Insurance Law Hawaii

Insured's Collapse Claim Survives Summary Judgment

    The insurer's motion for summary judgment seeking to dispose of the insured's claim for collapse was denied. Life Skills, Inc. v. Harleysville Ins. Co., 2024 U.S. Dist. LEXIS 143658 (D. Mass. Aug. 13, 2024). 

    Life Skills was a non-profit social service agency providing residential and day habilitation services to adults with autism and intellectual and developmental disabilities. The head office was covered by a policy issued by Harleysville with building coverage limits of $3,038,300. 

    Damage occurred in a ceramics classroom located in the basement of the building. The floor sank between eight to twelve inches in the northeast corner. The ceramics classroom contained two large kilns weighing approximately 200 pounds. 

    A portion of the floor was removed, revealing that "everything was rotted" and that the structural beams underneath showed severe deterioration. The area was roped off to prevent access. A temporary support system was designed for the second floor above the ceramics classroom, which, due to the failed first floor structure, also become unsafe for occupancy. 

    Harleysville received notice of Life Skills' loss and assigned Michael Coffey, an in-house representative, to handle the case. Coffey retained an independent adjuster, Armand Permian, who inspected the site. Permian initially reported no issues regarding coverage. In his report, Permian stated that "the weight of (2) kilns in the Workspace Area caused the flooring to collapse and cause [sic] damage to laminate flooring, subflooring, concrete and/or blocks, joisting and a foundation wall."

    Coffey then emailed Life Skills to confirm that coverage was provided for damages resulting from hidden decay. He detailed an actual cash value payment of $49,481.06 and requested that Life Skills submit any invoices related to demolition costs they had incurred. Life Skills submitted an initial repair estimate of $264,000.

    Harleysville then sent a forensic structural engineer (EFI Global) to the property. Harleysville raised doubts about whether the observed facts and damages satisfied the policy's criteria for "Additional Coverage - Collapse" and indicated that it was withholding a decision on the claim until a thorough investigation could determine both parties' respective rights and obligations under the policy. 

    EFI then issued a report finding that: "the reported vertical displacement of the floor at the northwest corner of the ceramics room was caused by long-term deterioration, in the form of decay of the floor structure's timber beams." The report identified "elevated levels of moisture in the crawlspace" as the cause of the floor decay. Based on this report, Harleysville denied coverage. 

    Life Skills then filed suit seeking damages totalling $402,801.00. Count I of the complaint alleged breach of contract.

    The policy excluded "Collapse," defined as an abrupt falling down or caving in, or loss of the structural integrity of the building. However, the policy provided "Additional Coverage - Collapse," which preserved coverage for collapse caused by building decay that is hidden from view.

    Harleysville moved for summary judgment arguing the loss was not covered because the floor did not "abruptly collapse" as the policy stated. Although the floor sagged 8 to 10 inches, it did not completely fall to the ground. Further, even though the floor partially detached from the exterior wall, it remained standing. Life Skills, on the other hand, argued that the damage was a "collapse' because the Additional Coverage - Collapse provision, included "partial collapse" and did to specify a minimum vertical displacement to qualify as a collapse. At the very least, part of the building suffered an "abrupt collapse," because the damage was unexpected, and Life Skills had no knowledge of the hidden decay prior to the incident. 

    While both parties offered reasonable interpretations of the policy language as applied to the facts, the court was not persuaded that the policy language unequivocally supported the interpretation of either party. If Harleysville intended for a "collapse" to require the entire building to fall to the gourd immediately, this should have been explicitly defined in the policy. The collapse provisions, however, were internally inconsistent and created ambiguity. Therefore, because the policy language could support reasonable differences of opinion, the court construed the language in Life Skills' favor and denied Harleysville's motion for summary judgment on the breach of contract claim. 

No Bad Faith in Insurer's Denial of Collapse Claim

    The Tenth Circuit affirmed the district court's grant of summary judgment to the insurer on the insured's claims for collapse and bad faith. Christopher M. Wolpert Saddletree Holding, LLC v. Evanston Ins. Co., 2024 U.S. App. LEXIS 10377 (10th Cir. April 30, 2024). 

