Claims Practices

Building Must Fall To Trigger Collapse Coverage

Barry Zalma | January 4, 2023

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Windcrest Owners Association filed a lawsuit against Allstate Insurance after the company declined a claim for property damage to a building in its condominium development. Allstate moved for summary judgment.

Allstate alleged that the property damage was not covered as a "collapse" and was excluded from coverage because it resulted from faulty construction and maintenance. The trial court granted summary judgment dismissing Windcrest's claims. Windcrest appealed.

In Windcrest Owners Ass'n v. Allstate Ins. Co., No. 82836-3-I (Wash. App., Div. 1, Dec. 12, 2022), Windcrest sought payment to repair a building in severe distress as a result of wear, tear, and defective construction under a "collapse" coverage. The Washington Court of Appeals read the full policy and applied its language to the facts presented by construction experts.

Facts of the Case


Windcrest Condominiums, which consisted of 15 units in 2 buildings, was completed in 1995. Allstate provided a commercial property insurance policy from November 2002 through 2017.

In October 2018, Windcrest notified Allstate of a property damage claim based on a structural report prepared by Dibble Engineers. The report noted decay consistent with substantial impairment of structural integrity to one of the buildings. Specifically, it noted, "The capacity of the building's lateral- and gravity-force-resisting systems are compromised by decay that has been hidden by the exterior siding."

Allstate, conducting a good faith investigation of the claim, retained construction consultants from Madsen, Kneppers & Associates, Inc. (MKA), to conduct an inspection and evaluation of causation of the damage at Windcrest. MKA concluded that there were sites of noted decay of structural components but no evidence of collapse, "defined as an abrupt falling down or caving in," as required for coverage by Allstate's policy.

Windcrest sued Allstate, alleging breach of contract and bad faith. Allstate moved for summary judgment; the trial court granted the motion and dismissed the claims with prejudice.

Collapse Coverage


Windcrest made a claim under the Allstate insurance policy. The policy's additional collapse coverage applied only to an abrupt collapse. The Allstate policy defined "collapse" as the following.

With respect to buildings:

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 a 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.

In addition to the lack of suddenness, Windcrest failed to provide evidence that the building or parts of the building fell down, fell to pieces, or caved in. Rather it still stood and was occupied. In addition, the MKA study noted that there was damage to the buildings and that "there is no evidence to indicate that any parts of the building are currently … in a state of collapse as defined as an abrupt falling down or caving in." Indeed, a Windcrest resident and board member confirmed that no part of the building had caved in or abruptly fallen down.

Windcrest produced no evidence that the structures were no longer habitable. A Windcrest resident and board member confirmed that Dibble never informed the board that the buildings were unsafe or unfit to occupy. The Washington Court of Appeal concluded that the Windcrest buildings had not collapsed such that they could no longer be occupied for their intended purpose. In addition, the court noted that Windcrest had not demonstrated a collapse as defined by the Allstate insurance policy, so the collapse coverage did not apply.

The evidence from both Allstate and Windcrest demonstrated that defective construction and maintenance initiated the chain of causation that resulted in the loss. Allstate submitted both a report and deposition testimony from expert David VanDerostyne to support a coverage exclusion due to defective construction. The report stated conclusively that decay and deterioration occurred over an extended number of years due to "defective original construction in combination with lack of repairs and/or maintenance" in addition to a lack of a collapse.

Since the evidence showed no abrupt or sudden falling down of any part of a building such that it could not be occupied for its intended purpose, the policy coverage for a collapse did not apply. Based on the evidence properly before the trial court, the damage to the condominium originated from faulty construction and maintenance.

The Allstate policy explicitly excluded coverage for faulty construction and maintenance, as well as for any loss initiated by those excluded perils. Therefore, the Washington Court of Appeal concluded that the trial court properly granted summary judgment for Allstate and dismissed Windcrest's claims.

Conclusion


Allstate provided coverage to insureds whose property had collapsed. However, it provided a clear and unambiguous definition of the word "collapse." Although Windcrest's expert used a technical definition of "collapse" that fit engineering practices, it did not fit the definition of "collapse" in the Allstate policy. Once a contract is written and accepted by an insured, the wording cannot be changed by a court to provide the coverage the insured would like and must apply the coverage as written in the policy.

© 2023 Barry Zalma, Esq., CFE

Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.


Opinions expressed in Expert Commentary articles are those of the author and are not necessarily held by the author's employer or IRMI. Expert Commentary articles and other IRMI Online content do not purport to provide legal, accounting, or other professional advice or opinion. If such advice is needed, consult with your attorney, accountant, or other qualified adviser.