin, so the workmanship exclusion applies and no independent covered peril intervened. | Workmanship exclusion applies; no independent covered peril intervened, so ensuing‑loss clause does not restore coverage. |
| Is the ensuing‑loss (resulting loss) exception triggered where excluded workmanship leads to collapse? | Taja asserted collapse is a covered peril and thus constitutes an ensuing loss separate from the defective work. | Peerless argued Virginia precedent requires an independent, covered superseding cause to trigger the exception; mere temporal sequence is insufficient. | Court required an independent covered cause; none existed here, so the exception does not apply. |
| Does the policy’s earth‑movement exclusion bar coverage for this below‑grade collapse? | Taja argued the exclusion targets movement at the earth’s surface and therefore should not reach below‑grade soil disturbance. | Peerless argued the policy language covers earth movement (including man‑made causes) at the earth’s surface and that the soil/clay movement here nonetheless involved the earth’s surface layer despite being below grade. | Earth‑movement exclusion applies: the movement involved the earth’s surface layer and the exclusion covers both natural and man‑made earth movement. |
| Contract interpretation / ambiguity question: Should terms like “surface” be construed against the insurer? | Taja argued “surface” is ambiguous and must be construed in favor of the insured. | Peerless argued the policy language is plain, unambiguous, and the insured cannot add terms like “grade” to limit it. | Terms were unambiguous; contra proferentum did not apply and the insurer’s reading was adopted. |
Key Cases Cited
- Limbach Co. v. Zurich Am. Ins. Co., 396 F.3d 358 (4th Cir. 2005) (workmanship exclusion applies where loss is attributable to insured’s defective workmanship)
- Travco Ins. Co. v. Ward, 715 F. Supp. 2d 699 (E.D. Va. 2010) (ensuing‑loss clause requires an independent covered cause; affirmed on appeal)
- PBM Nutritionals LLC v. Lexington Ins. Co., 283 Va. 624 (Va. 2012) (an exception to an exclusion does not create coverage where none exists)
- Fidelity & Guar. Ins. Underwriters, Inc. v. Allied Realty Co., 238 Va. 458 (Va. 1989) (coverage where earth pressure, a covered peril, was the primary cause of collapse)
- Vision One, LLC v. Philadelphia Indemnity Ins. Co., 174 Wash.2d 501 (Wash. 2012) (contrasting view: ensuing‑loss clause can restore coverage for collapse caused by faulty workmanship)
- Great Am. Ins. Co. v. Bogley, 837 F. Supp. 2d 570 (E.D. Va. 2011) (earth‑movement exclusion applied to below‑grade lateral soil pressure causing wall failure)