    On May 7, 2019, Saddletree filed a claim with Evanston for damages sustained to its building which was used as a community events center. After a winter of heavy snowfall, Saddletree discovered that the building's steel support columns had buckled two or more inches and the roof had deflected downward approximately six inches.

    Evanston retained an engineer to inspect the building. The engineer determined that the damage was the result of the building's inadequate "design and/or construction." Evanston disclaimed coverage under the policy's exclusion for damage caused by "hidden or latent defects" or "any quality in property that causes it to damage or destroy itself." 

    Saddletree then sued its builder, Dreams Carports & Buildings, Inc. To support its suit, Saddletree requested Evanston's engineering report, but Evanston declined. Saddletree then retained its own engineer who determined that the original design was deficient. Further, "it is very fortunate the structure has not collapsed based on the levels of deficiencies determined." The district court entered default judgment against Dreams and awarded Saddletree over $2.2 million in damages. Saddletree was still attempting to collect on the judgment.

    On July 8, 2021, more than two years after Saddletree filed its insurance claim- Saddletree's new counsel wrote to Evanston again requesting that they turn over their engineering report. Evanston disclosed the report on August 10, 2021. Two months later, Saddletree wrote demanding that Evanston reverse its coverage denial pursuant to, among other things, the policy's "Collapse" provision. Evanston declined, contending that the building had not collapsed under the policy's definition. Saddletree sued for breach of contract and substantive and procedural bad faith. 

    The district court entered summary judgment for Evanston on all claims. The breach of contract claim was barred by the policy's two-year contractural limitations period. Further, the parties' dueling expert reports rendered Evanston's coverage denial "fairly debatable" precluding Saddletree's claim for bad faith. 

    On appeal, Saddletree first argued that Evanston should be estopped from relying on the policy's limitations period. Saddletree argued Evanston lulled it into inaction  by failing to disclose the engineering report until after the policy's limitations period ran. But Saddletree testified it had "no idea" what it would have done differently had it received Evanson's engineering report sooner. Further, Saddletree identified no authority indicating Evanston had a duty to provide its engineering report. Absent an affirmative duty to provide the report, Evanston did not act inappropriately in refusing to provide it, and that refusal did not lead to estoppel.

    Nor did waiver apply. Saddletree did not preserve this argument for appellate review. But even if it had, Evanston did not waive reliance on the policy's limitations period. Evanston never indicated it would provide coverage, but denied coverage from the beginning. 

    The Tenth Circuit determined there was no substantive bad faith. By the policy's terms, coverage did not apply to a building that was standing even if it was "cracking, bulging, sagging, bending, or leaning." Because the building was still standing, it was at least "fairly debatable" whether the abrupt collapse provision applied.

    Nor did procedural bad faith apply. Evanston's conduct did not constitute procedural bad faith as a matter of law. Further, Saddletree did not identify recoverable damages necessary to sustain its claim. Saddletree argued Evanston was liable for procedural bad faith for (1) initially refusing to turn over its engineering report and (2) allegedly not disclosing that the building was unsafe to occupy during the winter months. Saddletree did not identify any legal authority requiring Evanston to disclose its engineering report. Further, testimony disclosed that Saddletree's representative accompanied Evanston's engineers during their initial inspection. Following the inspection, Saddletree locked to doors because the inspectors said that the structure of the building was too weak. From that point on, the building's only use was for personal storage. 

Collapse Claim Fails Due To Defectively Designed Roof and Deck

    The insured's claim for collapse of his roof and deck failed due to defective design and other exclusions under the policy. Dudar v. State Farm & Cas. Co., 2024 U.S. Dist. LEXIS 52706 (N.D. Ga. Feb. 6, 2024). 

    The insured submitted a claim to State Farm for damage to the roof ("Roof Claim"). State Farm's adjuster placed a ladder on the deck to access the roof and a portion of the deck collapsed. The insured then reported a claim to State Farm for damage to the deck ("Deck Claim"). The claims were denied and suit was filed.

    The roof had leaked on several occasions prior to submission of the Roof Claim. On February 25, 2022, the insured discovered that a branch had cut a hole in the tarp, causing water to leak into the home. The insured performed repairs on the roof. On March 8, 2022, a storm caused more water to seep through the tarp into the ceilings and walls. Thereafter, the Roof Claim was submitted.

