Introduction

Determining the differences

A tunnel is not a building

Building or structure or what?

Structural injury under the X, C, or U hazards

Coal conveyor tower is not a structure

A bridge is not a building

A dam is not a building

Other issues

Conclusion

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Introduction

Why do some property and liability coverage forms and endorsements differentiate between a building and a structure? What is the significance if both terms are viewed differently insofar as insurance coverage is concerned? In referring, for example, to the ISO Building and Personal Property Coverage Form (BPP), CP 00 10, note that, for purposes of covered property, the word "building" means building or structure without further commentary. Does the word "or" mean that the word "building" in this form is synonymous with the word "structure"? Or, does it mean that a building, which is a structure, is covered along with any structure that is not a building?

Here is another perspective: if building and structure are one and the same, it would appear that it is unnecessary to repeat "structure" when "building" is mentioned. An example, again referring to CP 00 10, under the property not covered section, are foundations of buildings or structures. Do structures have foundations? Another question is that, since the word "building" in the covered property section of the BPP means building or structure, why is it again necessary to repeat the word "structure" in relation to foundations? Also, under coverage extensions, if CP 00 10 covers a building, there is an extension of coverage that applies to new buildings. If a building also means a structure, can one assume that the coverage extension dealing with new buildings also applies to new structures or only to structures that are buildings?

The causes of loss forms also can generate questions. For example, the additional coverage of collapse in the standard ISO special causes of loss form is said to apply to a building or any part of a building. Does this mean that collapse coverage applies solely to a building or a part of a building even though a building means a structure, or is coverage limited solely to a building and not to a structure that is not also a building?

To be fair here, this issue is not limited to ISO forms. One can find numerous examples in independently filed property, liability, and specialty forms, on a commercial and personal lines basis, that mix the terms "building" and "structure." The Transportation Coverage Form, IM 7250, of the American Association of Insurance Services (AAIS), for example, defines "terminal" as "a building where covered property is transferred between vehicles." Suppose property in transit is on an open air dock or some other structure that does not have four walls and a roof and there is a loss. Can an insurer be well within its rights to deny coverage? Quite obviously, if there is a difference between a building and structure, there could be a gap in coverage to the detriment of insureds, as well as an ambiguity to the detriment of insurers. Much will likely depend on the nature of the claim and the amount being sought (the latter being the primary reason many insurers do not want to pay).

 Determining the Differences

Based on this brief exercise, two items are important. The first is how the policy describes the property, and the second is how the words "building" and "structure" are defined and whether there is a difference.

The first item, referring to the item of property (i.e., how the building or structure is described in the policy declarations) is important, to the extent an insurer requires a description. If the declarations page describes the building or structure, this may help to alleviate any issues between the insured and insurer in case of some dispute. It may even provide a red flag when reading the coverage form or endorsement and noticing the different treatment of building and structure, to the extent that is done even before a loss or claim occurs. When, however, the policy declarations page simply identifies the property by address, the underwriter is not going to know if the covered property is a building or a structure that is not a building.

Moreover, the insured is also not going to know if the covered property is actually covered when a loss occurs. A great deal is going to depend on how much effort goes into determining the elements of the covered property, such as its construction, location, occupancy and protection. The problem is that this subject is not solely limited to property insurance. It also involves inland marine and liability insurance, on a commercial and personal lines basis.

The second item deals with determining the exact difference between a building and a structure. Just to provide a flavor of what has been perceived to be a structure is Katsoff v. Lucertini, 103 A.2d 812 (1954), which held that a building is always a structure, but not all structures are buildings. Also, in Seattle Monorail Services v. Affiliated FM Ins. Co., 2005 WL 2333482, the court held that, under the terms of a commercial property policy, a monorail train was an integral part of the structure.

There might have been a reason, in the early stages of underwriting, to refer to these items separately. If an underwriter has all of the information necessary to underwrite a structure, why couldn't forms simply refer to some term other than building or structure, such as covered property or property not covered? When an insurer denies coverage and pulls out all stops to prove there are significant differences between the meanings of building and structure, it is good reference material for future arguments, but not so good if the meaning results to the detriment of the insured. Also, the differences between these two terms are seldom, if ever, taken into consideration at the time insurance is purchased. The differences between the two become apparent when the court finally makes its decision following denial by the insurer.

