The court denied the insurer's motion for summary judgment seeking to establish it did not breach the policy when denying coverage for the collapse of basement walls. Belz v. Peerless Ins. Co., 2016 U.S. Dist. LEXIS 118900 (D. Conn. Sept. 2, 2016).
The Belzes purchased their home in 2001. Prior to the purchase, they were aware of notable cracking in the basement walls. An engineer was hired to inspect the cracking and determined the cracks did not threaten the structural integrity of the home.
In 2007, the Belzes installed "brightwall" panels in their basement to cover the cracks. There was no photographic evidence, but the Belzes insisted that the cracks were no more severe in 2007 than they were in 2001 when the home was purchased. The brightwall was removed in April 2013. At this point, the Belzes discovered that the cracking had progressed substantially. The cracks were large enough to put one's finger through the wall.
The Belzes filed a claim under their homeowners' policy with Peerless. Under the policy, Peerless agreed to insure for "collapse of a building or any part of a building" caused by, among other things, "hidden decay." The term "collapse" was not defined in the policy. The collapse provision excluded the collapse of foundations and retaining walls "unless the loss is a direct result of the collapse of a building."
Peerless denied the claim, citing the exclusions for "poor workmanship and materials used." The Belzes filed suit. Peerless filed a motion to dismiss which was denied [post on the court's ruling on the motion to dismiss is here].
Peerless now moved for summary judgment, arguing that the cracking in the basement walls constituted a "loss to a foundation or retaining wall." Peerless also contended that the Belzes were aware of the cracking in 2001, well before the commencement of the policy.
The court had previously determined on the motion to dismiss that the terms "foundation" and "retaining wall" were ambiguous. Following the law of the case doctrine, the court again found on the motion for summary judgment that the terms were ambiguous and subject to multiple reasonable interpretations. Accordingly, the terms would be construed against Peerless. The Belzes' basement wall would not be considered part of the property's "foundation" or "retaining wall" for purposes of insurance coverage. Therefore, the cracking damage to the basement walls was not categorically excluded from coverage under the policy terms covering foundations and retaining walls. The question of whether the cracking actually resulted from "hidden decay" was a disputed question of fact left for the trier of fact.
There was also a material dispute as to whether the damage amounted to a collapse under the policy. Under Connecticut law, a "collapse" for home insurance purposes included "substantial impairment to the structural integrity of a building."
The court next considered whether the claim was timely reported. Other than the testimony of the inspecting engineers and the Belzes, there was no photographic or other evidence to show the condition of the basement walls before 2013. Instead, there was a disputed issue of fact as to when the collapse of the basement walls took place. Accordingly, Peerless had not met its burden with respect to the timing of the collapse.
Finally, there was a genuine factual dispute as to whether Peerless denied the Belzes' claim in bad faith. Deposition testimony suggested that it was Peerless' practice not to apply the "collapse" provision of the policy where the impacted structure was still standing, despite the long-standing principle under Connecticut case law that a collapse could be found even where a structure was still standing if the structural integrity was compromised.
Consequently, Peerless' motion was denied in all respects.