Property Insurance Coverage for Emerging Risk: Underground Climate Change

• Jurisdiction: United States,Federal
• Citation: Vol. 4 No. 1
• Publication year: 2024
• topic: Environmental Law,Insurance Law,Civil Procedure

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Dennis J. Artese, Ethan W. Middlebrooks, and Thomas Dupont ^*

Abstract: Studies have shown that heat emanating from basements, train tunnels, sewers, and other underground systems in major metropolises in the United States and Europe is heating the ground between city surfaces and the bedrock by as much as 27 degrees Fahrenheit. This "underground climate change" is affecting ground soil conditions, causing structural strains on buildings and exacerbating cracks and defects in walls and foundations. Whether property insurance coverage will respond to loss and damage resulting from underground climate change will likely hinge on the application of the "earth movement" exclusion and potential exceptions thereto, in addition to other policy exceptions. Focusing on broad "all risk" commercial property insurance policies, this article analyzes permutations of policy language and state law that may affect coverage for damage caused by underground climate change, including how state law treats anti-concurrent causation clauses, whether "human-caused" exceptions to earth movement exclusions may apply to underground climate change, and whether "abrupt collapse" exceptions to exclusions for building collapse may apply when undetected structural damage triggered by underground climate change triggers collapse.

Introduction

Studies have shown that heat emanating from basements, train tunnels, sewers, and other underground systems in major metropolises in the United States and Europe is heating the ground between city surfaces and the bedrock by as much as 27 degrees Fahrenheit

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in some places over the past several decades. ¹ This subterranean heating, dubbed "underground climate change" by scientists, is affecting ground soil conditions, causing layers of sand, clay, and rock to expand or contract by as much as half an inch beneath some buildings. These conditions are already causing structural strains on buildings and even exacerbating cracks and defects in walls and foundations. Should the problem go unabated, significantly more structural damage is expected.

Whether property insurance coverage will respond to loss and damage resulting from underground climate change remains to be seen and will likely hinge on the application of the "earth movement" exclusion and potential exceptions thereto, in addition to other policy exceptions likely to be implicated. That analysis involves a careful review of the policy language at issue, which will vary from policy to policy, as well as the application of state-specific rules with respect to insurance causation. Those rules seek to determine the cause(s) of a property damage loss as well as the significance of such cause(s) for insurance coverage purposes. As with insurance policy language, insurance causation rules vary from state to state. Therefore, policyholders should do whatever they can to avail themselves of the jurisdiction they deem most advantageous, as doing so may be outcome determinative.

All-Risk Coverage

This article focuses on broad, "all risk" first-party property insurance policies rather than the narrower "named perils" policies. Many businesses smartly purchase "all risk" property insurance policies. All risk policies generally cover all risks—that is, causes of loss—of direct physical loss or damage unless they are expressly excluded by the policy language. ² Conversely, a named peril policy provides coverage only if the cause of the loss is expressly included in the policy as an insured peril.

As with any insurance policy, it is the insurance company's burden to show that a coverage exclusion applies to preclude coverage under an all-risk property insurance policy. ³ Should the insurance company demonstrate that an exclusion applies to a particular loss, the burden then shifts to the policyholder to prove up any

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exception to the exclusion. Courts across...