HARRISBURG, Sept. 18 – A federal judge has ruled that a sinkhole collapse near the insured’s propane storage tanks was not a covered loss under the insured’s property policy, finding a flood exclusion in the policy applied.
In Heller’s Gas, Inc. v. International Ins. Co. of Hannover, Ltd.,, U.S. Middle District Judge Matthew Brann granted International’s motion for summary judgment in full on both breach of contract and bad faith claims. Heller’s had a policy insuring Heller’s property which include six propane storage tanks. Several months after policy inception, Heller’s noticed sinkholes near the tanks.
An engineering firm engaged by Heller’s concluded the sinkholes were the result of excessive rainfall. International began an investigation, reserving all rights, and raised a number of potential policy exclusions including Excavation Cost, Land and Water, and Earth Movement exclusions.
Ultimately Heller’s brought suit against the insurer, alleging International’s breach of the policy, and bad faith.
In granting the insurer’s summary judgment motion, Judge Brann held that Heller’s failed to meet the burden of establishing actual property damage. Judge Brann also found that the policy’s flood exclusion precluded coverage because the damage was the result of “surface water,” as confirmed by the insured’s engineering firm.
Judge Brann held that International had a reasonable basis to ultimately deny the claim, and that as a result Heller’s could not meet the heightened burden of clear and convincing evidence showing that the insurer acted in bad faith.