 A Tunnel Is Not a Building

A case in point involving the difference between a building and a structure is Montana Rail Link, Inc. v. The Travelers Indem. Co., 2011 WL 578690, which involved the collapse of part of a railroad tunnel under construction to widen it. The court held that a tunnel was a structure and not a building and therefore not covered.

While this conclusion may seem to make sense, given that a tunnel was involved, courts can be whimsical when it comes to insurance subjects being litigated. Why the court in this case displayed that attitude is uncertain, but here is what it had to say about this situation:

The Mullan Tunnel fell in. Now the relationship between the insurance company and its insured has fallen out. As a result, Montana Rail Link, Inc., wants a declaration that Travelers Indemnity Co. (Travelers) is obligated to pay expenses incurred as result of a collapse of the tunnel. The railroad claims that salt has been added to its wound in the handling of its claim, so it also alleges a violation of the unfair claims settlement practices provisions of the Montana Unfair Trade Practices Act.

The question presented by summary judgment is whether a tunnel is a hole, or whether as a whole, a tunnel is a building. The railroad rests its case wholly on the notion that a roof alone makes a hole a building. The insurance company's hole card is its argument that a hole is a hole and bricks alone do not make a building within the meaning of the policy.

Briefly, the factual background is as follows. Trains traveling on the Northern Pacific Railroad line cross the Continental Divide through the Mullan Tunnel. Built in 1881, the tunnel's original construction included more than 3,000 linear feet of three course brick arched ceiling. Montana Rail Link (MRL) hired LRL Construction Company (LRL) to widen the tunnel. Prior to the work, LRL purchased a Railroad Protective Liability policy identifying MRL as the named insured. LRL began the project in the spring of 2009. In the summer of that year, decomposed granite collapsed a section of the tunnel and buried the track. As a result, the collapse completely closed the tunnel and blocked rail traffic for approximately twenty-five days.

By its description, this event would appear to have been something very costly. The insurer of the Railroad Protective Liability policy maintained that damages incurred as a result of that collapse were not covered by the first party property coverage section of the policy. The reason was that, while the insurer agreed to pay for physical damage to property, those words were defined to mean "direct and accidental loss or damage to rolling stock and their contents, mechanical construction equipment or motive power equipment, railroad tracks, roadbeds, catenaries, signals, bridges or buildings". (Emphasis added.)

MRL (named insured) asked the court to declare that the tunnel was encompassed by the word "buildings," as that term appeared in the policy, but was not defined therein. The insurer, on the other hand, insisted that the policy did not cover the damages, because tunnels are not buildings and they were not otherwise listed in the policy.

The named insured, MRL, reasoned that the state courts should define building as "any structure, more or less permanent, with walls and a ceiling, and used for human habitation, commercial or industrial purposes". MRL drew its definition of building from such treatises and dictionaries as Am Jur. 2d Insurance ("any structure with walls and a roof is a building within such ordinary meaning"); Couch on Insurance, Sec. 20:21 ("defined as a structure or edifice enclosing a space within its walls and usually, but not necessarily covered with a roof"); Black's Law Dictionary, 9th Ed., ("a structure with walls and roof, esp. a permanent structure").

Arguing that a tunnel has walls, a ceiling and is used for commercial purposes, MRL insisted that common sense and the ordinary understanding of the word "building" encompassed the Mullan Tunnel. Its reasoning was based on the premise that the tunnel was the structure built inside an excavation. MRL also argued that if the insurer desired a more restrictive definition, it should have excluded tunnels from the definition of a building. The court's response, however, was that a specific or restricted definition was not required, because the common sense and ordinary meaning of building did not include tunnels.

The insurer, in fortifying its position, claimed that the Mullan Tunnel could not be included in the common sense meaning of the term "building", even if the tunnel shared similar structural traits to a building. The insurer pointed to other objects, such as a mailbox or submarine that met the named insured's broad definition, but fell outside the commonsense definition of building. The insurer also cited the Oxford English Dictionary (2008) which defines tunnel as "an underground passage built through a hill or under a building or dug by a burrowing animal". This same source, said the insurer, also defines building as "a structure with a roof and walls."

The insurer also maintained that the Mullan Tunnel did not have walls and a ceiling in the same manner as a building. It supported its argument by pointing to the Engineering Agreement and the Tunnel Construction Agreement which did not refer to the tunnel's walls and ceilings but rather to the tunnel lining. It argued that the walls and ceiling were nothing more than the mountain.

