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).

Things That Go Boom -- Court Affirms Coverage for Loss Due to Contaminants Released Into Atmosphere by Explosion at Nearby Chemical Plant

PROPERTY – CONTAMINATION – "DIRECT PHYSICAL LOSS" – EXPLOSION – "WEAR AND TEAR" EXCLUSION
Trupo v. Preferred Mut. Ins. Co.
(4th Dept., decided 2/6/2009)

On January 5, 2002, the Diaz Chemical Corporation facility in the Village of Holley, Orleans County, New York, accidentally released a mixture consisting primarily of toluene, water (steam), and 2-chloro-6-fluorophenol (CFP) into outdoor air. Soon after the chemical release, residents of nearby homes complained of acute health effects such as sore throats, headaches, eye irritation, nosebleeds, and skin rashes.

The "release" occurred when a pressure build-up in heated storage vessel at the Diaz facility caused a pressure disc to rupture. The rupture resulted in a chemical discharge that visibly contaminated surfaces in the nearby neighborhood and produced odors that were reported as far as 12 miles away. According to Diaz, approximately 80 gallons of liquid were released. The mixture was reported to be mostly water (in the form of steam), toluene, and CFP. Droplets of CFP deposited on cars, houses, and other surfaces to the east-northeast of Diaz. On January 6 and 7, fifteen to twenty families voluntarily relocated with assistance from Diaz.

Many if not all of these families made first-party property coverage claims to their homeowners insurers. The Trupos were one such family. They claimed that their home and contents were damaged by the explosion and release of CFP, a contaminant. Many of the insurers to which those claims were submitted, including Preferred Mutual Insurance Company, denied coverage based on a variety of reasons. Preferred Mutual's reasons included that there was no direct physical loss from a covered peril, including explosion, and the policy's "Wear and Tear" exclusion, which negated coverage for, among other things, loss that resulted from contamination.

In AFFIRMING the motion court's denial of Preferred Mutual's motion and granting of the plaintiffs' cross motion for summary judgment, the three-justice majority (Centra, Green and Gorski) of the Fourth Department ruled that an explosion was the cause of the damage to plaintiffs' property and the policy's wear and tear exclusion was ambiguous and did not apply:

The policy issued by defendant provided coverage for "direct physical loss" caused by certain perils, including explosion. We agree with plaintiffs that the incident at the chemical plant constitutes an explosion under the policy and that the alleged contamination of their home was caused by that explosion. We further agree with plaintiffs that the exclusion relied upon by defendant, entitled "Wear and Tear," does not apply to this case. Pursuant to that exclusion, defendant would "not pay for loss which results from wear and tear, marring, deterioration, inherent vice, latent defect, mechanical breakdown, rust, wet or dry rot, corrosion, mold, contamination or smog" (emphasis added). We reject defendant's contention that, because the damage to plaintiffs' home arises out of pollution or contamination, the exclusion for "Wear and Tear" applies. Rather, we conclude that the exclusion in question is ambiguous and thus should be construed in favor of plaintiffs, the insureds (see generally White v Continental Cas. Co., 9 NY3d 264, 267; Belt Painting Corp. v TIG Ins. Co., 100 NY2d 377, 383). The title "Wear and Tear" would lead an average person to believe that the exclusion for "contamination" therein included only contamination that occurred over time, rather than a sudden occurrence such as the incident here.

The two-justice dissent (Scudder and Pine), while agreeing that the chemical plant incident constituted an "explosion" under the policy and that the alleged contamination of plaintiffs' home was caused by that explosion, disagreed that the policy's wear and tear exclusion was ambiguous and did not apply to negate coverage.  "Plaintiffs suffered a loss from contamination, and the policy specifically excludes loss resulting from contamination. '[U]nambiguous provisions of an insurance contract must be given their plain and ordinary meaning[.]'"  The dissent also disagreed with the majority that the "Wear and Tear" title of the exclusion rendered it ambiguous:

The majority focuses on the title of the paragraph containing the exclusion in question and concludes that it would lead an average person to believe that the exclusion for contamination was only for contamination that occurred over time. We disagree. Rather, we apply the principle of statutory construction that titles are given little weight. "The title of a statute may be resorted to . . . only in case of ambiguity in meaning, and it may not alter or limit the effect of unambiguous language in the body of the statute itself" (McKinney's Cons Laws of NY, Book 1, Statutes § 123 [a]). Inasmuch as the language in the exclusion in question is unambiguous and does not limit the exclusion to contamination that occurs over time, we decline to add such limiting language.

