Most homeowners’ policies – and property insurance policies in general – contain a limited coverage extension for “collapse.” The interpretation of that collapse coverage has been litigated around the country for decades, with different jurisdictions reaching considerably different results. The latest of these decisions, Valls v. Allstate Insurance Company, No. 17-3495-cv (2d Cir. 2019), comes out of the Second Circuit, deciding the case under Connecticut law. The case presented a single substantive question: does the “collapse” provision afford coverage for basement walls which had significant cracking but remain standing? Both the district court (D. Conn.) and the Second Circuit Court of Appeal concluded that it does not.
In Valls, the plaintiffs owned a home in Connecticut which was insured by Allstate. The Allstate policy excluded “collapse,” but then contained a collapse coverage extension, which provided:
We will cover:
a) the entire collapse of a covered building structure;
b) the entire collapse of part of a covered building structure; and
c) direct physical loss to covered property caused by (a) or (b) above.
For coverage to apply, the collapse of a building structure specified in (a) or (b) above must be a sudden and accidental direct physical loss caused by one or more of the following: . . .
b) hidden decay of the building structure; . . .
f) defective methods or materials used in construction, repair, remodeling or renovation.
Collapse does not include settling, cracking, shrinking, bulging or expansion
The Valls noticed several horizontal and vertical cracks in their basement walls, but the walls remained standing. The Valls made a claim to Allstate, arguing that the damage should be covered under the collapse provision. Allstate denied coverage, and the Valls filed suit. The district court granted Allstate’s motion to dismiss, concluding that the collapse coverage did not apply. The Valls appealed, and the Second Circuit Court of Appeal affirmed the district court’s decision, finding that mere cracking did not constitute “collapse.”
In reaching this conclusion, the Second Circuit looked at the policy’s requirements that the collapse be “sudden and accidental” and that it be an “entire collapse.” First, the Court noted that the erosion and cracking of the basement walls had occurred gradually, and therefore was not “sudden and accidental.” Second, the Court found that even if the cracking had been sudden, it would still not be covered because the damage could not be deemed an “entire collapse.” Although the Policy did not define “entire collapse,” it expressly excluded “settling, cracking, shrinking, bulging or expansion.” Accordingly, there was no coverage for the loss.
By determining that cracking is not an “entire collapse,” the Second Circuit joins several other states who have reached similar conclusions. For instance, in Higgins v. Connecticut Fire Ins. Co., 163 Colo. 292 (1967), the Supreme Court of Colorado held that the cracking and upheaval in a floor could not be considered a “collapse.” Similarly, in Doheny W. Homeowners Ass’n v. Am. Guar. & Liab. Ins. Co., 60 Cal.App.4th 400 (Cal.Ct.App. 1997), the California Court of Appeal held that although “imminent” collapse may be covered, it does not include mere cracking or settlement.
Other states have reached the opposite conclusion. In Jenkins v. United States Fire Ins. Co., 185 Kan. 665 (1959), the Kansas Supreme Court held that the “collapse” provision included the “settling, falling, cracking, bulging or breaking of the insured building…in such manner as to materially impair the basis structure or substantial integrity of the building[.]”
In response to cases such as Jenkins insurers began including the limitations in the collapse provision – such as requiring complete collapse and excluding cracking and settling. Many courts which have addressed the limitations in the collapse provision end up concluding that the provision does not provide coverage for settling and cracking. See, e.g. Krug v. Milles’ Mut. Ins. Ass’n of Ill., 209 Kan. 111 (1972) (distinguishing Jenkins due to different policy language). And yet other courts continue to apply a very broad application of “collapse” even with the added limitations. For instance, in American Concept Ins. Co. v. Jones, 935 F.Supp. 1220 (D. Utah 1996), a district court in Utah held that the term “collapse” was ambiguous, and that settling and cracking could still be “collapse” despite the fact that the policy stated that collapse did not include settling or cracking.
The Second Circuit’s Valls opinion is now part of a sizeable body of case law from around the country interpreting the “collapse” coverage in property insurance policies. Without a doubt, as the policy language evolves, litigation over the breadth and meaning of “collapse” coverage will also continue.