Insured’s Collapse Claim Survives Summary Judgment

    The insurer's motion for summary judgment seeking to dispose of the insured's claim for collapse was denied. Life Skills, Inc. v. Harleysville Ins. Co., 2024 U.S. Dist. LEXIS 143658 (D. Mass. Aug. 13, 2024). 

    Life Skills was a non-profit social service agency providing residential and day habilitation services to adults with autism and intellectual and developmental disabilities. The head office was covered by a policy issued by Harleysville with building coverage limits of $3,038,300. 

    Damage occurred in a ceramics classroom located in the basement of the building. The floor sank between eight to twelve inches in the northeast corner. The ceramics classroom contained two large kilns weighing approximately 200 pounds. 

    A portion of the floor was removed, revealing that "everything was rotted" and that the structural beams underneath showed severe deterioration. The area was roped off to prevent access. A temporary support system was designed for the second floor above the ceramics classroom, which, due to the failed first floor structure, also become unsafe for occupancy. 

    Harleysville received notice of Life Skills' loss and assigned Michael Coffey, an in-house representative, to handle the case. Coffey retained an independent adjuster, Armand Permian, who inspected the site. Permian initially reported no issues regarding coverage. In his report, Permian stated that "the weight of (2) kilns in the Workspace Area caused the flooring to collapse and cause [sic] damage to laminate flooring, subflooring, concrete and/or blocks, joisting and a foundation wall."

    Coffey then emailed Life Skills to confirm that coverage was provided for damages resulting from hidden decay. He detailed an actual cash value payment of $49,481.06 and requested that Life Skills submit any invoices related to demolition costs they had incurred. Life Skills submitted an initial repair estimate of $264,000.

    Harleysville then sent a forensic structural engineer (EFI Global) to the property. Harleysville raised doubts about whether the observed facts and damages satisfied the policy's criteria for "Additional Coverage – Collapse" and indicated that it was withholding a decision on the claim until a thorough investigation could determine both parties' respective rights and obligations under the policy. 

    EFI then issued a report finding that: "the reported vertical displacement of the floor at the northwest corner of the ceramics room was caused by long-term deterioration, in the form of decay of the floor structure's timber beams." The report identified "elevated levels of moisture in the crawlspace" as the cause of the floor decay. Based on this report, Harleysville denied coverage. 

    Life Skills then filed suit seeking damages totalling $402,801.00. Count I of the complaint alleged breach of contract.

    The policy excluded "Collapse," defined as an abrupt falling down or caving in, or loss of the structural integrity of the building. However, the policy provided "Additional Coverage – Collapse," which preserved coverage for collapse caused by building decay that is hidden from view.

    Harleysville moved for summary judgment arguing the loss was not covered because the floor did not "abruptly collapse" as the policy stated. Although the floor sagged 8 to 10 inches, it did not completely fall to the ground. Further, even though the floor partially detached from the exterior wall, it remained standing. Life Skills, on the other hand, argued that the damage was a "collapse' because the Additional Coverage – Collapse provision, included "partial collapse" and did to specify a minimum vertical displacement to qualify as a collapse. At the very least, part of the building suffered an "abrupt collapse," because the damage was unexpected, and Life Skills had no knowledge of the hidden decay prior to the incident. 

    While both parties offered reasonable interpretations of the policy language as applied to the facts, the court was not persuaded that the policy language unequivocally supported the interpretation of either party. If Harleysville intended for a "collapse" to require the entire building to fall to the gourd immediately, this should have been explicitly defined in the policy. The collapse provisions, however, were internally inconsistent and created ambiguity. Therefore, because the policy language could support reasonable differences of opinion, the court construed the language in Life Skills' favor and denied Harleysville's motion for summary judgment on the breach of contract claim.