    The damage from the leaking roof and the deck collapse were caused by rotting. The rotting, in turn, was caused by a combination of defective building design and resulting water damage from rain and storms over the years. The roof and deck were constructed to provide mutual support to one another. The roof did not contain an adequate slope, which caused water to seep down into the walls and flooring rather than to flow downward and away from the property. Over time, penetrating water caused portions of the roof, the floor, and the supporting wall between the roof and deck to rot. 

    The defective design also caused penetrating water to rot the supporting wall of the deck over the years. The lack of flashing between the deck and house caused water to rot the band joist, which corroded and loosened from the deck fasteners. Ultimately, the rotting caused the deck to collapse when the insured and the adjuster placed a ladder on the deck to inspect the roof. 

    The policy included a Losses Not Insured provision providing that "losses directly and immediately caused by . . . wear, tear, marring, scratching, deterioration, inherent vice, latent defect and mechanical breaks, or rust, or wet or dry rot" were not covered. Plaintiff's claims were excluded by the "wet or dry rot" exclusion and the "deterioration" exclusion. Also excluded were losses caused by "defect, weakness, inadequacy, fault or unsoundness in design, specifications, workmanship, or construction of any property." Here, there was no dispute that the property's design and building were defective, which, in combination with years of rain and storm water, caused the property's roof, walls and floor to rot.

    Nevertheless, the insured claimed that losses from the Roof Claim and Deck Claim were both covered under the policy's additional "Collapse" coverage. The provision provided,

11 Collapse. We insure for direct physical loss to covered property involving collapse of a building or any part of a building caused only by one or more of the following:

    a. . . . windstorm or hail . . . or water damage . . . 

        (2) water damage means accidental discharge or leakage of water or steam as the direct result of the breaking or cracking of any part of a system or appliance containing water or steam;

    b. hidden decay.

    . . . 

    d. weight of contents, equipment, animals or people.

    . . . 

    f. use of defective material or methods in construction, remodelling or renovation if the collapse occurs during the course of construction, remodelling or renovation.

    The insured contended that the damages associated with the Roof Claim were covered because a "collapse resulting from a deluge of stormwater" occurred. The insured argued that the Roof Claim was also covered under the windstorm or water damage coverage, the hidden decay coverage, and the use of defective materials or methods during construction coverage. For the Deck Claim, the insured argued that the Collapse provision's hidden decay and weight of contents coverages applied. 

    The insured had to prove that the collapse of a building was "caused only by one or more of the" specific causes set forth in the provision. Here, the damages from the leaking roof and the deck collapse were caused by rotting, which in turn was caused by a combination of defective building design and water damage from rain and storms over the years. These causes were not among the specific causes set forth in the Collapse provision. Accordingly, even if one of the Collapse provision's coverage categories applied, the claims were not covered because the collapses were not caused "only by" one of the specific causes set forth in the provision.

    Further, none of the coverage categories in the Collapse provision applied. The "decay" was not "hidden. The insured admitted that he discovered rotting and deterioration in the roof before the loss occurred. For the Deck Claim, foam sealant in the area of the decay indicated that the conditions were known before the deck collapsed. Therefore, the decay was not hidden. 

    For water damage, the insured did not point to any evidence that the water that damaged the property came from "a system or appliance containing water or steam" as required for the coverage to apply. Instead, the insured alleged that the water damage came "from rain and storms over the years." 

    The defective construction or renovation coverage did not apply because the roof's original defective construction caused the collapse associated with the Roof Claim. The collapse did not occur "during the course" of the original construction. 

    Finally, the windstorm and weight of contents coverages did not apply to the Roof Claim or Deck Claim. These coverages applied only when a loss involving a collapse was "caused only by one or more of the" specific causes set forth in the Collapse provision. Even if the court assumed that there was some causal connection between a windstorm and the leaking roof and weight of contents and the deck collapse, these were not the only causes of the collapses. Instead, the damages from the leaking roof and the deck collapse were caused by rotting, which in turn was caused by a combination of defective building design and water damage from rain and storms over the years. 

    State Farm's motion for summary judgment was granted and the insured's motion for partial summary judgment was denied.

