Tred R. Eyerly | Insurance Law Hawaii | December 26, 2018
The insurer properly denied coverage for collapse of a building when the insured knew from an expert’s examination that the walls of his house were deteriorating. Jaimes v. Liberty Ins. Corp., 2018 U. S. Dust. LEXIS 198224 (D. Colo. Nov. 21, 2018).
The insured discovered a crack in the wall of his home. He hired Anchor Engineering to inspect. Anchor found a large bulge in the south wall. Several problems with deterioration were noted in the basement. The structure of the house was unstable and dangerous.
The insured filed a claim with his homeowners insurer, Liberty. The claim was denied because damage to the wall was the result of deterioration.
The south wall of the house later collapsed. The insured submitted a second claim. Liberty again denied the claim because the collapse was the result of deterioration of the wall. The insured sued.
The policy covered collapse of any part of a building caused by hidden decay. Liberty argued there was no coverage for the first claim because no wall had collapsed. The insured argued the cracking wall was subsumed into his second claim and should be covered as hidden decay. For purposes of this decision, the court agreed the first claim was subsumed into the second claim.
Nevertheless, there was no coverage. There were several statements in the Anchor letter that would put a reasonable person on notice that there was decay in the house. For example, the letter stated that in the basement, a number of floor joist ends had deteriorated. Further, mortar deterioration was severe.
The parties agreed that the terms deterioration and decay were interchangeable. Accordingly, there was no genuine dispute about the fact that Anchor communicated with the insured that there was decay around the wood bearing plate in the foundation wall and in floor joists. The insured should have understood the decay that Anchor observed was related to his explanation of the south wall – the wall that eventually collapsed. Therefore, the insured reasonably should have known of the decay before the collapse occurred.
Therefore, the collapse was not caused by hidden decay and there was no coverage under the policy.