Sentinel Associates v. American Mfrs. Mut. Ins.

• Decision Date: 26 October 1992
• Docket Number: Civ. A. No. 3:92CV192.
• Citation: 804 F. Supp. 815
• Parties: SENTINEL ASSOCIATES, Plaintiff, v. AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

804 F. Supp. 815

SENTINEL ASSOCIATES, Plaintiff, v. AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY, Defendant.

Civ. A. No. 3:92CV192.

United States District Court, E.D. Virginia, Richmond Division.

October 26, 1992.

Samuel Walter Hixon, III, William Rutherford Mauck, Jr., Williams, Mullen, Christian & Dobbins, Richmond, Va., for plaintiff.

Pamela Michele Pearson, Hunter C. Quick, Cozen & O'Connor, Charlotte, N.C., for defendant.

MEMORANDUM OPINION

SPENCER, District Judge.

This matter is before this Court on defendant's motion, pursuant to Fed.R.Civ.P. 56, for summary judgment. In the underlying claim, plaintiff Sentinel Associates ("Sentinel") alleges a breach of an "all-risk" insurance contract by defendant American Manufacturers Mutual Insurance Co. ("AMMI"). For the reasons set forth below, defendant's motion for summary judgment is DENIED.

I.

Plaintiff Sentinel is a New York partnership which owns and manages various commercial properties, including the Mid-City Shopping Center in Portsmouth, Virginia. The shopping center was insured by an "all-risk" insurance policy, No. 3MH 101 526-01, purchased from defendant AMMI, an Illinois corporation with a branch office and registered agent in Richmond, Virginia.

The policy covered all physical damage to the property, except for certain damages specifically excluded. At issue with respect to defendant's motion for summary judgment are Sections F and G of the policy, which state, in part:

F. COVERED CAUSES OF LOSS

We insure covered property against risks of direct physical loss or damage from external causes ... unless the loss is:

1. Excluded in Section G, Exclusions; or

2. Limited in Section H, Limitations; that follow.

G. EXCLUSIONS

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

* * * * * *

b. Earth Movement

1) Any earth movement (other than sinkhole collapse), such as an earthquake, landslide, or earth sinking, rising or shifting. But if loss or damage by fire, theft or explosion results, we will pay for that resulting loss or damage.

* * * * * *

2. We will not pay for loss or damage caused by or resulting from any of the following:

* * * * * *

d. (1) Wear and tear;

2) Shrinkage, evaporation, loss of weight, change in flavor, color, rust, corrosion, fungus, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself;

* * * * * *

5) Settling, cracking, shrinking or expansion;

* * * * * *

But if loss or damage by the "specified causes of loss" or building glass breakage results, we will pay for that resulting loss or damage.

"Specified causes of loss" include water damage, defined as "accidental discharge or leakage of water or steam from any part of a system or appliance containing water or steam."

On or about July 6, 1990, employees of the Smith & Welton department store, a tenant in the shopping center, discovered substantial cracking in the ceiling and walls throughout the store. Further inspection revealed cracks and loose bricks in one corner of the building and a deeply cracked and settled interior rear wall, as well as other damage.

Plaintiff informed defendant of the damage and, following an investigation, defendant denied coverage on the claim. Plaintiff then brought the present action, alleging that defendant breached the insurance policy by denying coverage.

The parties disagree as to the cause of the damage to the shopping center. Plaintiff contends that the damage was caused by a broken pipe which, between May and September 1989, leaked approximately 570,000 gallons of water into the soil beneath the Smith & Welton store. This leak, according to plaintiff's expert, NTH Consultants, Ltd.,

appears to have disturbed the native silty sand soils and carried some of the finer fractions of soil into the backfill zones of existing underground lines, or even into the lines themselves. This condition in turn would have resulted in undermining and subsidence of supported structures causing the observed distress. In addition, the release of water may also have temporarily loaded the underlying compressible organic soils and contributed to consolidation in the underlying organic silty clay soil.