Court Grants Insurer's Motion for Summary Judgment After Insured Fails to Provide Evidence of Systemic Collapse

    With the insurer conceding that there was evidence of potential collapse at portions of eight specific building locations, the court granted the insurer's motion for partial summary judgment in determining no additional buildings suffered from collapse. Exec. 1801 LLC v. Eagle W. Ins. Co., 2024 U.S. Dist. LEZXIS 5923 (D. Or. Jan. 11, 2024). 

    Executive 1801 owned a group of six buildings with eighty-six residential units. The court previously granted partial summary judgment on Executive 1801's rain damage claim, leaving only claims regarding collapse. Eagle insured "the property for direct physical los or damage to Covered Property . . . caused by or resulting from any Covered Cause of loss."  The policy further provided, "We will pay for direct physical loss or damage to Covered Property, caused by collapse of a building or any part of a building insured under this policy, if the collapse is caused by . . . hidden decay."

    Eagle moved for partial summary judgment on the collapse claim. Eagle acknowledged that Executive 1801 had presented some evidence such that a jury could reasonably conclude that a covered collapse occurred, but only in eight specific instances. Eagle argued that summary judgment should be granted on all potential claims of collapse except those instances. Executive 1801 argued that a jury could look at the eight specific instances of collapse and conclude that widespread and systemic conditions existed at access stairways, walkways, and balconies. Executive 1801, however, offered no evidence to back up this conjecture, maintaining simply that the photographs were representative of what happened throughout the property. 

    Executive 1801 did not point to any evidence or photographs that showed downward movement in any additional locations beyond the eight that were conceded by Eagle. Rather, Executive 1801 argued that a jury could conclude that it was more likely than not that other building components fell some distance. Executive 1801's allegations of widespread, systemic collapse, without any evidence to back them up, were insufficient to defeat summary judgment.

    Therefore, Eagle's motion was granted.

No Coverage for Roof Collapse During Hurricane

    The Fifth Circuit affirmed the district court's determination that the insured's roof collapse was not covered. Exclusive Real Estate Inv., L.L.C. v. S.G.L. No. 1, Ltd., 2023 U.S. App. LEXIS 29368 (5th Cir. Nov. 3, 2023). 

    A building owned by Exclusive Real Estate partially collapsed during a rain-storm. The insurer, SGL, inspected the roof and determined that there was no coverage. Exclusive sued SGL for breach of contract and bad faith. SGL moved for summary judgment, which was granted by the district court. Exclusive appealed. 

    The poicy covered "direct physical loss to the property" caused by windstorms. Exclusions, however, precluded coverage for losses "caused by rain, snow, sleet, sand or dust unless the direct force of wind or hail damages the building causing an opening in a roof or wall and the rain, snow, sleet, sand or dust enters through this opening." 

    Two investigators hired by SGL found that rain caused the roof to collapse and none of the damage was caused by wind. An employee of Exclusive was in the building when the roof collapsed and testified that he saw rain blowing sideways during the storm. No other evidence was produced by Exclusive to show the collapse was due to wind.

    The Fifth Circuit found that Exclusive's relied solely on the employee's testimony that the rain was blowing sideways and did not present any additional evidence. Exclusive had no expert witness to sustain its claim. On the other hand, SGL submitted evidence through depositions, reports, and photographs supporting its position that the roof collapse was not caused by wind. The district court properly found that Exclusive failed to create a genuine issue of material fact sufficient to preclude summary judgment.

Portions of Policyholder's Expert's Opinions Excluded

    The federal district court granted, in part, the insurer's motion to exclude portions of expert testimony. Tundra M. Holdings, LLC v. Markel Ins. Co., 2023 U.S. Dist. LEXIS 139952 (D. Alaska Aug. 10, 2023).    

    Plaintiff alleged a building it owned suffered damages consisting of building roof failure due to snow load. Plaintiff submitted a claim to Markel for its loss. 

    Plaintiff hired an engineering firm to conduct an inspection. The recommendation was to install snow guards and that 28 rafters be replaced with new beams. The evaluation did not state that the recommendation was required by law or ordinance. Nor did the evaluation make mention of replacing the metal roof on the building or anything about the water system or sprinkler system. Plaintiff then obtained an estimate of $687,500 for roof repair/replacement, store front repair, a sprinkler system installer and a water system upgrade. 

