The Definition of Collapse is Questioned in Connecticut Courts
September 24, 2018
In a certified insurance coverage question that has been sent to the Connecticut Supreme Court, the United States District Court for the District of Connecticut asks whether homeowners or their insurance companies will have to pay for damage resulting from compromised concrete that prematurely deteriorates, and was used in tens of thousands of homes in Connecticut. The case is Karas v. Liberty Ins. Corp., No. 3:13-cv-01836 (SRU), 2018 U.S. Dist. LEXIS 71844 (D. Conn. Apr. 30, 2018).
Liberty Insurance Corp. denied coverage under Steven and Gail Karases homeowners insurance policy for a loss to their basement walls. The Karases sued Liberty for breach of contract, breach of the implied covenant of good faith and fair dealing, and the commission of unfair and deceptive practices. Liberty moved for summary judgment, which was denied. The main question being asked was whether the definition of “collapse” given in a previous Connecticut case (Beach v. Middlesex Mutual Assurance Co.) applied in the case at hand. Liberty sought to certify the question to the Connecticut Supreme Court for a final ruling.
The Karases home was among tens of thousands built in Connecticut between 20 and 30 years ago with concrete supplied by the J.J. Mottes Concrete Company. The stone that was used contained a ferrous mineral that reacts with water, oxygen, and concrete paste to form expansive secondary materials which, when they expand, destabilize the concrete leading to premature deterioration. In 2013 the Karases noticed that their basement walls were cracking, crumbling and deteriorating in what they later found out to be the typical fashion for concrete poured by Mottes. They filed a claim with Liberty, who denied the claim the same day asserting that the damage was caused by deterioration which is not covered by the policy. Less than a month later, the Karases filed suit against Liberty stating that the loss was a “collapse” as defined in the case mentioned above, Beach v. Middlesex Mutual Assurance Co. The Liberty policy's “collapse” section is as follows. “We insure for direct physical loss to covered property involving collapse of a building or any part of a building caused only by one of the following . . . (b) hidden decay. . . (f) use of defective materials or methods in construction, remodeling or renovation. . . . Collapse does not include settling, cracking, shrinking, bulging, or expansion.”
In the Beach decision, the Connecticut Supreme Court held that the term “collapse” when otherwise undefined, was “sufficiently ambiguous to include coverage for any substantial impairment of the structural integrity of a building” and specifically rejected the argument of the insurer that “'collapse' . . . unambiguously contemplates a sudden and complete falling in of a structure.” So, the true question at issue is whether the damage constitutes a “collapse” under Beach.
The reviewing judge determined that Beach provided the relevant standard in regards to the interpretation of the term “collapse.” So, the question being sent to the Supreme Court is what constitutes “substantial impairment of structural integrity” for the purposes of applying the “collapse” provision of the homeowners insurance policy?
Editor's Note: The definition and provision of collapse has changed over time. In this case they determined that the interpretation that is included in the Beach case applies here, as collapse was not defined in the policy. The question now is was the damage caused by the faulty concrete substantial impairment, and what kind of standard applies to that determination of collapse. Alternately, as mentioned above and rejected by Beach some argue that collapse should be defined as “a sudden and catastrophic type event.” If that definition is applied in this case, the damage to the home of the Karases would not be covered.
Because of this very issue ISO changed the definition of collapse in the 2000 homeowners policy to directly state that collapse is “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 a building cannot be occupied for its intended purpose”. This change in language removed the confusion for those using the ISO language.
Since there were so many Connecticut homes built with concrete supplied by Mottes Concrete Co., the Courts decision in this case could affect tens of thousands of Connecticut residents and insurers.
Trigger of coverage may also become an issue in this case. Since the homes in question were built between 20 and 30 years ago, several insurers are likely involved across the years, and could potentially be on the hook for the damages.
In the U.S. law, a “certified question” is a formal request by one court to one of its sister courts for an opinion on a question of law. In this case, the United States District Court for the District of Connecticut asked for the opinion of the Connecticut Supreme Court. We are still awaiting the opinion of the Connecticut Supreme Court, which will likely not be published until late 2019.
The case referenced in this Litigation Watch is Beach v. Middlesex Mut. Assurance Co., 205 Conn. 246, 532 A. 2d 1297 (1987).