"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."  

Action Against Property Insurers Dismissed Based on Finding of No Collapse

COMMERCIAL PROPERTY – COLLAPSE – NO ABRUPTNESS – WEAR & TEAR EXCLUSION – DETERIORATION EXCLUSION – EXPERT OPINION FROM AN ARCHITECT
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).

Court Finds That Insured Building Did Not "Collapse"

PROPERTY – "COLLAPSE" COVERAGE – NO AMBIGUITY FOUND
Yat-Saint Chiang v. Public Serv. Mut. Ins. Co.
(Sup. Ct., Queens Co., decided 12/4/2008)

Plaintiff's property was damaged during excavation and construction work being performed at the lot adjoining the plaintiff's property due to a failure to provide proper shoring and/or bracing.  Plaintiff claimed that the lack of underpinning resulted in the cracking and collapse of a third of the width of plaintiff's driveway, as well as the cracking of the foundation and several interior walls and ceilings of plaintiff's building.  Plaintiff submitted a claim under its multi-peril Dwelling Policy with Public Service Mutual for the damages to her property.  PSM disclaimed coverage on the ground that "earth movement" was not a covered peril and that the loss claimed was not a covered loss since it was not a collapse of a building resulting from a named peril.  Plaintiff commenced this action for breach of the insurance contract, and both parties moved for summary judgment.

In granting Public Service Mutual's motion and denying the plaintiff's cross motion, Queens County Supreme Court Justice Allan Weiss initially noted that although Public Service Mutual had disclaimed based in part on the earth movement exclusion in the policy, both parties were seeking summary judgment under the section of the policy entitled "Other Coverages: Collapse".

The "Collapse" section of plaintiff's policy provided, in pertinent part:

We insure for risk of direct physical loss to covered property involving collapse of a building or any part of a building caused only by one or more of the following:

*  *  *  *  *

f.  use of defective material or methods in construction, remodeling, or renovation, if the collapse occurs during the course of the construction, remodeling, or renovation.

Loss to * * * pavement, * * * foundation, [or] retaining wall, * * * is not included under items  * * * f, unless the loss is a direct result of the collapse of a building.

Collapse does not include settling, cracking, shrinking, bulging, or expansion.

In support of its motion, Public Service Mutual asserted that the plaintiff's loss was not covered loss because it did not involve the collapse of a building caused by an enumerated cause, specifically, defective construction on the insured premises.

In opposition plaintiff argued that the policy's "Collapse" provision was ambiguous because: (1) New York courts have found a "substantial impairment of the structural integrity of the building" constitutes a collapse without the need for the building to actually fall down; and (2) the policy did not define where the defective construction, a named cause of a collapse, must take place to trigger coverage.

In ruling in favor of Public Service Mutual and dismissing plaintiff's complaint, Justice Weiss found that there was no coverage under the policy's "Collapse" provision:

The court finds no ambiguity in the term "collapse" in this case inasmuch as the policy specifically defines collapse as not including settling, cracking, shrinkage, bulging or expansion. The plaintiff's building did not "collapse" for purposes of coverage under the additional coverage for collapse provision of the policy. The only damage to the building reported by plaintiff's expert are cracks in the foundation and interior walls (see Graffeo v. U.S. Fidelity & Guaranty Co., 20 AD2d 643 [1964], lv to appeal dismissed 14 NY2d 685 [1964]).

Even deeming the term collapse to be ambiguous and accepting plaintiff's argument that a substantial impairment of the structural integrity of the building can constitute a collapse of a building (see Royal Indem. Co. v. Grunberg, 155 AD2d 187, 188-190 [1990], there is no evidence of such impairment. Nowhere in the plaintiff's expert's report is there any claim that the structural integrity of the building is impaired much less that it is "substantially" impaired. While the plaintiff's expert reports that a portion of the driveway collapsed such a collapse is not the collapse of a building.  In addition, the policy expressly excludes loss to pavement unless caused by the collapse of a building. The damage to the driveway was not the result of the collapse of a building.

Inasmuch as the court has determined that the plaintiff's property did not sustain a collapse, the issue of whether an ambiguity exists as to the location of the construction which causes a collapse is irrelevant.