In an effort to strengthen its position, the named insured, MRL, argued that the items listed before the term "building" in the definition of physical damage to property implied that the term "building" included tunnels. This argument also fell on deaf ears. This assertion, the court said, carried no weight because general terms at the end of a list of specific items are interpreted as referring to the same general class or kind of items. In the definition of "physical damage to property," "railroad tracks, roadbeds, catenaries, signals, [and] bridges," preceded the term "building" and are fixtures and real property associated with the roadway.

In a final attempt, MRL argued that a tunnel is a structure associated with a railroad that fell into the more general class of buildings. The court responded that this argument failed because the category "building" is more restrictive than the category "structure." While tunnels, the court added, may fall into the more general category of railroad structure, it fell outside the more restrictive category of buildings.

 Buildings or Structures or What?

Whether insurance coverage applies is a question of law for the courts to decide (whether the decision makes sense or not). For example, what the court in a pollution cleanup case seemed to be saying is an enigma: even though a policy covers buildings or structures, property cannot be considered a structure if it is not specifically covered by the policy.

The case is Hardy Oil Company, Inc. v. Nationwide Agribusiness Ins. Co., 2011 WL 6056599, and involved a family petroleum business that was confronted with a failed diesel fuel line and some remedial costs for cleaning up the fuel. The named insured, who claimed coverage under several sections of its package policy pertaining to coverages for property, income, petroleum property, and flood, maintained that much of the cleanup was performed to remediate damage to structures it owned, including a diked, secondary-containment area, above-ground storage tanks, and associated piping. Even though buildings and structures were said to be covered property, the areas of damage described by the named insured were said by the court to not be structures.

Since the policy did not define the term "structure," the court was not obligated to look any further than the language of the policy unless there was an ambiguity and the court did not see that an ambiguity existed. The term "structure," said the court, was not ambiguous because its meaning within the context used was not doubtful.

The named insured, however, offered two dictionary definitions of "structure," including "something (as a building) that is constructed" or "something built," and "something arranged in a definite pattern of organization." The named insured argued that the diked secondary-containment area surrounding the above-ground storage tanks, as well as the tanks and associated piping, fell within those definitions.

The court disagreed with that argument, saying that even though the secondary containment area was not raw land and was constructed to contain fuel spills, it was not constructed as a building. Furthermore, the court continued, when construing the phrase "according to the entirety of [the] terms and conditions as set forth in the policy," the appropriate interpretation of structure is something that is built or constructed like a building because structures are covered as building property under the policy.

Even if the term were ambiguous, the court went on to explain, the named insured's expectation that a secondary-containment dike, above-ground storage tanks, and associated piping would constitute a structure under the building property provision of covered property was not reasonable. The policy, the court added, specifically stated that land, retaining walls, underground pipes, drains, and paved surfaces were not covered property. These types of property, the court said, were more analogous with the areas at issue than with a constructed building.

(Interestingly, whether the named insured's Petroleum Property endorsement covered the cleanup and removal of oil was an issue left to the jury because coverage was contingent on loss by a specified peril.)

 Structural Injury under the X, C, or U Hazards

With the exception of some liability policies issued by insurers of the excess and surplus lines market, most insurers automatically include coverage for property damage arising out of the X, C, or U hazards, also known as explosion, collapse, or underground property damage. Arguments over what constitutes collapse or underground property are still possible but not as frequent as they once were. One such case that involved a dispute over the meaning of "structural injury" and "collapse" is Hartford Accident and Indem. Co. v. Crider, 392 F. Supp. 162 (1974).

Crider (the subcontractor) was in the business of boring and jacking, excavation work, and the construction of underground tunnels, which was covered by a Manufacturers and Contractors Liability (M&C) policy issued by the Hartford Accident and Indemnity Company. The work performed by the subcontractor that was the center of dispute involved the installation of sewer lines under U.S. Route 20 for a distance of 100 linear feet. The general contractor brought suit against the subcontractor alleging breaches of contract. As a result of these breaches, Route 20 allegedly subsided, resulting in severe damage not only to Route 20, but also to the underlying soil supports and underground construction already performed.

