I have a case where I am trying to determine how coverage would apply. The situation involves a building that has electric meters attached to an exterior wall that is below grade. To access the meters, a retaining wall was built of wood that has a set of steps to get to the meters so they can be read. This area that is below grade has drains that are designed to carry away water that enters this area.
During heavy rains the volume of water was too much for the drains, causing this area in question to accumulate water and saturate the ground. The material from under and behind the retaining wall washed out during the rains causing the wall to collapse.
The adjuster cited several other exclusions form which I would like your opinion. A copy of the denial letter is attached.
One of the reasons the insurance company denied coverage is because the retain wall was not part of a building. While it is true that the retaining wall was not attached to the building, it abutted directly to the building wall on both ends, and certainly is detrimental to the operation of the building. The meters cannot be read unless this retaining wall existed, and the OSHA compliant stairs existed. I believe because of this fact that the adjuster's interpretation is incorrect, and I would like your opinion related to the matter.
The adjuster also cited the following B. Exclusions b. Earth Movement, etc. g.Water and all those exclusions entail.
2.d.(4) Settling, cracking, shrinking or expansion.
3.a. Weather conditions. 3.b. Acts or decisions, etc.
What is your opinion on each of the cited exclusions? Specifically, could there be any coverage related to B. Exclusions g. Water (3) Water that backs up or overflows from a sewer, drain or sump?
I mention the above exclusion because the policy does include some coverage for Backup of Sewers or Drains.
Can you please provide some insight into the matter and let me know your professional opinion?
Ohio Subscriber
We are very sorry for the insured, but we do not see any coverage for this loss under the CP 00 10 04 02 property form, as per the insurer's denial. Since the retaining wall was not part of the building, it would be considered an other structure under the form. As such, there is no coverage for collapse.
As for the coverage for water backup from a sewer or drain, from the loss description this was simply an accumulation of heavy rains, not a backup or overflow. Therefore, the water backup coverage would not apply to this loss.
Part 2:
Subsequent question to the Ohio retaining wall collapse question: Thank you for your response. The insured is convinced this is a part of the building based on a state-revised code that treats a retaining wall as a building according to code. Do you have any court case knowledge that clearly defines retaining wall vs. building?
Answer:
A retaining wall does not meet the definition of a building. Merriam Webster defines building as a usually roofed and walled structure built for permanent use (as for a dwelling). The best definition we could find for a retaining wall is Dictionary.com's which defines it as a wall for holding in place a mass of earth or the like, as at the edge of a terrace or excavation. A wall is defined as a continuous vertical brick or stone structure that encloses or divides an area of land. This brings us back to the difference between a building and a structure, and thus a retaining wall is a structure, not a building.
The insured is entitled to his opinion, but we don't agree. There are state-specific endorsements that would address a situation where the state regulations preempt policy language. We do not have access to Ohio state-specific endorsements so we can't say if such an endorsement exists for this situation, but we are not aware of such an endorsement. We also checked for court cases but did not see any relevant to this issue.
Christine G. Barlow, CPCU
Christine G. Barlow, CPCU, is Executive Editor of FC&S Expert Coverage Interpretation, a division of National Underwriter Company and ALM. Christine has over thirty years’ experience in the insurance industry, beginning as a claims adjuster then working as an underwriter and underwriting supervisor handling personal lines. Christine regularly presents and moderates webinars on a variety of topics and is an experienced presenter.