Court Upholds Denial of Collapse Coverage Where Building Still Stands

Tred R. Eyerly | Insurance Law Hawaii | August 29, 2018

The Michigan Court of Appeals affirmed the trial court’s decision finding the policy’s collapse coverage did not apply. Cmty. Garage v. Auto-Owners Ins. Co., 2018 Mich. App. LEXIS 2680 (Mich. Ct. App. June 19, 2018).

The insured operated a truck repair business. In June 2016, the insured’s place of business sustained damage due to failure of several trusses providing structural support to the building’s roof. The failure was due to latent construction defects leading to an insufficient load bearing capacity. The roof began to sag while one of the walls bulged outward due to the sudden pressure overload. The insured hired a construction firm to install temporary shoring to support the roof and prevent further damage. All of the building’s walls remained standing and, although the roof sagged, it also remained intact. However, the building could not be safely occupied until repairs were completed.

The insured submitted a claim to Auto-Owners under a property casualty and liability policy. Collapse was covered under the Additional Coverage section of the policy. But the policy required the collapse to be “abrupt.” meaning an abrupt falling down or caving in of a building or any part of a building, rendering the building unfit for its intended purpose. The claim was denied on the ground that the damage was not a covered “collapse” under the terms of the policy.

The insured sued and cross motions for summary judgment were filed. The trial court concluded that the building had neither fallen down nor caved in, as it was still standing. Therefore, there was no collapse.

The appellate court affirmed. Although one of the walls of the building bulged outward and the roof sagged, they nonetheless remained intact. While the roof may have been in imminent danger of caving in were the shoring to be removed, the policy excluded from coverage any part of a building that was simply in danger of falling down or caving in.

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