The coverage issue was whether the collapse hazard exclusion precluded liability coverage for the damages. (Parenthetically, both M&C and CGL policies until 1986 included exclusions for the explosion, collapse, and underground property damage hazards, which could be purchased by usually designating the respective exclusions with an "x" or by showing a premium charge in the policy declarations.) In this case, the collapse exclusion was not purchased. The M&C policy, in fact, specifically stated that the policy did not apply to property damage included within the collapse hazard (unless purchased). The policy defined the collapse hazard as including structural property damage as defined herein and property damage to any other property at any time resulting therefrom. "Structural property damage" meant the collapse of or structural injury to any building or structure due to (1) grading or land excavating, burrowing, filling, back-filling, tunneling, pile-driving, cofferdam work or caisson work, or (2) moving, shoring, underpinning, raising or demolition of any building or structure or removal or rebuilding of any structural support thereof.

There was no question that the subcontractor did not purchase the collapse hazard coverage although he apparently could have. The issue, nonetheless, was whether the allegations in the complaint filed by the general contractor alleged damages excluded by the collapse hazard.

The insurer argued that the collapse hazard excluded coverage for the damage to U.S. Route 20 for the following reasons: (1) Route 20 collapsed due to the subcontractor's operation; (2) Route 20 was structurally injured due to the subcontractor's operation; (3) Route 20 collapsed due to the removal of its structural support (formation of voids in the subsurface); and, (4) Route 20 was structurally injured due to the removal of its structural support.

The subcontractor made several arguments opposing the insurer's interpretation of the collapse hazard exclusion. It first argued that the road subsided and did not collapse. It then maintained there was no collapse of or structural injury to any structure because the rule of ejusdem generis limits the meaning of structure to a structure similar to a building. Consequently, the exclusion was inapplicable to a highway. The insurer countered with the argument that even if there were no collapse, there was structural injury to a building or structure, and as a result, the damage to Route 20 was not covered. The subcontractor countered that while there may have been structural injury to Route 20, there was no structural injury to a structure because the meaning of structure is limited to structures resembling a building.

While two cases were cited that pertained to the collapse hazard, the better reasoned one from the court's perspective was Associated Indem. Corp. v. Bur-Tex Constructors, Inc., 444 S.W.2d 338 (1969), in part because it was similar to the present case.

In the Associated Indemnity case, the insured was installing an underground oil sewer line. In the course of the installation, the insured's workers came to an area where a cement encased electrical conduct pipe was buried. Because the conduit crossed the path of the proposed excavation, the insured decided to burrow under the conduit since the sewer line was going to run much deeper than the conduit. Just as the sewer pipe was being placed in the tunnel, the tunnel and the side collapsed, causing the conduit's cement casing to break, damaging many of the electrical panels inside. The insured was covered by a general contractor's liability policy that contained a collapse hazard exclusion identical to the one in the Hartford policy.

The court in the Bur-Tex case analyzed the policy provision as follows:

The insurance company says that since the word "structure" may mean building, it is clear that by naming building and placing the word "or" after it, the meaning of building was excluded from the meaning of structure. Appellant argues that since the plain and ordinary meaning of "or" is disjunctive, it denotes alternatives as well as mutually exclusive choices and the word "structure" was placed in the contract to describe something other than building. Appellees, on the other hand, contend that the words "any building or structure" as used in the exclusion of the insurance policy must be defined to encompass things similar to buildings, such as bridges, towers, large chimneys, oil and gas storage tanks, and like structures. We agree with the appellees for several reasons.

The relatively specific word "building" when used alone and where it is followed immediately by a more generic word which includes within its meaning the foregoing category 'building', the latter general word should necessarily be limited to like things, such as buildings. The rule of ejusdem generis means literally "of the same kind." The rule is designed to aid in the interpretation of general words that follow a specific word or words and are construed to embrace objects similar in nature. The general word is not to be construed in its broadest sense, but is held to apply to things of the same kind or class as specifically mentioned; that is, in a more restricted sense.

The court concluded that since the conduit was not a structure like a building, the damage to the conduit was not excluded under the collapse hazard. The court in the Hartford case stated that the reasoning in the Bur-Tex case was applicable to the present case since Illinois followed the rule of ejusdem generis. Furthermore, the word "structure" had both a broad and narrow definition. It could mean anything that was built or constructed, or it could mean an edifice or building of any kind. The word's meaning, the court added, may not be taken in isolation, such as referring to a dictionary. Instead, its denotation must be ascertained by looking to the preceding language in the policy. The court explained further that use of the specific word "building" immediately followed by the word "structure" required that structure be taken in its narrow sense. Otherwise reference to building was unnecessary, since structure would, in the broad sense, include a building. Therefore, the court concluded, the word "structure" was limited to mean structures such as buildings. And, since a highway, was not a structure as defined, the collapse hazard exclusion did not bar recovery for the damages alleged against the subcontractor.

