Disputed Facts on Cause of Collapse Results in Denied Cross-Motions for Summary Judgment

Tred R. Eyerly | Insurance Law Hawaii | January 22, 2018

Although the court concluded that the policy covered a loss caused by the weight of snow, disputed facts as to the cause of the collapse led to the denial of cross-motions for summary judgment. Freeway Drive Inv., LLC v Employers Mut. Cas. Co., 2017 U.S Dist. LEXIS 207165 (E.D Mich. Dec. 18, 2017).

Freeway Drive owned a single story commercial building insured by Employers Mutual Casualty Company (EMCC). The building sustained damage when trusses within the roof shifted and dropped, causing visible sagging. EMCC denied Freeway Drive’s claim.

Freeway Drive hired structural engineer Abdul Brinjikji to inspect the damage. He visited the building three times. On the first visit, he saw snow on the roof but could not estimate how much. Nevertheless, he opined that the collapse was caused by an overload of snow. He developed a plan to shore up the roof and repairs commenced.

After repairs were completed, Brinjikji visited the property a second time. He sill opined that the collapse was caused by snow load. His opinion did not change after this third visit.

EMCC retained an engineer, Richard Hamann, who also investigated the cause of the collapse. After the inspection, EMCC stated in a letter to Freeway Drive that the damage to the roof trusses was a result of fire retardant applied to the roofing structure when it was built. Over time, the fire retardant, along with moisture in the attic, resulted in structural failure of the trusses. EMCC concluded that the loss did not fall within the policy’s collapse coverage, that the damage was not caused by a “specified cause of loss” as defined by the policy, and that the loss was subject to the policy’s collapse exclusion.

After receiving EMCC’s denial letter, Freeway Drive tested a sample of the truss lumber for the presence of fire retardant. The test indicated the presence of small amounts of Boron, which was one of three major fire retardant tracer elements. But the amount of total fire retardant that permeated into the wood was minimal. Brinjikji later testified that Boron did not affect wood like earlier used fire retardants in older buildings did.

Freeway Drive sued EMCC and cross-motions for summary judgment were filed. The court first determined that the policy was “all-risk,” meaning the loss was covered unless the particular damage was specifically excluded.

Next, the court noted that “weight of snow” was a specified cause of loss” under the policy. While EMCC did not dispute that damage caused by weight of snow was covered under the policy, it contended that the plain language of the “Collapse Exclusion” barred coverage for collapse due only to the weight of snow. EMCC said that coverage could only be extended if a snow-load collapse occurred after construction, remodeling, or renovation was complete, and because of the use of defective materials or methods.

The court disagreed with EMCC’s attempt to limit the analysis to the “Additional Coverage – Collapse” provision of the policy. Although collapse was excluded from the policy, the exclusion did not apply if coverage was provided under the Additional Coverage-Collapse provision or if the collapse was caused by a “specified cause of loss.”

EMCC argued that the collapse exclusion exception had to be read in harmony with the Additional Coverage – Collapse provision. Interpreting the policy to provide collapse coverage for collapse solely due to a specified cause of loss rendered as surplusage the unambiguous language of the Additional Coverage-Collapse provision.

Freeway Drive argued that the plain language provided that collapse coverage was restored under the exclusion when the collapse was due to the weight of snow. The Additional Coverage – Collapse clause and the “specified causes of loss” provision were distinct exceptions to the collapse exclusion that had to be applied separately.

The court agreed with Freeway Drive. The policy provided coverage for collapse due only to a “specified cause of loss,” i.e., the weight of snow, regardless of the Additional Coverage – Collapse provision.

Nevertheless, the experts disagreed on the cause of the loss, creating a factual dispute as to whether the weight of snow, or deterioration due to fire retardant, caused the collapse. Hamann said that further testing was needed on the roof trusses. In the first test, traces of fire retardant were found. Brinjikji could not say for certain that the conditions in which the retardant could have affected the trusses did not occur. Neither party could demonstrate the absence of a dispute of material fact that either the weight of snow, degradation, or both, caused the loss. Therefore, summary judgment could not be granted to either party.

