You would think that an all-risk policy would cover your home and business for almost everything. Wrong. Contrary to popular belief, there are always exclusions.
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Underground Pipe Bursts Over the Weekend
Let’s suppose you lock your office Friday night and come back Monday morning to a nightmare like “Julie”, one of our readers, experienced.
“My graphic arts studio is located in a century-old house on a block that has been turned into offices. These lovely homes have beautiful lawns and trees, which require irrigation systems.
“Over the weekend, my neighbor’s underground irrigation system burst. Since my office is slightly lower than his, thousands upon thousands of gallons water flowed towards me, weakening and destroying my foundation. My floors and walls were cracked and my carpet felt like a sponge when I opened my eyes Monday morning. It caused problems with my printers and computers. “I was out of business!”
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Earth Movement Exclusions
Many policies for homeowners and businesses include language to address earth movement. This allows them to limit or exclude it from their coverage. These exclusions include sinkholes, land slides, and earthquakes. You can purchase special policies to cover such natural disasters. Even if you don’t live in an area prone to these types of issues, it is possible that your property could be affected by earthquakes in other less dramatic ways.
Veroff states that before the Great Recession many homes were bought in tracts built on compacted soil. This is a common and costly example of how exclusion can lead to great disappointment and loss. Poor compaction can lead to soil sinking below foundations, which can cause significant damage to homes.
Effective Proximate Cause
Business insurance and homeowners insurance cover covered claims. This usually covers anything that isn’t excluded. Understanding the cause of the damage is crucial to coverage. This is often the question that is asked and should be addressed by readers.
In determining whether a claim will be approved or denied, the central role of causation (cause and effect) is key. Lawyers use the term “proximate Cause” to help resolve coverage issues that involve causation scenarios. They ask: “What was the efficient proxy cause? That real thing that set off a chain of events that led to the loss or damage?”
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Veroff points out that “the efficient proximate reason must be the primary cause of the resulting injury,” and “it might not be the final in a series of events which led to damage or loss.”
Here’s what Veroff suggests property owners do when a claims adjuster says, “Earth Movement (or any other cause) isn’t covered.” Tough!”
(1) Request a letter from the company explaining its position on the claim, identifying any significant facts, and the policy provisions.
(2) This letter provides you with the basis to sue the company for failing to pay the claim without a valid foundation, but it may also help you avoid litigation.
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(3) Write to the company explaining that the most significant cause of the damage (the efficient proxy cause) was X. They are denying that Y is exempt.
Veroff says, “I have seen such letters cause insurers to take a second glance at the claim and actually cover it. They are aware that their insured has done their homework and is not a dummy.”