"This is not the first case of a subfloor decaying due to the lack of ventilation."

COMMERCIAL PROPERTY – DECAY OR DETERIORATION EXCLUSION – CONTINUOUS OR REPEATED SEEPAGE OF WATER EXCLUSION – DEFECTIVE DESIGN EXCLUSION – COLLAPSE
Bella-Vita LLC v. Tower Ins. Co. of N.Y.
(Sup. Ct., New York Co., decided 12/1/2010)

I'm not an engineer or a builder, but even I know that it's not a good idea to pour four inches of concrete over a wood floor that hovers above an unventilated crawlspace through which a steam pipe runs.

Plaintiff owned a five-story building in lower Manhattan.  While showing the basement of the building to a prospective tenant, plaintiff's building manager discovered that the doorway leading into the basement was sagging.  A small piece of the basement's concrete floor was opened, revealing a rotting wooden floor system beneath the concrete with a steam pipe underneath.  Plaintiff's broker notified Tower, and it sent a licensed professional engineer to inspect.

Following his inspection, the engineer opined that the extreme moisture from the damp and cramped crawl space was causing the wood to rot and deteriorate.  He also believed that the condition had existed for about 15 years.  He rejected the idea that a recent escape of steam from a broken pipe was the cause of the decaying wood.  Based on the engineer's findings, Tower denied coverage to plaintiff for damages to the property, and plaintiff commenced this suit, alleging breach of contract.

In granting Tower's motion for summary judgment, New York County Supreme Court Justice Louis York found:

• the engineer's findings that the basement's wood joists, beams and subfloor were deteriorating, due “to high levels of moisture within the damp and unventilated crawl space” triggered the policy's exclusion for damages due to “rust, corrosion, fungus, decay, [or] deterioration, hidden or latent defect in property that causes it to damage or destroy itself”;
• the engineer's finding that the wooden subfloor had been exposed to water seepage in the crawlspace for over 15 years triggered the policy's exclusion for damages due to "[c]ontinuous or repeated seepage or leakage of water that occurs over a period of 14 days or more";
• "This is not the first case of a subfloor decaying due to the lack of ventilation. * * * [C]onstructing an unventilated crawl space is faulty design, because it is readily apparent that decay will ensue. * * * Given that the policy’s coverage does not include property damage deriving from defective design, Plaintiff is further barred from recovery."; and
• there was no coverage for a collapse of the insured building since the policy limited the scope of its collapse coverage to include only an “abrupt falling down or caving in of a building ... even if it shows evidence of cracking, bulging, sagging [or] bending.”  "Hence, a building in danger of collapsing is not covered under the policy."