No Coverage for Building’s First Collapse, But Disputed Facts on Second Collapse

Tred R. Eyerly | Insurance Law Hawaii | January 3, 2018

While building’s first collapse was not covered, there were disputed facts regarding the second collapse, leading to a reversal of the order granting summary judgment to the insurer on both collapses. Intergroup Int’l Ltd. v. Cincinnati Ins. Cos, 2017 Ohio app. LEXIS 5099 (Ohio Ct. App. Nov. 22, 2017).

Intergroup bought a building after it was inspected. While leaks on the roof were repaired and a roof truss that was sagging was replaced, the inspector found the roof to be in good shape.

Over two years later, in 2014, a truss holding up the roof moved overnight and was sagging in place. Intergroup attempted to stabilize the sagging truss by engineering a metal support beam to hold it up. Intergroup also notified its carrier, Cincinnati, and filed a claim. Cincinnati hired Rudick Forensic Engineering to investigate. Eric Hauser, a senior forensic engineer, went to the site and inspected the property. His report stated that two trusses had experienced “differential movement” and Intergroup had installed a steel post to hold up the two compromised trusses. Two employers informed Hauser that it had rained the night before and that water was leaking down through the roof directly above the damaged areas.

Cincinnati denied the claim based on Hauser’s conclusion that the damage to the roof truss was not storm related but due to varying degrees of rot and decay. Cincinnati quoted portions of the policy in the denial, including exclusions for wear and tear, and deterioration. A rider to the policy provided coverage for a sudden collapse caused by decay hidden from view. Cincinnati believed that the presence of decay was an open and obvious condition that occurred over a period of time.

In 2015, a large portion of the roof, approximately 4,000 square feet) collapsed inward onto the interior floor of the building. Intergroup filed a second claim with Cincinnati. Hauser was sent to investigate again. When Hauser removed roof fragments, he observed similar rot and decay that had been present during his 2014 inspection. He opined that surface runoff penetrated through openings in the roof membrane, causing leaks that may or may not have damaged the interior. He also felt that the rot present had developed from exposure to moisture over an extended period of time. Cincinnati again denied the claim because Intergroup had been put on notice due to the 2014 truss failure, which occurred in the same general area as the 2015 failure.

Intergroup sued. Intergroup alleged it never noticed decay to the roof. Further, the expert report on the 2014 even was inconclusive about the cause of loss and in many ways confirmed that there was no apparent or visible rot in the roof structure. Intergroup also alleged that the 2015 collapse was the direct result of Cincinnati’s failure to provide coverage so that the 2014 damage could be properly addressed.

Cross motions for summary judgment were filed. The trial court ruled in favor of Cincinnati.

On appeal, the court noted that Intergroup had failed to submit any expert report or testimony that would explain how the 2014 storm was causally connected to the resulting loss. Therefore, Intergroup offered only its own assertions that the storm caused the loss. But these assertions did not create a genuine issue of material fact. Hauser’s expert opinion asserted there were no patterns of damage or torn portions of the roof that would suggest that the roof had been compromised by exposure to wind. The Hauser report was direct and credible evidence that a storm did not cause the loss. Therefore, the trial court did not err by finding in favor of Cincinnati on Intergroup’s clams for breach of contract related to the 2014 claim denial.

Granting summary judgment on the 2015 claim was in error, however. Under the rider to the policy, there were outstanding genuine issues of material fact related to coverage under the collapse provision. Although Intergroup did not submit an expert report, it relied upon the deposition testimony of several employees who testified that prior to the collapse, they never saw rot or decay in the areas of the roof structure that collapsed in 2015. One employee, the maintenance supervisor, was in a position to notice rot and decay because he often repaired areas of the building that needed maintenance. He stated that he did not see rot prior to the 2015 event. Further, whether Intergroup was aware, or should have been aware, of the rot and decay was a question of fact for the jury. And whether the 2014 truss failure caused the 2015 collapse was also a genuine question of material fact. Accordingly, the court erred by granting summary judgment to Cincinnati on Intergroup’s 2015 claims.