    Markel only paid $117,406.78 because the $687,500 estimate included upgrades that were not required by ordinance or law. The policy provided that "losses and costs incurred in complying with recommended actions or standards that exceed actual requirements imposed by ordinance or law are not covered." 

    Markel sent plaintiff a reservation of rights letter noting that coverage was excluded for loss or damage that was the result of "faulty, inadequate or defective design, specifications, workmanship, repair, construction, renovation, remodelling, grading or compaction." 

    Plaintiff filed suit asserting breach of contract, bad faith claims handling, and breach of the covenant of good faith and fair dealing. Plaintiff disclosed expert Elliot Flood to render "opinions on insurance industry customs, practices, and standards." Flood had over 30 years of experience in the insurance industry and had worked as an investigator and defense attorney for major insurers as well as insureds.

    In his expert report, Flood offered 25 numbered opinions as well as numerous other opinions. Markel moved to exclude some of Flood's opinions. 

    Markel first moved to exclude Flood's opinions as to whether the estimate encompassed repairs that were required by law or ordinance as unreliable because Flood lacked the expertise to cover such opinions. For example, Flood opined that Markel had no reasonable basis to exclude paying for the cost of repairs necessary to rebuild to the minimum required by current building codes as reflected in the estimate. The court agreed that Flood was not qualified to offer an opinion as to whether the repair proposal would take the building back up to code because he was not a certified engineer or architect, and had no expertise in construction, renovation, or restoration of a commercial building. Flood also had no expertise in the application of the building codes or ordinances that applied at the relevant time. His opinions on this issue were unreliable and had to be excluded. 

    Markel also argued that some of Flood's opinions were legal conclusions that should be excluded. He opined that "under the terms of the policy, even if there is a defective design, that does not defeat coverage if the loss is caused by a listed peril, such as collapse from excessive weight of snow." He also opined that the Markel adjuster "knew, or should have known, the the defective design exclusion would not apply" and that Markel had "no reasonable basis" to send the reservation of rights letter because it was based on the defective design exclusion. 

    The court agreed that these interpretations were opinions of the defective design provision which had to be excluded. Flood could not offer such an opinion nor could he offer an opinion as to whether it was reasonable for Markel to send the reservation of rights letter based on the defective design provision because the foundation of the opinion was Flood's interpretation of the policy.

    Markel also sought to exclude Flood's opinion on Markel's net worth. Flood opined that the audited financial statement showed Markel's net worth to be $1,637,775,000. Here, Flood was not attempting to authenticate Markel's public financial filing, but was stating that he used the filing to calculate Markel's net worth. Such evidence was relevant should the jury determine that punitive damages were warranted. The net worth opinion was also reliable because Flood had sufficient expertise to offer such an opinion,. He was a former had auditor and CPA with special expertise in insurance accounting. Therefore, Flood's opinions on Markel's net worth would not be excluded. 

    

    

Jury's Verdict for Loss Caused by Collapse Overturned

    The Florida Court of Appeal overturned the jury's verdict findng loss caused by collapse. Universal Prop. & Cas. Ins. Co. v. Caboverde, 2023 Fla. App. LEXIS 4474 (Fla. Ct. App. June 28, 2023).

    The insured homeowners had two claims. One was a 2016 ceiling collapse; the second was loss caused by Hurricane Irma in 2019. The homeowners' policy covered collapse defined as "an abrupt falling down or caving in of a building or any part of a building with the result that the building . . . cannot be occupied for its intended purpose." Collapse had to be caused by, among other things, decay or insect damage that was hidden from view.

    At trial, the insureds' pre-purchase home inspector testified that no wood destroying organisms were found. Further, the roof was five to seven years old and in "really good" condition. Nevertheless, in September 2016, seven months after the homeowners had moved into the house, the living room ceiling collpased by two or three inches. The homeowners were no longer able to ocupy the living room area because of the risk. 

