The Eighth Circuit determined a jury instruction regarding the applicability of the "all-risk" policy's exclusion for "collapse" was inadequate. See KAAPA Ethanol, LLC v. Affiliated FM Ins. Co., 2011 U.S. App. LEXIS 22158 (8th Cir. Nov. 3, 2011).

   KAAPA had nine large, cylindrical, stainless steel tanks fabricated at its location. Soon after operations began in 2003, some of the tanks experienced unusual movement and began to shift. A geotechnical engineer found "silty clay" had been used for infill instead of compacted granular fill called for in engineering drawings. A year long plan to repair all nine tanks was implemented.

   Affiliated's "all-risk" policy excluded damage caused by faulty workmanship. It also excluded damage caused by settling or cracking. The settling exclusion went on to provide, "This exclusion will not apply to loss or damage resulting from collapse of: a building or structure; or material part of a building or structure." Affiliated denied coverage because of the faulty workmanship and settling exclusions.

   After the jury found that some of KAAPA's losses were caused by an excluded peril and some were caused by collapse, the court upheld the award of nearly $4 million for losses caused by collapse.

   On appeal, Affiliated argued the district court erred in instructing the jury when a collapse occurs under Nebraska law. Affiliated's proposed instruction would have required proof that an actual collapse was imminent or that the structure was unsafe or unstable. Affiliated objected to the district court eventual instruction, which provided,

"Collapse" means substantial impairment of the structural integrity of a building or any part of a building. A structure or part of a structure does not need to fall down or be in imminent danger of falling down in order for it to have "collapsed," nor do you need to find that the structure was either abandoned or taken out of use.

   Regarding the phrase "imminent danger," the Eighth Circuit predicted that the Nebraska Supreme Court would adopt an imminence requirement. It was an error of law to instruct the jury to disregard the imminent factor altogether.

   Affiliated also objected the abandonment criteria in the instruction. Here, the Eighth Circuit determined there was no error. The court felt the Nebraska Supreme Court would conclude it is not necessary or essential to a finding of collapse that a structure be taken out of service or rendered uninhabitable, especially where the policy's coverage included coverage of a material part of a building.