Homeowner’s Claim for Collapse Survives Summary Judgment

Tred Eyerly | Insurance Law Hawaii | September 18, 2017

The insurer failed to present adequate evidence on summary judgment that damage caused by the collapse of a swimming pool was not covered. Klein v. State Farm Ins. Co., 2017 N.Y. Misc. LEXIS 3030 (Sup. Ct. N.Y. July 11, 2017).

Klein notified State Farm that his in-ground pool collapsed on February 5, 2014, with a side wall falling into the pool, causing damage to brick, borders and the patio around the pool. Upon inspection, State Farm’s agent found that the cover of the pool had partially fallen into the pool, and that the vinyl pool liner had a tear. State Farm covered the damage to the pool liner, but denied coverage for the in-ground swimming pool walls, the brick border and the patio surrounding the pool. State Farm maintained that the loss was due to a “collapse,” which was excluded under the homeowner’s policy.

The policy covered “the direct physical loss to covered property involving the sudden entire collapse of a building or any part of a building” caused by listed perils. The policy contained exclusions for wear and tear, faulty construction, earth movement and water damage.

Klein informed State Farm that the damage was caused by an arrow shot into his pool by an unknown deer hunter, which damaged the pool liner and then led to the pool collapse. Klein later found a piece of an arrow at the bottom of the pool. State Farm denied coverage, asserting that the swimming pool was not a “building” and that the collapse was not covered, even if caused by an arrow piercing the pool liner. Further, State Farm relied upon exclusions in the policy.

The court denied State Farm’s motion for summary judgment because its engineering report was not in an admissible form. Therefore, State Farm had not established from the language of the policy a prima facie case that damage to the pool walls, brick border and patio area was caused by wear, tear and the deterioration of the pool liner. State Farm also failed to establish that damage was caused by earth movement.

Collapse of Improperly Built Deck Not An Occurrence

Tred Eyerly | Insurance Law Hawaii | August 16, 2017

The court found that the insured’s faulty construction of an outside deck did not arise from an occurrence. Employers Mut. Cas. Co. v. West, 2017 U.S. Dist. LEXIS 113951 (N.D. Miss. July 21, 2017).

D.L. Action Construction Company (DLA) constructed multifamily dwellings. They were sued by the homeowners after a deck collapsed at one of the dwellings. Also sued was the subcontractor, Littrell Construction, who installed the deck. The homeowners alleged that Littrell knew that college students would be residing in the units and that the decks would be heavily used. The decks were attached to the building structure using only nails instead of bolts.

On November 22, 2014, the deck collapsed, causing everyone standing on the deck to fall onto cars parked below. Regarding injuries sustained in the fall, the homeowners claimed against Littrell for negligence, breach of warranty, misrepresentation, fraud, fraudulent concealment, and wanton, gross, and/or intentional conduct. DLA cross-claimed against Littrell, seeking indemnification.

Employers Mutual denied coverage because there was no occurrence. The court granted summary judgment to Employers Mutual. In his deposition, Jason Littrell testified that the method he used to fasten the deck, using nails secured into oriented strand board, would not be an appropriate method of fastening a deck used for live loads. Further, he testified that he knew people would use the deck.

Bodily injury or property damage, expected or intended from the standpoint of the insured, could not be the result of an accident. The result of improperly constructing the deck was the failure and collapse of the deck, which were will within Littrell’s foresight and anticipation. Consequently, there was no occurrence and Employers Mutual had no duty to defend or indemnity.

Court Finds That Split in Underground Storage Tank is Not a Covered Collapse

Christopher Kendrick and Valerie A. Moore | Haight Brown & Bonesteel LLP | July 5, 2017

In Tustin Field Gas & Food v. Mid-Century Ins. Co. (No. B268850, filed 7/3/17), a California appeals court ruled that a split in an underground storage tank, caused by the tank sitting on a rock for years, was not a covered “collapse” as a matter of law.

