The insurer’s point of view
Subsidence and landslide are insured events on most policies but damage to retaining walls is usually excluded, unless the building itself is damaged by the same cause at the same time. Even then, a much larger excess will apply.
The policy will indicate whether the retaining walls are covered and list any exclusions which apply to them. If retaining walls are not specifically excluded, and the damage which happens is caused by something other than the mentioned exclusions, the retaining wall will be covered within the terms of the policy. Certain retaining walls are uninsurable due to the nature of their construction and the intrinsically higher incidence of damage claims related to them.
So-called "Löffelstein" walls are made up of loosely stacked, interlocking concrete bricks. Owing to the nature of their construction and the inherently higher claim incidence, insurers are reluctant to underwrite the risk.
While your policy may not cover a retaining wall, failure to maintain it could result in claims related to other damages being repudiated. For example, if an ordinary wall becomes unsafe or falls over because a retaining wall is failing, your claim for the ordinary wall could be turned down on the grounds that no measures were taken to prevent the retaining wall from degrading.
Curbing the Risk
While not designed for the task and unbeknownst to their owners, simple boundary walls often assume retaining-wall duties due to the elevated soil level on one side of the wall as a result of landscaping, property development or natural soil movement. In many cases, the owners of two adjacent properties are not aware of who owns the wall dividing the properties and the question of who is responsible for the wall only comes up when the boundary wall and the lower-lying property suffer damage.
For this reason, it is imperative that property owners are aware of what is happening on both sides of their walls at all times.
There are usually obvious warning signs of a retaining wall's impending failure, such as mortar crumbling, joints cracking or the wall bowing outwards. Such deterioration can be treated but the most economic – and least popular - way of dealing with the declining state of a retaining wall is to demolish and rebuild it according to an engineer's design based on the specific environment which will then deem the wall an insurable risk.
Read part one of this blog: Retaining walls: The risk explained 1