Homeowners in Connecticut (and other states) have had issues with crumbling foundations and basement walls of their homes due to defective concrete manufactured by a specific supplier.  They have turned to their homeowners insurance policies for coverage and coverage has been denied.  Multiple lawsuits have been brought.  In a series of recent cases, the Connecticut Supreme Court was asked on a certified question in two of the cases to resolve questions of Connecticut law concerning the term “collapse” in the insurance policies, whether the “substantial impairment of structural integrity” standard applied to the “collapse” provision of the insurance policies, whether that standard requires a showing of imminent danger of falling down or actually collapsing, and whether the term “foundation” in the policies unambiguously includes the basement walls of the homes.

 The main opinion is contained in Karas v. Liberty Insurance Corp., No. SC 20149 (Ct. Sup. Ct. Nov. 12, 2019).  Shorter opinions are contained in Vera v. Liberty Mutual Fire Insurance Co., No. SC 20178 (Ct. Sup. Ct. Nov. 12, 2019) and in a factually distinct opinion,  Jemiola v. Hartford Casualty Insurance Co., No. SC 19978 (Ct. Sup. Ct. Nov. 12, 2019).  The first two cases came to the Connecticut Supreme Court by way of certified questions from the Connecticut federal court.  The third case was a direct appeal of a Connecticut case.  The outcome on the coverage question is the same, but the facts and discussions have differences.  All three cases held for the insurance companies and against the policyholders on coverage for the crumbling walls.

There’s a lot to unpack in the main opinion and the state court case opinion and quite a bit of deep legal analysis.  In the main opinion, the court concluded that the term “collapse” in the policy was otherwise undefined and therefore ambiguous so as to include coverage for any substantial impairment of structural integrity.  But the court also held that the substantial impairment of the structural integrity standard required proof that the home was “in imminent danger of falling down,” and that the term “foundation” unambiguously encompassed the home’s basement walls.

In finding ambiguity, the court stated that “although the collapse provision purports to exclude settling, cracking, shrinking, bulging and expansion from its purview, it does not express a clear intent to exclude coverage for a collapse that ensues from what initially began as unexceptional, run-of-the-mill settling, cracking, shrinking, bulging or expansion but what later developed into a far more serious structural infirmity culminating in an actual or imminent collapse.”  The court noted that the controversy over the term “collapse” has been around since before 1960 and that with this much warning, the insurer was capable of unambiguously limiting collapse coverage to a building reduced to rubble and actual collapse.

On the standard of substantial impairment, the court clarified that substantial impairment meant imminent danger of falling down as the most reasonable standard.  This imminence requirement, said the court, does not render collapse coverage illusory; “it merely gives effect to the reasonable expectations of the parties as evidenced by the language of the policy.”

Finally, the court addressed the coverage exclusion for collapse of the home’s foundation and whether it unambiguously included the basement walls of the home.  The court held that it did based in part on the court’s view that even laypersons with no special knowledge understand that the concrete basement walls of a home are part of the home’s foundation.

Since there was no imminent danger of collapse and because the basement walls were part of the foundation, there was no coverage.