Tustin Field owned a gas station in Palm Springs. The installer of the underground storage tanks did not follow the manufacturer’s instructions to bury them in pea gravel or crushed rock. Instead, the installer just dug a hole, placed the tanks into that hole, and then covered them with “native soil” containing rocks, boulders and other debris.

The tanks were double-walled, steel with a fiberglass sheath. Sixteen years after installation, testing revealed that the fiberglass sheath on one tank was no longer intact. The tank was excavated and the fiberglass sheath was found to be cracked from the tank sitting on a nine-inch boulder. The insured paid to have the crack repaired and made a claim for the cost of excavating and repairing the tank.

The Mid-Century policy generally excluded collapse, but provided “Additional Coverage for Collapse” as follows:

“[Mid-Century] will pay for direct physical loss or damage to Covered Property, caused by a collapse of a building or any part of a building insured under this policy, if the collapse is caused by one or more of the following:… (b) Hidden decay;…(d) Weight of people or personal property;… (f) Use of defective material or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation. However, if the collapse occurs after construction, remodeling or renovation is complete and is caused in part by [an enumerated] cause of loss…, [Mid-Century] will pay for the loss or damage even if use of defective material or methods in construction, remodeling or renovation, contributes to the collapse.”

The subsection also specified that “Collapse does not include settling, cracking, shrinkage, bulging or expansion.”

Mid-Century denied coverage and in the following bad faith lawsuit, the trial court granted summary judgment to the insurer while denying the insured’s cross-motion for summary judgment.

The trial court concluded that there was no covered cause of loss because there had been no “collapse.” The court ruled that the insured had to show an “actual” collapse, but had failed to submit evidence that the tank “suffered a complete change in structure and lost its distinctive character as an underground storage tank.” The insured had shown, at most, that the tank was no longer usable under storage tank law because its outer sheath had been breached, but “a mere impairment of [the tank’s] structural integrity did not constitute an actual collapse.”

The appeals court affirmed. First, the court rejected the argument that if a structure is not usable it has necessarily collapsed. (Citing Sabella v. Wisler (1963) 59 Cal.2d 21 and Doheny West Homeowners’ Assn. v. American Guarantee & Liability Ins. Co. (1997) 60 Cal.App.4th 400.)

The Tustin Field court also rejected the argument that “substantial impairment of structural integrity” of a building constitutes collapse: “This is incorrect…. California law specifically holds to the contrary, at least where, as here, a policy excludes from collapse ‘settling’ and the like.” (Citing Doheny West, supra, and Stamm Theatres, Inc. v. Hartford Casualty Ins. Co.(2001) 93 Cal.App.4th 531.)

The Tustin Field court went on to reject a claim that ambiguity from the lack of a specific definition for collapse in the policy mandated interpretation in the policyholder’s favor, as well as rejecting the insured’s appeal to public policy.

The Tustin Field court distinguished Doheny West, supra, Stamm Theatres, supra, and Panico v. Truck Ins. Exchange (2001) 90 Cal.App.4th 1294, as all involving a broader meaning of collapse:

“[B]ecause the [Mid-Century] Policy excludes collapse from its definition of Covered Causes of Loss, and then creates a more limited ‘exception to the exception’ that re-extends coverage for collapse-related damage, but only ‘for direct physical loss or damage to Covered Property, caused by a collapse of a building or any part of a building insured under this policy, if the collapse is caused by one or more’ enumerated reasons. Because this revival of coverage for collapse does not include ‘risks of’ collapse (just collapse itself) and because the Policy nowhere covers damage ‘involving collapse,’ the broader definition of collapse discussed in Doheny West, Panico, and Stamm Theatres is inapplicable.”

The Tustin Field court also dismissed the insured’s use of expert testimony as inadmissible for the purpose of contract interpretation, and ruled that even if causation posed a factual dispute, it was not material to the result.

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