 Coal Conveyor Tower Is Not a Structure

One would think, in a vacuum, that a coal conveyor tower would fall into the category of being a structure, but much depends on the understanding of the parties and how the case is briefed. A case in point is Alderman v. The Hanover Ins. Group, 363 A.2d 1102 (1975), which involved a coverage question under a Manufacturers and Contractors (M&C) Liability policy covering a scrap iron and metal business. The named insured, conducting her deceased husband's business, contracted with another entity to remove certain items, including a coal conveyor tower, from a two-story building so that a new boiler could be installed.

While employees were attempting to remove this tower, made of steel, with a base about four feet square and extending through the first and second floors to about fifteen feet above the roof, it toppled to the ground, crushing and tearing parts of the roof and knocking down part of the brick wall of the second story of the building. The insurer denied coverage because of certain policy exclusions, including damage to property in the insured's care, custody, or control, which the court ultimately decided was not applicable. The second exclusion, which was the subject of this appeal, precluded coverage for "injury to or destruction of any property arising out of…the collapse of or structural injury to any building or structure due…(b) to moving, shoring, underpinning, raising or demolition of any building or structure or removal or rebuilding of any structural support thereof." The trial court concluded that the damaged building did not collapse nor did it suffer structural injury. In addition, none of the items, including the coal conveyor tower, was structural support or a structure. All of the items were pieces of equipment that the named insured had contracted to remove so that new boilers could be installed.

The court also considered the meaning of the term "structure" and examined cases from other jurisdictions. In addition to buildings and certain other freestanding constructions, the court explained that the term "structures" was held to include devices that were not in any strict sense independent buildings as, for example, bay windows, signs attached to the sides or roof of a building, pass ways, bridges or arches between buildings, and all forms of structures in mines, billboards, platforms, and staging. The court explained that the coal conveyor tower was not freestanding nor weight bearing. It also was not an integral part of the building. The coal conveyor, the court added, could best be characterized as a piece of equipment. Since the conveyor tower was held to not be a structure, the damage that occurred was held to be covered by the M&C policy.

 A Bridge Is Not a Building

As mentioned earlier, the additional coverage of collapse in the standard ISO special causes of loss form for use with commercial coverage forms is said to apply to a building or any part of a building. Although the language is somewhat different with personal lines dwelling and homeowners policies, collapse coverage is remarkably similar. This is explained by referring to Ortiz v. State Farm Fire and Cas.Co., 260 P.3d 678 (2011).

The plaintiff (named insured) owned a house where access to her property was over a bridge she owned. When the bridge collapsed, she made a claim under her homeowners policy but it was denied. The trial court concluded that collapse of the bridge was not covered under the policy, and the appeals court affirmed that decision.

It is not necessary to quote the entire provisions of the homeowners policy, but the additional coverage of collapse is quite similar to what applies in the ISO special causes of loss form, CP 10 30, for use with commercial forms. Thus, collapse coverage is limited to an entire building or any part of a building. It was undisputed that the named insured's bridge consisted of two logs spanning a river and was covered with decking, planks, and metal grates. The bridge collapsed under the weight of a large tow truck. The parties assumed, for the sake of the appeal, that the bridge collapsed within the meaning of the policy due to one of the causes covered by the policy. The only dispute was whether the bridge was a building within the meaning of the policy and, therefore, fell within the policy's exception to the exclusion for collapse.

In arguing that the collapse of a bridge was covered by the policy, the named insured did not seriously contend that the bridge was a dwelling since, in the words of the court, this would have been implausible. However, in the named insured's view, the bridge was a dwelling extension within Coverage A because it was a structure on the residence premises and, further, that the collapse of the bridge fell within the policy's exception to the exclusion for collapse, because the bridge was a building. In the alternative, the named insured contended that the meaning of the term "building," as used in the policy, was ambiguous and could have included the bridge. The insurer agreed that the case turned on whether the bridge was a building and reasoned that the term, as used in the policy, unambiguously did not include the bridge.

