Homeowner’s insurance policies are designed to cover many of the “ordinary” perils that a home may face such as fire, theft, a falling tree and the like. However, because not every eventuality can be foreseen, various insurance carriers’ policies are written to account for the “extraordinary” eventualities in different ways. For instance, a building collapse may be excluded by excluding some of its causes, such as “earthquake”, or “earth movement”. A building collapse may also be excluded by reference to its nature; sudden versus gradual. Typically, your average Connecticuter would not have much of a worry about an earthquake-type policy exclusion since your average Nutmeg State earthquake—which is a rare event in and of itself—does nothing more than rattle the knickknack shelf. However, a building can collapse for other reasons, such as substandard construction methods or materials. This is a real worry for those whose homes were constructed of concrete supplied by the JJ Mottes Company in the 1980’s and 90’s.
In the recent case of Metsack v Liberty Mutual Fire Insurance Company and Allstate Insurance Company (2017 WL 706599; 14-CV-01150[VLB]), the United States District Court for the District of Connecticut was confronted with two different insurance policies covering a home with a JJ Mottes foundation. The plaintiffs, the Metsacks, had owed the home since it was constructed in 1992. The Metsacks’ home had been insured by Allstate from the time of its construction through September of 2009, and by Liberty Mutual since. In the years following the construction, the Metsacks noticed minor cracking in the foundation, commencing prior to 2008. Despite these cracks, no problems were perceived with the foundation until April of 2014, when they noticed water infiltrating into the basement. Around that same time, a friend of the Metsacks observed the cracking and suggested that they speak with a contractor. During their conversation with the contractor, the Metsacks first learned that their foundation may be affected by the defective JJ Mottes concrete.
The Metsacks placed claims with both insurance carriers, and the separate experts retained by the Metsacks and the carriers confirmed that the foundation was, indeed, made of defective concrete. The Metsacks’ expert went further and opined that although the house was still safe to live in, the horizontal cracks indicated that the foundation was substantially impaired (which generally occurs between ten and eighteen years after the foundation is poured), and that the foundation walls will continue to weaken until they can no longer support the weight of the home. Both insurance carriers denied the Metsacks’ respective claims, and the Metsacks sued both carriers for coverage under the policies.
Both insurance carriers moved for summary judgment, arguing that the language of their respective policies barred the Metsacks’ claims. The Liberty Mutual policy language provided that the policy covered “direct physical loss … involving collapse of a building or any part of a building caused only by one or more of the following … (b) Hidden decay … or (f) Use of defective material or methods in construction, remodeling or renovation.” The Liberty Mutual policy excluded loss of a foundation, “unless the loss is a direct result of the collapse of a building”, as well as “settling, cracking, shrinking, bulging or expansion”. The Court rejected Liberty Mutual’s argument that the collapse had to effectively result in the building’s crumbling or becoming uninhabitable, finding that case law which provided that the “substantial impairment” of a building “so severe as to materially impair [its] ability to remain upright” sufficed. The Court also brushed back Liberty Mutual’s contentions that the structure at issue was not a foundation, and that the loss occurred outside of the policy period, finding that there were questions of fact as to whether these exceptions applied and that these issues had to be put to a jury. The Allstate policy similarly covered collapses caused by defective methods or materials used in construction. However, unlike the Liberty Mutual policy, the Allstate policy required that any such collapse be “sudden and accidental”. Based on that language, the Court found that Allstate established, as a matter of law, that there could be no circumstances under which the Metsacks’ claims against the Allstate Policy could be viable.
The takeaway from the Metsack case is that a homeowner—or any property owner, contractor, or anyone else covered under an insurance policy—needs to carefully read their policies to see what is, and what is not, covered. If you have any questions about what may be buried deep in your insurance policy, you should reach out to your insurance professional or your attorney.