(Article from Insurance Law Alert, April 2019)
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The Second Circuit ruled that a collapse reinstatement provision in Connecticut homeowners’ policies does not make coverage available for claims arising from the cracking of basement walls that remain standing. Valls v. Allstate Ins. Co., 2019 WL 1442081 (2d Cir. Apr. 2, 2019).
The homeowners’ basement walls were constructed with allegedly defective concrete. They sought coverage for cracking of the walls under all-risk policies issued by Allstate. The policies expressly exclude coverage for damage arising from a collapse, but reinstate coverage for a limited class of collapse events, including a “sudden and accidental direct physical loss caused by . . . hidden decay . . . [or] defective methods or materials.” The provision also states that “[c]ollapse does not include settling, cracking, shrinking, bulging or expansion.”
Applying Connecticut law, the Second Circuit ruled that the collapse reinstatement provision did not provide coverage for the cracking of the basement walls caused by gradual deterioration of its concrete. The court reasoned that gradual erosion could not be deemed “sudden,” and that in any event, the provision expressly exempted settling and cracking from the scope of coverage. Based on this ruling, the Second Circuit also affirmed dismissal of cracking concrete coverage claims in two other cases (Lees v. Allstate Ins. Co., 2019 WL 1466939 (2d Cir. Apr. 2, 2019) and Carlson v. Allstate Ins. Co., 2019 WL 1466935 (2d Cir. Apr. 2, 2019)). A few days before the Second Circuit rulings, a Connecticut federal district court reached a similar conclusion in a dispute involving the same policy language. Huschle v. Allstate Ins. Co., 2019 WL 1427143 (D. Conn. Mar. 29, 2019).