The district court accepted the magistrate's recommended ruling denying the insurer's motion for summary judgment on breach of contract and bad faith claims in a case involving collapse. Jang v. Liberty Mut. Fire Ins. Co., 2018 U.S. Dist. LEXIS 51880 (D. Conn. March 27, 2018).

    After purchase of their home, the insureds' inspector found large cracks in the foundation. Liberty denied coverage, contending that the basement wall was collapsing due to settling earth or movement. The insureds' expert later found the foundation had cracks from the oxidation of iron sulfide minerals in the foundation's concrete. The insureds sued for breach of contract, bad faith, and violations of the Connecticut Unfair Insurance Practice Act and the Unfair Trade Practices Act. 

   Liberty contended that because the policy explicitly stated that "collapse" does not include settling, cracking, shrinking, bulging or expansion, the claimed loss did not constitute a collapse under the unambiguous terms of the policy. The court disagreede. The policy's provision for "collapse" stated that "we insure for direct physical loss to covered property involving collapse of a building or any part of a building caused by . . . b. hidden decay . . . f. use of defective material or methods in construction, remodeling or renovation." The policy then stated, "collapse does not include settling, cracking, shrinking, bulging or expansion." 

    Here, the insureds did not allege that they suffered mere settling or cracking. Instead, they pointed to evidence that their home was substantially structurally impaired, which constituted collapse under Connecticut law. There were two diametrically opposed expert opinions on whether there was a collapse, thereby establishing an issue of material fact. At this stage of the proceedings, it was not the court's role to weight the credibility of the experts' testimony. 

    Liberty also argued that the magistrate's ruling erred in finding unambiguous terms to be ambiguous. Because the policy excluded coverage for loss to a foundation or retaining walls unless the loss was a direct result of the collapse of a building, Liberty argued that the terms "foundation" and "retaining walls' were unambiguous, and extrinsic evidence revealed that the claimed loss was to the foundation. Courts within the District of Connecticut, however, had consistently rejected this argument and had determined that the policy terms were ambiguous and should be construed against the insurer. 

    Regarding the bad faith claim, the magistrate found that the record established a material dispute of fact as to whether Liberty had actually conducted in investigation of the claim. On this record, the magistrate had correctly denied summary judgment on the insureds' bad faith claim. 

    Finally, the court agreed with the magistrate's recommended ruling to dismiss the insureds' claims under the Connecticut Unfair Insurance Practice Act and the Unfair Trade Practices Act