Defendant, on the other hand, contends that such a leak never occurred. Defendant suggests that the higher-than-normal water consumption at the shopping center in the summer of 1989 resulted not from a leaking pipe, but rather from a malfunctioning air conditioning unit at the Smith & Welton store, which defendant claims was continually sprayed with water to cool down its compressor. Subsidence of the soil beneath the shopping center, defendant contends in its memorandum, was inevitable,

regardless of any leak, because of the type of soil and organic material on which the Shopping Center was constructed and the natural effects of this structure existing on this soil and material over time. The structure essentially was built on peat moss and sand.

For the purpose of its summary judgment motion, defendant accepts plaintiff's version of the facts, but argues that the policy does not cover plaintiff's loss even if plaintiff's theory about the cause of the damage to the shopping center is correct.

II.

Under Rule 56(c), a motion for summary judgment may be granted "only if the pleadings, depositions, interrogatory answers, admissions, and affidavits show `that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.'" Magill v. Gulf & Western Indus., Inc., 736 F.2d 976, 979 (4th Cir.1984) (quoting Fed.R.Civ.P. 56(c)); accord Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986); Houchens v. American Home Assurance Co., 927 F.2d 163, 165 (4th Cir.1991). "Where ... the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, disposition by summary judgment is appropriate." United States v. Lee, 943 F.2d 366, 368 (4th Cir.1991) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986)).

The party moving for summary judgment always bears the initial burden of informing the district court of the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. at 2552. Any inferences "drawn from the underlying facts contained in the materials before the trial court must be viewed in the light most favorable to the party opposing the motion." Helm v. Western Md. Ry., 838 F.2d 729, 734 (4th Cir.1988).

For purposes of analyzing this summary judgment motion, this Court therefore assumes that plaintiff's theory as to the cause of the damage to the shopping center is correct, and must determine whether, with the facts thus "viewed in the light most favorable" to the plaintiff, the policy covered the damage.

III.

The law governing the interpretation of insurance policies in Virginia is well-established. In a recent case, the Virginia Supreme Court restated the following "familiar principles":

Where an insured has shown that his loss occurred while an insurance policy was in force, but the insurer relies on exclusionary language in the policy as a defense, the burden is upon the insurer to prove that the exclusion applies to the facts of the case.... Further, because insurance contracts are ordinarily drafted by insurers rather than by policyholders, Virginia courts consistently construe such contracts, in cases of doubt, in favor of that interpretation which affords coverage, rather than that which withholds it. Policy language purporting to exclude certain events from coverage will be construed most strongly against the insurer.

Bituminous Cas. Corp. v. Sheets, 239 Va. 332, 389 S.E.2d 696, 698 (1990).

It is therefore incumbent upon an insurer to employ exclusionary language that is clear and unambiguous. Language is ambiguous, under Virginia law, when it may be understood in more than one way. American Reliance Ins. Co. v. Mitchell, 238 Va. 543, 385 S.E.2d 583, 585 (1989).

Defendant AMMI, in its memorandum in support of its summary judgment motion, contends that the insurance policy's earth movement clause "clearly and unambiguously ... precludes coverage for any form of earth movement regardless of its cause or scope." The policy's language, however, belies defendant's claim.

The policy refers to "any earth movement ... such as an earthquake, landslide, or earth sinking, rising or shifting." This language clearly may be understood to have a meaning other than that assigned to it by defendant.

Virginia courts have long recognized the doctrine of noscitur a sociis, which holds that "when general and specific words are grouped, the general words are limited by the specific and will be construed to embrace only objects similar in nature to those things identified by the specific words." Cape Henry Towers, Inc. v. National Gypsum Co., 229 Va. 596, 331 S.E.2d 476, 481 (1985).¹ Here, the general term "earth movement" therefore must be read to refer to events similar in nature to "earthquakes, landslides, and earth sinking, rising or shifting" — all of which are natural phenomena.² Taking the phrase in this context, and applying the rule that ambiguities in such clauses must be resolved in favor of the insured, the earth movement clause must be read as referring only to phenomena resulting from natural, rather than man-made, forces.

While this policy must be analyzed based on its own unique language, which has not been confronted previously in any reported decision, it is nonetheless helpful to note that numerous courts faced with analogous language have reached similar conclusions. See, e.g., Peters Township School Dist. v. Hartford Accident & Indem. Co., 833 F.2d 32, 33 (3d Cir.1987); Peach State Uniform...