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Issue of What Constitutes a “Collapse” Sent to Connecticut Supreme Court

by | Jun 1, 2018 | Bad Faith, Homeowner Insurance, Insurance Exclusions, Insurance Law, Property Insurance, Unfair Insurance Practices

    There are more than fifty insurance cases pending in Connecticut courts against insurance companies arising from the denial of insurance claims under homeowner property policies for damage to homes due to defective concrete used in construction of the homes dating back to the late 1980s.  The property damage claims arise from concrete supplied from one particular company that included stone aggregate containing pyrrhotite.  Over time, the pyrrhotite reacts to water and oxygen, causing minerals in the concrete to crack and weaken the concrete basement walls of the buildings.  Thousands of homes in northeast Connecticut have been affected by the defective concrete issue and many homeowners have turned to their insurance carriers for assistance.  Many claims have been denied because the insurance companies contend, among other reasons, that their insurance policies do not provide coverage for a loss unless there is a “collapse” of the building caused by specified events.  Various policies contain different descriptions of what constitutes a “collapse” for purposes of coverage.

    While many homeowner insurance policies provide coverage for direct physical loss to covered property involving collapse of a building or a portion of the building, certain policies do not specify what constitutes a collapse.  The Connecticut Supreme Court previously ruled that the term “collapse”, when otherwise undefined was sufficiently ambiguous to provide coverage for any “substantial impairment of the structural integrity of a building.”  Beach v. Middlesex Mutual Assurance Co., 205 Conn. 246 (1987).  The Supreme Court in Beach rejected the argument that the term “collapse”, when not defined, means that there must be a sudden and complete caving in of a structure.  The Court, however, did not further define what constitutes a substantial impairment of the structural integrity of a building.

    In an opinion issued on April 30, 2018, Judge Stephan Underhill of the United States District Court for Connecticut requested guidance from the Connecticut Supreme Court on the question of what constitutes a substantial impairment of structural integrity to a building for purposes of coverage under a collapse provision in a homeowner’s insurance policy when the policy does not otherwise define the term “collapse”. Karas v. Liberty Insurance Group, 2018 WL 2002480 (D. Conn. 2018).  The insureds in Karas seek damages from Liberty Insurance for breach of contract, bad faith, and unfair insurance practices in violation of the Connecticut Unfair Insurance Practices Act and the Connecticut Unfair Trade Practices Act after Liberty denied their insurance claim.  The Liberty policy at issue provided insurance coverage for “direct physical loss to a covered building involving collapse” of the building or any part of the building caused by certain perils.  Like many other homeowner policies, the Liberty policy did not provide any additional detail as to what constitutes a “collapse” other than to state that a collapse “does not include settling, cracking, shrinking, bulging or expansion.”   Although Judge Underhill believes that the standard for determining coverage under a collapse provision previously established in Beach v. Middlesex is relatively clear, the court requested guidance from the Connecticut Supreme Court because of important issues of public policy and the fact that the issue is almost certain to recur in other cases.

    The Connecticut Supreme Court now has an opportunity to provide guidance on the issue of collapse coverage under homeowner policies which may affect numerous policyholders in Connecticut who have sustained damage to their homes due to defective concrete.  In addition to the question presented by Karas, the Supreme Court is set to decide whether coverage is available under a collapse provision in a homeowner policy for damage to the structural integrity of a building when the policy describes a collapse to require an abrupt falling down or caving in of a building. Jemiola v. Hartford Casualty Insurance Company, Supreme Court Docket No. 19978.  Stay tuned for future updates on these significant cases.    


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