Thursday, September 17, 2009

Action Against Property Insurers Dismissed Based on Finding of No Collapse

Rapp B. Props., LLC v. RLI Ins. Co.
(1st Dept., decided 9/15/2009)

Plaintiff sought payment from their commercial property insurers for damage to its building's south wall as a result of collapse, an allegedly covered peril, which occurred "[o]n or about July 19, 2005 and continuing thereafter."  The complaint cited damage consisting of "severe cracking, bulging, splaying and displacement of the exterior brick facade."  The insurers disclaimed coverage on the ground that the damage was "due to wear & tear and gradual deterioration not collapse."  The policy's additional coverage provisions defined collapse as respects buildings as follows:
a.  Collapse means 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 the building cannot be occupied for its intended purpose;
b.  A building or any part of a building that is in danger of falling down or caving in is not considered to be in a state of collapse;
c.  A part of a building that is standing is not considered to be in a state of collapse even if it has separated from another part of the building;
d. A building that is standing or any part of a building that is standing is not considered to be in a state of collapse even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.
Plaintiff sued its insurers and two entities that had installed an outdoor sign that allegedly contributed to the failure of the building's south wall.  New York Supreme denied the parties' respective motions for summary judgment and all parties appealed.

In MODIFYING the order to grant the insurers' motion for summary judgment dismissing plaintiff's complaint against them, the First Department held:
The interpretation of an unambiguous provision of an insurance contract is a question of law for the court (White v Continental Cas. Co., 9 NY3d 264, 267 [2007]. Accordingly, regardless of the cause or causes of the damage, it was error for the court to deny the insurers' motion, because there was no collapse within the meaning of the policies. Michael H. Rappaport, plaintiff's managing member, testified that the building and its south wall were still standing three months after the damage was observed in July 2005. Standing alone, Rappaport's testimony suffices to belie any claim that the wall's collapse was "abrupt" within the meaning of the additional coverage provisions. John Paul Murray, plaintiff's architect, observed displacement of brick masonry units and opined that there was an "imminent risk that the wall would completely collapse." In light of subparagraph b above, which excludes imminent collapse from the definition, Murray's affidavit does not bring the occurrence within the coverage of the policies. In Rector St. Food Enters., Ltd. v Fire & Cas. Ins. Co. of Conn. (35 AD3d 177 [2006]), this Court held that a building that was "shown to have had two-to-three-inch-wide cracks in its facade and was sinking, out of plumb, and leaning" did not meet a materially identical definition of collapse. Rappaport's affidavit is also unavailing insofar as he claims to have discovered that bricks had fallen from the inside of the wall where it was covered by sheetrock and tile. As noted above, the wall was still standing. Tellingly, Rappaport describes the condition as hidden "decay," a phenomenon which, by definition, does not occur abruptly.  
The appellate court did affirm that part of the lower court's order that had denied the outdoor sign installer defendant's motion for summary judgment.  The First Department held that the plaintiff's architect's opinion that the tension created by tightly stretching the sign against its fasteners contributed to the failure of the south wall created a triable question of fact regarding the sign defendants' alleged negligence, precluding summary judgment to the sign defendants.  In rejecting those defendants' argument that the plaintiff's architect was not qualified to offer an opinion regarding the sign and the tension its attachment created on the south wall, the appellate court held:
The profession of architecture involves "the application of the art, science, and aesthetics of design and construction of buildings ... including their components and appurtenances ... wherein the safeguarding of life, health, property and public welfare is concerned" (Education Law § 7301).


Larry Rogak said...

With all due respect, a building or part of a building that appears to be in imminent danger of collapse according to the opinion of an architect, engineer or the building department, certainly presents the building owner with a conundrum, doesn't it? If he does nothing, and the building collapses and causes injury or damage to others, he is negligent -- but then he can collect insurance money under his property policy. If he does the prudent thing and takes remedial measures to prevent the collapse, then he forfeits his first party property coverage. Doesn't seem right to me.

Roy A. Mura said...

If the building owners had done nothing and the wall had eventually collapsed, there probably would be no coverage due to the policy's wear/tear and deterioration exclusion. Property insurance policies are not intended to cover a building owner's normal maintenance costs.