The majority also affirmed the motion court's decision denying that part of plaintiffs' cross motion for damages in the amount of approximately $144,000, and instead ordering a hearing on damages.

Why Mom Says to Get Out of the Pool When There's Lightning

PROPERTY – POOL COLLAPSE – CAUSE OF LOSS – WEAR AND TEAR OR DETERIORATION – LIGHTNING
Lynch v. Liberty Mut. Fire Ins. Co.
(3rd Dept., decided 1/8/2009)

Do you remember your flash-to-bang ratio?  For each five seconds you count between seeing a lightning flash and hearing the thunder, there is one mile between you and that lightning strike.  Most public swimming pools close when the flash-to-bang is 50 seconds (10 miles).  

The Lynches had an above-ground swimming pool in their backyard.  Liberty was their homeowners insurer.  During a bad thunderstorm in late June, the Lynches' daughter felt a huge explosion at the same time she saw a flash of light in the backyard, leading her to believe that the house had been struck by lightning.  When she and her father went into the backyard a short time later, it appeared that "the pool had exploded."  The Lynches submitted a claim to Liberty for that damage, which Liberty denied based on its inspection of the damaged pool and determination that the pool had collapsed due to the excluded causes of wear  and tear or deterioration.  The Lynches sued.

Albany Supreme granted Liberty's motion for summary judgment, dismissing the complaint, and the Lynches appealed.  In MODIFYING the order appealed from to deny Liberty's summary jugdment motion, the Third Department found that the plaintiffs had created a question of fact as to whether lightning was the cause of their swimming pool's collapse:

[D]efendant offered the deposition testimony of its claims representative and one of its pool inspectors, both of whom denied seeing any evidence such as charring and burning that lightning struck the pool. On the other hand, they observed that the steel truss supporting the pool was rusted. In fact, the claims representative testified that the truss was so weak that it crumpled in his hands when he touched it and the pool inspector opined that the failure of the steel truss to support the pool wall had led to the wall's collapse. Coupled with the testimony of plaintiff George Lynch that the pool was almost 20 years old when the incident occurred, this evidence established that the policy provision concerning wear and tear was applicable in this case (see id. at 1016), thereby shifting the burden to plaintiffs to raise a question of fact.

Contrary to Supreme Court's determination, we find that plaintiffs met this burden. Lynch testified that he maintained his pool in a state of good repair and that yearly maintenance had been performed up until the time of the incident. Plaintiffs also provided evidence that there was a particularly bad thunderstorm on the night the pool was damaged. In addition, the sworn statement of plaintiffs' daughter was presented wherein she alleged that she felt a huge explosion contemporaneous to seeing a flash of light in the backyard, leading her to believe that the house had been struck by lightning. When she and her father went into the backyard a short time later, it appeared that "the pool had exploded."

Plaintiffs also offered the sworn statement of Ronald Casso, a licensed architect with over 25 years of experience repairing and building above-ground pools. Based upon his review of color photographs of plaintiffs' pool taken shortly after the incident, Casso concluded that the pool had "been subjected to an extreme trauma." He further noted that the structural makeup of plaintiffs' pool was such that, even if the steel truss in question had been rusted, such wear and tear would not have been responsible for the pool's collapse. In his experience, when pools collapse due to wear and tear, it is "always the last stage in a process of deterioration that is physically apparent," and he observed nothing that would indicate that such a process of deterioration had taken place here.

Finally, plaintiffs offered the sworn statement of Howard Altschule, a certified meteorologist who performed an analysis of the weather conditions on the evening of June 29, 2005, reviewing weather data and climatological records of the area in and around plaintiffs' residence. This analysis reflected data indicating numerous lightning strikes within a five-mile radius of plaintiffs' home at or about the time of the incident, including one particular bolt that struck "very close to the house in question." While defendant's attorney questions the proximity of that particular strike based upon his interpretation of the meteorological data, nothing in the record establishes his qualifications to do so. In all events, his contrary opinion would, at best, merely create a question of fact. Additionally, Altschule explained that lightning strikes can be "hot" or "cold," with the latter failing to leave charring or scorching in and around the area of a strike. Thus, based upon the data and the testimony of plaintiffs' daughter, Altschule concluded that lightning did strike plaintiffs' pool, causing the corner of the pool to collapse.

If "cold" lightning has enough power to lift a 44,000 ton ocean liner six feet into the air, a backyard above-ground swimming pool probably won't escape a direct strike unharmed.