In yet another of the collapse cases being litigated in state and federal courts in Connecticut, the federal district court denied the insurer's motion to dismiss. Rosenberger v. Amica Mut. Ins. Co., 2018 U.S. Dist. LEXIS 95345 (D. Conn. June 6, 2018).
The insureds had policies with Amica since 1989. Policies before December 18, 2006, covered collapse caused by hidden decay or other specified causes. "Collapse" was not defined by the policy. These policies did not include any provisions explicitly excluding coverage for a chemical reaction.
The post-2006 policies held by the insureds covered collapse, but under a significantly modified definition. The newer policy language stated that "collapse applies only to an abrupt collapse." Further, collapse was defined as "an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose."
At some point before March 2015, the insureds allege that they noticed cracking patterns in the basement walls of their home. A professional structural engineer found a chemical reaction occurring in the concrete which would cause the structure to eventually fail. He recommended that the walls be replaced. Amica denied coverage. The insureds sued alleging breach of contract and bad faith.
The insurer filed a motion to dismiss, arguing that the breach of contract claim failed to allege the collapse was abrupt or that the house could not be occupied for its intended purpose. When the collapse term was undefined in the policy, courts in this district applied the Connecticut Supreme Court's decision in Beach v. Middlesex Mut. Assur. Co., 205 Conn. 246 (1987).There, the court held that when collapse was not defined in the policy, the term "includes coverage for any substantial impairment of the structural integrity of a building." Applying this definition, courts had regularly found the "collapse" provision in policies to be ambiguous and denied motions to dismiss as a result. When, however, collapse was modified by terms such as "sudden and accidental" or "abrupt," courts in this district held that the terms of the policy were unambiguous and that the plaintiffs in concrete cases had not alleged such a collapse.
The policies at issue in this case implicated both sides of the distinction. The motion to dismiss here had to be denied if the insureds could show: (1) that the 2006 policy might apply, and (2) that the insureds' complaint sufficiently alleged a "substantial impairment of the structural integrity of a building."
The complaint alleged that the insureds noticed cracking sometime before March 30, 2015, and that, at that point, the walls already needed to be replaced. It was therefore plausible that the damage to the walls might have occurred under Amica's pre-2006 coverage. A more complete factual record could demonstrate that damage to the basement walls did not rise to the level of "collapse" under Beach until some point after 2006, and the insureds would have to meet the more stringent "abrupt collapse" standard. But this issue had to be addressed at a later stage of the case. Therefore, the complaint sufficiently stated a plausible claim that the basement walls were substantially impaired before 2006. The motion to dismiss was denied with respect to the breach of contract count.
The bad faith count was dismissed, however. The insureds' claim was "fairly debatable" under Connecticut law.