Termites Did Not Cause a "Collapse" under the Policy in Place
January 2, 2018
In June of 2017, the Supreme Court of Kentucky affirmed the decision of the appellate court and determined that the mere presence of hidden insects did not constitute a collapse as defined in the homeowners policy that was in place at the time. The case is Thiele v. Ky. Growers Ins. Co., 552 S.W.3d 198 (Ky. 2017).
In 2004 Hiram Campbell purchased a homeowners insurance policy through Kentucky Growers Insurance Company (Ky. Growers). The policy was self-renewing and continued after Hiram's death in 2005. His daughter, Wanda Thiele, moved into the insured home after he passed away. She was also the executrix of his estate. Six years later, Thiele moved the refrigerator and discovered a termite infestation. An inspection of the house determined that there was more termite damage including damage to wall paneling and flooring. Thiele contacted Ky. Growers to make a claim under the homeowners policy that was in place. The provision under which she made her claim was the provision covering collapse, which stated "'we' pay for direct physical loss. . . involving the collapse of a building or part of a building caused by only the following: . . . (b) hidden insect or vermin decay". Under the policy, collapse does not mean settling, cracking, bulging, or expanding.
Since no true collapse, as defined in the policy, had happened, Ky. Growers denied the claim. Thiele filed a declaration of rights claim in the local Circuit Court. The trial court conducted a hearing and issued a judgment in Thiele's favor. On appeal, the Court of Appeals unanimously reversed the trial court's decision. The Supreme Court of Kentucky affirmed the Court of Appeals decision.
The word "collapse" has been defined in a court case from 1962, Niagara Fire Ins. Co. v. Curtsinger, 361 S.W. 2d 762, 763 (Ky. 1962). Curtsinger used the Webster Dictionary definition to define "collapse" as (1) to break down or go to pieces suddenly, especially by falling in of sides; to cave in . . . It seems to us that the mere subsidence of the floor of the porch, which pulled it and the roof away from the building a few inches, cannot be regarded as the collapse of any part of the building". It is undisputed that the damage in Thiele's case did not constitute a "collapse" under the Curtsinger definition, but the damage to the Thiele home was more extensive than that in Curtsinger. Thiele asked the Court to adopt the more lenient majority rule which states "the structure not be in imminent danger of collapse, but the damage to it must substantially impair the structural integrity of the building. The damage must alter the basic stability or structure of the building in order to constitute a 'collapse.'" The Court has consistently held that the words in insurance policies, if clear and unambiguous, should be given their plain and ordinary meaning, and a significant number of states still adhere to the plain language interpretation of the word "collapse." The Court found no reason to depart from the Curtsinger decision.
Editor's Note:
This is another lesson for insureds to always pay close attention to the policy language before submitting a claim. Insurance policies are interpreted very strictly and coverage will not apply if the described damage has not occurred. The dissenting judge in this case disputed the Court's conclusion that "it is undisputed that Thiele's residence has not 'collapsed' under Curtsinger's definition. There was significant damage to the house, and it was prevented from "collapsing" due to four of the walls being made primarily of concrete. The doctrine of reasonable expectations dictates that the policy must be interpreted in favor of the insured if the policy creates a reasonable expectation of coverage. The Ky. Growers policy created a situation in which it would be almost impossible for Thiele to make a successful claim, because of the way termites work combined with a significant portion of the building being impervious to termite damage.