(Article from Insurance Law Alert, November 2019)
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In three decisions issued this month, the Connecticut Supreme Court ruled that “collapse” provisions in homeowners’ insurance policies do not encompass claims arising from defective concrete. These decisions illustrate the absence of insurance coverage for the vast majority of claims stemming from the faulty concrete used to construct the foundations of thousands of Connecticut homes.
In Karas v. Liberty Ins. Corp., 2019 WL 5955947 (Conn. Nov. 12, 2019), the court answered three certified questions. First, the court ruled that “substantial impairment of structural integrity” is the applicable standard for collapse under a Liberty Mutual policy. The insurer argued that the policy’s use of the term “collapse” is unambiguous because it specifically excludes settling, cracking, shrinking, bulging or expansion. The insurer therefore asserted that the “substantial impairment” standard—which applies when policies do not define “collapse” and the term is therefore deemed ambiguous—should not be taken into account when interpreting the policy at issue. Rejecting this contention, the court concluded that the language was insufficient to remove ambiguity as to the exact scope of “collapse.” In so ruling, the court noted that the insurer could have used more precise verbiage to limit collapse to a sudden and catastrophic event, had it so intended.
Second, the court clarified that the structural impairment standard includes a temporal element, requiring collapse to be imminent to qualify for coverage. The court noted that this conclusion was supported by Connecticut’s and other states’ case law and comports with a reasonable layperson understanding of the term “collapse.” The court emphasized that whether the evidence satisfies this standard in any given case necessarily turns on the specific facts, including in particular, expert testimony.
Third, the court ruled that a policy exclusion relating to the collapse of a “foundation” unambiguously applies to the basement walls of a home. The Connecticut Supreme Court deemed inapposite or unpersuasive federal and state court decisions that have “rejected insurers’ claims that the foundation of a home clearly includes the home’s basement walls” and have reasoned that “foundation” can reasonably be interpreted to refer solely to the footings beneath the basement walls.
On the same day that Karas was decided, the Connecticut Supreme Court also found no coverage available for concrete claims in a case involving substantially identical policy language. See Vera v. Liberty Mut. Ins. Co., 2019 WL 5955936 (Conn. Nov. 12, 2019). In a third case, Jemiola v. Hartford Cas. Ins. Co., 2019 WL 5955904 (Conn. Nov. 12, 2019), the court affirmed a trial court decision holding that Hartford had no duty to cover the costs of replacing crumbling walls. The court ruled that the collapse provision at issue—which defined collapse as “an abrupt falling down or caving in” such that it “cannot be occupied for its current intended purpose”—unambiguously foreclosed coverage given that the home remained standing and continued to be occupied by the homeowner.