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Sinkhole damage in Malibu spotlights homeowners insurance coverage gap
Coverage may turn on whether the loss is treated as excluded earth movement, or whether an ensuing fire or explosion triggered by the collapse is covered.
A large sinkhole opened outside a Malibu home reportedly owned by actor Nicolas Cage after heavy rain from Tropical Storm Marie weakened the ground following a driveway collapse, according to Insurance Business. The sinkhole was estimated at about 30 feet by 30 feet, and no injuries were reported, though the collapse triggered a gas leak that prompted an emergency response before SoCalGas confirmed the leak was secured.
City officials have declared at least five homes on the street unsafe for entry, warning that emergency access is severely constrained because so much of the road has collapsed. For homeowners facing similar losses, the key insurance question is whether the damage falls under an earth movement exclusion that appears in nearly every standard homeowners policy in California.
Insurance Business notes that California Department of Insurance consumer guidance lists earth movement, landslide, subsidence, and sinkholes among common exclusions, meaning damage caused directly by ground collapse is typically not covered unless a homeowner separately purchased an earth movement or landslide add-on. The outlet also points out that a carve-out can apply, since ensuing fire or explosion caused by excluded earth movement is generally covered in homeowners policies.
California courts use the efficient proximate cause doctrine when covered and excluded perils overlap, which can produce split outcomes. Insurance Business says the distinction could matter in this case if a gas leak sparked by the sinkhole collapse had led to a fire, because the resulting fire damage would likely be covered even if the sinkhole itself was not.