    While the insureds' contractor testified he found termite damage, on cross-examination he admitted he was not a termite expert and he could not opine on how long the termites were in the home, or the rate at which termites could cause damage. The insurer's field admuster revealed that the home's interior walls and ceiling were all standing. The ceiling contained cracks, but no pieces of the wall or ceiling were laying on the ground. 

    At the close of the evidence, the insurer moved for a directed verdict on the ceiling collpase claim. The motion was denied and the the jury found there was a collapse caused by decay or termite damage. The insurer moved for judgment notwithstanding the verdict, which was also denied.The circuit court entered a final judgment in the homeowners' favor. 

    The Court of Appeals reversed. The circuit court judge should have granted the motion for judgment notwithstanding the verdict because the homeowners had not presented evidence that unknown or hidden decay or termite damage had caused the alleged ceiling collapse. The homeowners never presented any evidence that hidden and unknown decay or insect damage had been present in the home in September 2016. The only witness who testifed about termite damage was the homeowners' contractor, who did not inspect the home until June 2021, almost five years after the alleged ceiling collapse. Further, the contractor expert admitted he was not a termite expert and he did not know how long the termites had been present.

    Therefore, the insurer was entilted to final judgment in accordance with its motion for judgment notwithstanding the verdict. The circuit court's final judgment was reversed. The circuit court's final judgment in the homeowners' favor on their 2019 Hurricna Irm cliam was affirmed, however.

Insurer Must Defend General Contractor

    Interpreting Massachusetts law, the federal district court determined consequential damage resulting from the insured's faulty work triggered a duty to defend. Capitol Spec. Ins. Corp. v. Dello Russo Enter. LLC, 2023 U.S. Dist. LEXIS 11627 (D. Mass. Jan. 24, 2023). 

    Peta-Gay and Michael Print sued the insured, Dello Russo, who they hired as the general contractor for extensive remodelling and renovation of their building. During the demolition work, certain structural load-bearing walls were removed, including a portion of an exterior bricked masonry wall. Shoring of other parts of the building was inadequate and removal of the masonry wall reduced the structural integrity of the building. Cracks began to appear in the remaining portion of the masonry wall and increased over the next few days. Soon thereafter, the City of Boston determined the building was dangerous and that salvage of the undamaged portions was not feasible. Therefore, the building was demolished.

    Certain Underwriters at Lloyd's, London, filed suit against Dello Russo as subrogee of the Prinns. Dello Russo tendered the complaint to its insurer, Capitol Specialty Insurance Corporation, who defended under a reservation of rights,. Capitol then filed a suit seeking a declaratory judgment that it had no duty to defend or to indemnify. The parties cross-claimed for summary judgment.

    Under Massachusetts law, faulty workmanship was not an accidental occurrence. Coverage was possible, however, when faulty workmanship caused an accident. Here, the home-improvement contract stated that Dello Russo was not hired to demolish the entire building. Therefore, the underlying complaint did not allege that an improperly performed demolition was the accident. Instead, the underlying complaint alleged that as a result of Dello Russo's faulty workmanship during renovations, the building partially collapsed, requiring the demolition of the remaining structure. Therefore, the claims against Dello Russo alleged "property damage" caused by an "occurrence."

    Capitol argued that exclusions (j)(5) and (j)(6) were applicable. These provisions excluded coverage for claims alleging property damage to "[t]hat particular part of real property on which you  . . . are performing operations, if the 'property damage' arises out of those operations," or "[t]hat particular part of any property that must be restored, repaired or replaced because 'your work' was incorrectly performed on it." Capitol contended that as the general contractor, Dello Russo had control over the entire premises, and thus that "particular part" of property meant the entire project.

    The court noted that Dello Russo was not hired to construct, renovate or demolish an entire building. He was required to provide "demo shoring equipment," but not responsible for demolishing or removing any of the building's load-bearing walls. Nor was Dello Russo responsible for demolishing the building's exterior, or any other way performing work relating to the building's exterior walls, windows, foundation, or roof. Rather, Dello Russo's tasks included removing all non-load-bearing walls, and demolishing the building's entire interior residential space. In other works, Dello Russo was obligated to work only a "particular part" of the building: its interior. 

    Therefore, Capitol had a duty to defend. Capitol's motion in regards to the duty to indemnify was premature because the underlying action had not determined liability or adjudicated factual disputes. 