As did the trial court, the court of appeals concluded that the bridge was plausibly a dwelling extension within the meaning of Coverage A because, depending on the named insured's proof as to the location of the bridge, it was plausibly a structure. The exception to the collapse exclusion, however, provided coverage for the collapse of a building or any part of a building. Thus, the court stated that for coverage to apply, it depended on whether the bridge was a building or any part of a building.

To that end, the court resorted to dictionaries. Pertinent here, according to the court, was Webster's Third New International Dictionary (unabridged ed. 2002) that defined a "building" as "1. A thing built: a: a constructed edifice designed to stand more or less permanently, covering a space of land, usu. covered by a roof and more or less completely enclosed by walls, and serving as a dwelling, storehouse, factory, shelter for animals, or other useful structure…distinguished from structures not designed for occupancy (as fences or monuments) and from structures not intended for use in one place (as boats or trailers) even though subject to occupancy."

This dictionary provided both a broad definition—"a thing built"—and a narrower definition—"a constructed edifice…usu. covered by a roof and more or less completely enclosed by walls, and serving as a dwelling…distinguished from structures not designed for occupancy (as fences or monuments)." The named insured contended that, in the context of the policy, the broader definition was plausibly applicable and that the bridge was covered by the policy because it was "a thing built." The court, on the other hand, concluded that, considered in the context in which the term was used, the narrower definition was more plausible. Further, the court of appeal said, when the term was viewed in the context of the policy, as a whole, the narrower, common meaning of "building" was the only plausible meaning.

The court of appeals then went to the policy in question and stated, first of all, that the policy described, as an exception to its collapse exclusion, the "direct physical loss to covered property involving the sudden entire collapse of a building or any part of a building." The policy listed certain structures (awning, fence, patio, pavement, swimming pool, underground pipe, flue, drain, cesspool, septic tank, foundation, retaining wall, bulkhead pier, wharf, or dock) for which no collapse coverage was provided unless the loss was the direct and immediate cause of the collapse of the building. Implicitly, the court said, the policy contemplated that the listed structures were not buildings, despite the fact that they were "things built." Thus necessarily, the court added, the term "building" had a meaning narrower than simply a "thing built."

That conclusion, the court said, was borne out by the many references to "building" throughout the policy. The court then pointed some of these out. For example, the policy's windstorm or hail peril does not include loss to the property contained in a building caused by rain, snow, sleet, sand or dust except when the direct force of wind or hail damages the building causing an opening in a roof or wall and rain, snow, sleet, sand or dust enters through this opening. Also, the policy's falling object peril does not include loss to property contained in a building unless the roof or an exterior wall of the building is first damaged by a falling object. The court explained that it would have seemed from the various references to "building" that the policy contemplated the narrower, common meaning of building and that a building was a structure that could contain things and that had walls and a roof; the disputed bridge had none of these characteristics, said the court. It therefore was the conclusion of the appeals court that, under the unambiguous terms of the policy, the collapsed bridge was not a building within the meaning of the homeowners policy and that collapse of the bridge was not a covered loss.

 A Dam Is Not Building

Another homeowners policy case that ended up with no coverage for its named insured is Bergeron v. State Farm Fire and Cas. Co., 766 A.2d 256 (2000). The plaintiffs (homeowners) purchased property, which consisted of a barn foundation, septic system, thirty-three-acre pond, and a dam that impounded the pond. The homeowners reconstructed the dam. They also purchased a builder's risk policy that was later converted into a homeowners policy upon substantial completion of their home. Four years after purchasing the property, the dam collapsed. Several engineering firms investigated its failure and concluded it failed because of piping. (Piping is the migration of materials of which the dam is constructed that creates an open flow, or pipe within the dam. The dam's design and construction caused it to be susceptible to piping.)

 The homeowners brought a petition for a declaratory judgment to determine whether their policy covered the dam's failure. They contended coverage applied for this loss because the dam was a building, which collapsed either from an explosion of part of the dam or hidden decay. The trial court, however, found that the insurer had met its burden of proving that the policy did not cover the incident because the dam was not a building nor was its failure caused by an explosion or hidden decay.

