A large hole in the ground next to a hotel is not a sinkhole and therefore not covered by its comprehensive policy, a federal appeals court ruled Tuesday, upholding a decision in favor of an insurer.
In January 2016, employees of Blissful Enterprises Inc., which operates a hotel in Edgewood, Maryland, discovered the hole, which it characterized as a sinkhole, according to the ruling by the 4th US Circuit Court of Appeals in Richmond, Virginia, in Blissful Enterprises Inc. v. Cincinnati Insurance Co . A damaged underground pipe was later repaired at a cost of $335,484.
In August 2016, Cincinnati Insurance denied all coverage for the loss on the grounds that it was not caused by a sinkhole as defined in the policy. The hotel sued in US District Court in Baltimore, Maryland, which ruled in favor of the insurance company.
A three-judge panel of the appeals court upheld the lower court̵7;s ruling, saying the hotel’s all-risk policy excludes losses caused by rust “or other corrosion, decay, deterioration, hidden or latent defects, or any quality in property that causes it to be damaged or destroyed.” “
“The district court correctly held that this exclusion applies here, and Blissful does not meaningfully challenge that conclusion on appeal,” the panel said, also holding that other exclusions under the policy’s underground property extension precluded coverage.
Attorneys in the case did not respond to requests for comment.