A company that claimed for damage caused by a landslip following a storm has won its bid to overturn its insurer’s application of a policy exclusion.  

The landslide hit the company’s insured property on July 4 2022 during a period of heavy rainfall in the Blue Mountains region. 

Swiss Re International SE acknowledged the storm was probably the proximate cause of the damage but declined the claim because its policy did not cover losses caused by “erosion, subsidence, earth movement or collapse”. The insurer said the causal connection required for the exclusion was “not one of proximate cause” and contended the landslide was “earth movement”. 

In a dispute ruling, the Australian Financial Complaints Authority says the term “earth movement” is distinct from the other words in the exclusion, namely “erosion” and “subsidence”.   

It also notes the policy’s definition of “accidental damage” includes losses caused by “spontaneous combustion, subsidence, earth movement or collapse resulting therefrom or landslip”.  

It says the policy offers clear distinctions and “does not consider earth movement as a peril or circumstance that encompasses either erosion or landslip”.  

“The two are treated distinctly. In such a context, there is no reason for the panel to accept that ‘earth movement’ in the exclusion is intended to encompass landslip, given the two are used distinctly elsewhere.

“To conclude otherwise would give the term inconsistent meanings in different parts of the policy.” 

The authority accepts the landslide was a “natural consequence of the storm” and “even if the panel was to accept landslip could be earth movement (which it does not), the panel is not persuaded the wider causal connection in the exclusion is established”.  

It adds: “The proximate cause was the storm. The natural consequence of this was the landslip that resulted in damage. There is no information to suggest an intervening factor. While the insurer referred to instabilities in the area, there was nothing to suggest the particular area where the insured property was located was geologically unstable.”  

The decision requires the insurer to assess the losses and accept liability for the claim.  

Click here for the ruling.

From Insurance News magazine: All the best photos from our inaugural conference in Sydney