This story is reprinted with permission from FC&&S Legal, the industry's only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe.
A federal district court in Illinois, relying on a new exclusion in a homeowners' insurance policy, has ruled that a home had not “collapsed” where it “remained upright on its foundation” — even if it was cracked, bulging, sagging, bending, leaning, settled, shrunk, or expanded.
|The Case
In the lawsuit they filed against their homeowners' insurer, Travelers Home and Marine Insurance Company, Patrick and Colleen Walsh asserted that they had hired a contractor to build a second story addition off the rear on their one-and-one-half story brick bungalow on West Catalpa Avenue in Chicago, which originally had been built in the late 1920s.
According to the Walshes, they agreed with the contractor to expand the project to lowering the existing basement floor to be level with the basement floor of the rear addition.
|Contractor's wrongdoing?
The Walshes asserted that, as a result of the contractor's malfeasance, their home's foundation was compromised, failed, and cracked, rendering their home structurally unsound and unsafe, both for use as a dwelling and for the completion of the project.
Specifically, the Walshes asserted, the west brick wall laterally displaced, the first story floor/basement ceiling (including joists) sloped downward towards the west wall, and the second story floor moved. They added that cracks in the mortar and large gaps or separations opened – some through which daylight was visible — between the bricks and between bricks and window framing on the west wall, and that there were cracks in the mortar and large gaps or separations between the bricks on the east wall. The Walshes also said that they also observed cracks on interior walls, ceiling, and archways.
|Insured sought to recover from loss
No wall had fallen over to the ground, however, and no one observed that anything had come off the Walshes' home and fallen to the ground, such as bricks.
Soon after observing these conditions, the Walshes said, the contractor jacked and shored the west side of the home, and he manually removed bricks that had made the west exterior wall.
The Walshes sought to recover from Travelers for a loss caused by a “collapse.”
Travelers moved for summary judgment.
|The Travelers policy
The Travelers policy defined:
collapse
as:
an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied
Excluded from:
a state of collapse
was:
a building or any part of a building that is in danger of falling down or caving in[;]
a part of a building that was standing:
even if it has separated from another part of the building[;]
and a building or any part of a building that was standing:
even if it shows evidence of cracking, bulging, sagging, bending, leaning settling, shrinkage or expansion.
|The District Court's decision
The district court granted the insurer's motion.
In its decision, the district court, relying on Indiana Ins. Co. v. Liaskos, 697 N.E.2d 398 (Ill. Ct.App. 1998), and Gulino v. Economy Fire & Cas. Co., 971 N.E.2d 522 (Ill. Ct.App. 2012), explained that the legal meaning of “collapse” in a homeowners' policy, disregarding the exclusions, was “the sudden impairment/undermining of a structure even if the structure ha[d] not completely fallen down.” According to the district court, under this definition, the Walshes' home “would be in a state of collapse.”
The district court then pointed out, however that the Walshes' policy had one additional exclusion from coverage “that was not present in the policies addressed in Liaskos and Gulino.” It noted that the Walshes' policy did not cover a loss from a collapse if the building remained standing, even if cracked, bulging, sagging, bending, leaning, settled, shrunk, or expanded.
|Home remained upright
In the opinion of the district court, the policy, read as a whole, demonstrated that Travelers intended to cover “only a peril in which the building [lost] its character as a building.” The district court concluded that because the Walshes' home, “remained upright on its foundation after the loss incident,” their claimed loss was excluded from coverage as a collapse.
The case is Travelers Home and Marine Ins. Co. v. Walsh, No. 15 CV 3063 (N.D. Ill. March 14, 2017).
Steven A. Meyerowitz, Esq., is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. Email him at [email protected].
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