 On appeal, the homeowners contended that the trial court erred by construing certain undefined terms in the policy, including "explosion," "building," and "hidden decay, " and failing to find coverage under the " any resulting loss" section of the policy. The insurer proceeded with essentially the same arguments as were made in the State Farm case dealing with the bridge collapse. The insurer, thus, resorted to dictionary definitions, legal treatises, and the policy language to show that there was no ambiguity and no coverage. In the final analysis, the dam was held not to be a building.

 Other Issues

The issue of whether certain property is considered to be a building or structure is not limited to insurance coverage. A variety of the issue has produced court decisions, which admittedly are not particularly helpful for insurance purposes, even though some of these decisions have been relied on to make a coverage case. In other words, if there is a complete absence of insurance case law on which to rely for one's argument, these other noninsurance-related cases will likely be introduced. The same goes when there is a dearth of property cases and attorneys cite cases having to do with liability insurance to buttress their arguments.

An example of such noninsurance-related cases is The Town of Erie v. Eason, 18 P.3d 1271 (2001). The Town of Erie sought to enjoin a landowner who had not obtained a building permit from using semi-trailers as rental storage units. In granting the injunction, the trial court held that a building permit was required, reasoning that the semi-trailers were structures within the meaning of the Uniform Building Code (UBC) because the landowner had intended to use the semi-trailers as public rental storage units. On appeal, the court of appeals reversed the trial court's decision, concluding that semi-trailers did not fall within the purview of the UBC because they were not permanently affixed to the land.

Another example is Wilson v. Handley, 97 Cal. App.4th 1301 (2002). In that case, the court of appeal held that a row of trees planted along or near the property line between adjoining parcels to separate or mark the boundary between the parcels was a structure in the nature of a fence.

 Conclusion

One has to wonder why the Railroad Protective Liability policy in the first discussed case of Montana Rail Link referred to the term "buildings" and not "structures" given that a tunnel is a structure. It is probably a fair assumption that railroads have more exposures to structures than to buildings and, yet, this particular policy referred to buildings and not to structures. Considering the way insurance forms are traditionally drafted, it is doubtful that anyone gave any thought to that question. Reference to "buildings" has probably been borrowed from earlier forms. It, in fact, would not come as a surprise if no one, underwriter or policyholder, even noticed reference to "buildings" in that policy.

Here is another point to ponder and why the time has come to eliminate reference to building and structure in various coverage forms. (Some insurers have already done this with their builders risk policies.) Consider the architecture that is being produced around the world. One of these unusual designs that comes to mind is the structure that does not have four walls and a ceiling, such as the pyramid, triangular-shaped structure. The Luxor Las Vegas Hotel is an example of such a structure that based on most of the definitions cited earlier, could conceivably not qualify as a building. Are the four sides protruding from the walls or from the ceilings? If this hotel is not a building, does the property form properly describe it? Admittedly, readers may feel that it is a real stretch to say that such a structure is not a building, but stranger interpretations sometimes come about from court decisions. Is this hotel a structure or a building? It may not matter because of the way it is described in a policy, but such questions sometimes unexpectedly become crucial when policy language is interpreted by the courts.

It might have been difficult years ago to underwrite a structure that was not a building. Also, there might have been fewer structures in existence than there are today. But if coverage forms are properly underwritten (i.e., underwriters ask questions instead of acting on automatic information provided by standard applications), there is no reason why coverage forms need to refer to both building and structure. It would not take much to fix the forms. Of course, since forms differ, the approach will likely have to differ as well. Instead of saying, for example, buildings or structures, the forms could simply say building and structure or, better yet, solely mentioning structures, given that a building is a structure, but not all structures are buildings. What structures underwriters do not want to cover can be stated in the forms, as they do now when they preclude coverage for items such as fences, towers, or tanks.

In reading the cases discussed, what seemed to come clearer about the differences between reference to building and structure was the courts' rationale that the term "structure" is something that is built or constructed like a building; or to say it another way, a structure is limited to structures resembling a building. This would mean that the Luxor Las Vegas Hotel would be a structure since it does not have all the characteristics of a building but it does resemble a building. Using this line of reasoning, fences, tanks, towers, underground conduits, and tunnels could never be considered buildings or structures.

 Given the examples of coverage issues that have resulted from denials of coverage from insurers, insurance buyers need to examine their policies and insist on changes or clarifications from underwriters because once something happens, the person who will be the bearer of good or bad news will likely be someone who had nothing to do with the coverage form in the first place.

Original publication: June 13, 2013, titled Building versus Structure

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