Taylor Corporation v. XL Insurance America, Inc.

Background

Taylor Corporation sought insurance coverage for damage to concrete press pads at a printing facility leased by its wholly owned subsidiary, Curtis 1000, Inc. The pads had settled and cracked, preventing the installation of printing presses. Taylor replaced the pads after an engineering firm concluded that non-uniform soil density would cause differential settlement under the presses.

Taylor sought coverage under nearly identical policies issued by XL Insurance America, Inc., Westport Insurance Corp., and Liberty Mutual Fire Insurance Co. The insurers denied the claim, citing exclusions for faulty design or workmanship, settling and cracking of foundations, inherent defects, and errors or omissions in planning or development.

The parties filed cross-motions for partial summary judgment on one issue: whether the policies’ earth-movement coverage extension applied when faulty workmanship or settling contributed to earth movement, even though those causes were otherwise excluded.

Legal Standard and Policy Language

Summary judgment is appropriate when there is no genuine dispute about a material fact and the moving party is entitled to judgment as a matter of law. Minnesota law governed the dispute. Under Minnesota law, ambiguous insurance-policy language—language reasonably open to two or more interpretations—is construed in favor of the insured, and exclusions are narrowly and strictly construed against the insurer.

The policies defined “earth movement” to include any movement of earth, whether natural or man-made, including subsidence, “regardless of any other cause or event contributing concurrently or in any other sequence to the loss.” The policies also excluded faulty workmanship and settling, cracking, shrinking, bulging, or expansion of foundations, including pads supporting machinery.

Court’s Analysis

The court treated the quoted “regardless of any other cause or event” language as traditional anti-concurrent-causation language. Such language generally prevents coverage when an excluded cause contributes to a loss, regardless of whether another cause also contributed. Taylor argued that the language instead operated here to extend coverage for earth movement, including earth movement caused by faulty workmanship or settling.

The court identified competing reasonable interpretations. The language appeared in the definition of earth movement rather than in a section describing coverage or exclusions, which suggested that it might define what qualifies as earth movement rather than override exclusions. The court also noted that using anti-concurrent-causation language to extend coverage was unusual and could significantly limit the effect of other policy provisions.

At the same time, the language had the ordinary meaning of anti-concurrent-causation language and expressly referred to other causes contributing concurrently or in any sequence. The court also reasoned that interpreting the language as covering earth movement would not necessarily make the settling exclusion entirely meaningless, because settling could occur without earth movement.

Because neither interpretation was clearly more persuasive, the court found the earth-movement coverage extension ambiguous. It therefore construed the policies in Taylor’s favor.

Disposition

The court held that earth movement caused by faulty workmanship and/or settling was covered by the policies’ earth-movement coverage extension, regardless of whether faulty workmanship or settling was the proximate cause of the loss. It ruled that the insurers’ affirmative defenses based on the faulty-workmanship and settling/cracking exclusions did not apply to that coverage issue.

The court granted Taylor’s motion for partial summary judgment and denied the defendants’ cross-motion for partial summary judgment.