The insurer's motion for summary judgment seeking dismissal of the insured's claim for collapse coverage was rejected by the Supreme Court of New York. Parauda v. Encompass Ins. Co. of Am., 2018 N.Y. Misc. LEXIS 269 (N.Y. Sup. Ct. Jan. 25, 2018).
The insureds submitted a claim to Encompass for damage to the brick siding, or façade, of their home, which was bulging near the front door. Encompass hired H2M Architects and Engineers to inspect the home and issue a report. H2M determined that the brick façade near the front door was separated from the house. Photos showed that the bricks had separated, the mortar joints were cracked, and there were cracks and deterioration in the mortar. H2M concluded that the brick façade was in poor condition and need repairs and/or replacement. H2M concluded that the separation of the brick façade was caused by water infiltration behind the wood trim and brick façade, occurring over a several year period. Encompass denied the claim based upon exclusions for "freezing, thawing," "wear and tear," and "inadequate maintenance."
The insureds retained Diego Fernandez, a general contractor, to replace the stucco and wood trim in the house. Fernandez stated in an affidavit that the wooden vertical studs and horizontal plates that supported the house were in a severe state of decay. The vertical studs were hanging unattached to the horizontal plates and other vertical studs were crumbling, leaving the structure without support in certain areas. When Fernandez removed a section of the stucco adjoining the bricks near the front door, he found more decayed framing that was not supporting the house as it was intended. Fernandez installed temporary exterior supports, as well as temporary interior framing, to prevent further collapse of the building.
Encompass had a second inspection performed by Eagle Adjusting Services. Eagle found that water was getting behind the stucco and brick siding. The trim embedded in the stucco was rotten and missing in most areas. These issues had been going on for some time according to Eagle. Encompass again denied the claim based upon exclusions for "collapse," "wear and tear," "wet or dry rot," "settling, shrinking, bulging," and "inadequate maintenance."
Plaintiffs sued, alleging that the loss was caused by the collapse of the building due to hidden decay. Encompass moved for summary judgment to dismiss the complaint. The policy required a structure to "abruptly fall down or cave in" to constitute a collapse. Further, the loss was excluded by the policy exclusions covering wear and tear, wet or dry rot, and settling, shrinking, bulging.
The court determined that collapse must significantly effect the structure of the building to be covered. The affidavit of Diego Fernandez established prima facie that the vertical studs supporting the second floor had collapsed from decay. Because the collapsed studs could not be seen until the bricks and stucco were removed, plaintiff had established prima facie that the collapse was caused by hidden decay. The burden shifted to defendant to show a triable issue as to whether the collapse was caused by hidden decay or whether any policy exclusion applied. Focusing primarily on the exterior façade, Encompass' experts thought that the home had not been properly maintained. However, the experts failed to explain how more regular maintenance would have uncovered the hidden decay. Thus, the experts' opinions were merely conclusions.
Judgment was granted to the insureds to the extent of declaring that the loss was covered by the policy.