 

Claim for Collapse After Demolition of Building Fails

    After several city citations and the eventual demolition of the insureds' apartment building, their claim for coverage based on collapse was unsuccessful. Barker v. AmGuard Ins. Co., 2022 U.S. Dist. LEXIS 202069 (W.D. Mo. Nov. 7, 2022).

    The plaintiffs purchased a three-story multi-family apartment building on March 9, 2009. Prior to the purchase, steel beams were installed in the basement along the east and south walls. By 2013, the south and east walls were leaning. 

    On March 13, 2017, the city building inspector observed "the foundation failing in several areas and deflection in the south wall." The building inspector issued a citation for a pubic nuisance in violation of the City Code. This was followed by several more citations against plaintiffs. The plaintiffs' inspector reported the basement walls were experiencing "extensive lateral deflections primarily due to the inadequate design of the basement walls." 

    Plaintiffs understood the issues to be "cosmetic.'" They had no work done on the property besides aesthetic upgrades. After additional citations were entered, the building was ordered demolished.

    Shortly before the demolition, the plaintiffs submitted a claim to AmGuard. Collapse was only covered when "an abrupt falling down or caving in of a building or any part of a building" occurred. AmGuard's inspection before the demolition found damage to the building, including a leaning foundation cracks in the walls and ceilings, and unsanitary conditions. Further, the walls were nearly vertical and there was no imminent danger of collapse. 

    When the claim was denied, plaintiffs filed suit. AmGuard moved for summary judgment. The court agreed with AmGuard. Plaintiffs did not create a genuine issue of material fact. The failed to submit evidence that the property's framework itself fell or collapsed. 

Coverage for Collapse Ordered on Summary Judgment

    A collapsed floor in a restaurant was found to be covered. J&J Fish on Center Street, Inc. v. Crum & Forster Spec. Ins. Co., 2022 U.S. Dist. LEXIS 163661 (D. Wis. Sept. 12, 2022).

    J&J Fish rented property from Vision. Vision was obligated to keep the premises insured under an all-risk policy. Vision was also responsible for maintaining and repairing the property "including the slab flooring exterior walls of the premises." Vision never obtained insurance on the building, but J&J Fish secured a commercial property policy from Crum & Forster.

    On May 29, 2020, approximately 25% of the building's slab floor, the section beneath the walk-in cooler, collapsed into the crawl space below. Dr. Daniel Wojnowski inspected the crawl space and observed overall dampness as well as a pool of water in the space. He concluded that the collapse occurred because the steel support beams and steel elements of the floor corroded after prolonged exposure to moisture. Based on this report, Crum & Forster denied coverage. J&J Fish sued and the parties moved for summary judgment.

    The policy covered collapse, which meant an abrupt falling down or caving in of a building or any part of a building. Further, if the collapse was caused by decay that was hidden from view, it was covered. 

    Here, 25% of the building's floor fell three-and-a-half feet into the crawl space overnight. On its face, it was a sudden and unexpected fall or drop that rendered part of the building unfit for use as a restaurant.

    Crum & Forester raised several arguments against coverage. First, it claimed the events did not amount to a collapse because the policy did not consider a collapse to include a building or an part of a building to be in damage of falling down or caving in. But here, the slab floor was no longer "in danger of falling down" because that danger was long-passed with the floor already having fallen.

    Crum and Forster next argued that the decay causing the collapse was not hidden from view because it could be observed from within the crawl space. Dr. Wojnowski, equipped with a flashlight, entered the crawl space on all fours and observed the decay. But the problem with this argument was that "hidden" was a matter of degree. Under the plain meaning of the term, decay that was concealed within a cramped, unlit space was "hidden from view."

    Crum & Forster also relied on exclusions expressed in the policy in sections other than Section D which addressed collapse. The court held that Crum & Forster could not rely on these exclusions to oust coverage under section D, and J&J Fish was entitled to summary judgment on the question of liability.

    Finally, the court held that Crum & Forster was entitled to subrogation against Vision pursuant to the lease between Vision and J&J Fish. Vision breached the lease by (1) failing to acquire property insurance and (2) failing to maintain the slab floor.