Broker Check

Subsidence Exclusions in CGL Policies

April 01, 2022
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Among exclusions often found in contractors' CGL policies is earth movement or land subsidence. Craig Stanovich reviewed this exclusion in a recent Expert Commentary on the IRMI website (https://www.irmi.com/articles/expert-commentary/subsidence-exclusion-in-the-cgl-policy).

There is wide variation in exclusion wording. Some exclusions target land subsidence from natural force. Others exclude subsidence resulting from a contractor's or subcontractor's operations. The most restrictive exclude subsidence however caused, whether natural or man-made .  

Understandably, court rulings are mixed depending on wording and the allegations in a claim. Many find the exclusion ambiguous, not differentiating between man-made and natural subsidence. At least one court found it contradicted the insured's reasonable expectation of coverage.

On the other hand, courts have found in favor of insurers when subsidence was caused by an insured's operations, or ruled that exclusions were not ambiguous.

Contractors need to have their CGL policies reviewed by an advisor so any subsidence exclusion can be discussed. If the exclusion would seriously restrict coverage for an insured's operations it should be removed or scaled back.