Taja Invs., LLC v. Peerless Ins. Co., 2017 U.S. App. LEXIS 19855, 2017 WL 4534788 (4th Cir. 2017)
Taja Construction LLC was renovating a row house owned by affiliate Taja Investments LLC (together, “Taja”) when the east wall of the house collapsed. Taja sought to recover the cost of repairs under its insurance policy, issued by Peerless Insurance Company (“Pearless”). Peerless determined that the collapse was caused by Taja’s failure to support the building’s foundation properly while excavating the basement, and it denied Taja’s claim under a policy exclusion for defects in construction or workmanship. Peerless also denied the claim under a separate exclusion for damages resulting from movement of the earth’s surface. Taja filed suit against Peerless for breach of its insurance policy.
The district court granted summary judgment to Peerless, holding that both exclusions applied and that each separately supported the denial of Taja’s claim. Beginning with the Workmanship Exclusion, the court found that undisputed witness testimony attributed the collapse of the row house’s all to Taja’s failure to underpin the property while excavating. This exclusion provision provided that Peerless would not be liable for loss caused by an act, defect, error, or omission relating to construction. Given the testimony and the fact that it had been accepted as true by both parties, the court found it beyond dispute that the Workmanship Exclusion applied in this case. In doing so, the court also rejected Taja’s argument that damages associated with the collapse constituted an “ensuing loss.” The court held that in the event a defectively-designed structure collapses, it is not appropriate to characterize the effect of gravity as a distinct and separate event.
Finally, Taja argued that the Earth Movement Exclusion did not apply because the “movement” in this case occurred below the earth’s surface, at the basement level of the house. The court disagreed with this interpretation, ruling that though the movement that caused the wall’s collapse occurred below grade, it still involved movement of the earth surface as the exclusion is referring to the uppermost layer of the soil and clay. The Fourth Circuit affirmed the grant of summary judgment to Peerless.