Intuitively, an all-risks policy is supposed to cover all risks. But we know that even all-risks policies have exclusions. Sometimes, however, an exclusion is reinstated in part to provide coverage for a limited species of the excluded item. For example, an all-risks policy may exclude “collapse,” but may write back that coverage to a limited degree by providing coverage for sudden and accidental direct physical loss. In a recent case, the Second Circuit addressed a series of claims under homeowners’ all-risk policies seeking coverage for horizontal and vertical cracks in basement walls — the so-called “crumbling concrete cases.”
In Valls v. Allstate Insurance Co., No. 17-3495-cv (2d Cir. Apr. 2, 2019), the Additional Protection provision of the homeowners’ all-risks policy provided coverage for a limited class of collapses. Either the entire collapse of a building or the entire collapse of a part of a building causing direct physical loss to a covered property had to occur. And for coverage to apply, the collapse must have been sudden and accidental direct physical loss caused by hidden decay of the building and/or defective methods or materials used in construction or repair. The policy goes on to state that “[c]ollapse does not include settling, cracking, shrinking, bulging or expansion.” As articulated by the court, the sole issue on appeal was “whether the gradual deterioration of the . . . still standing basement walls constitutes a covered ‘collapse’ under this provision of the Policy.”
In construing the issue under Connecticut law, the court held that there was no coverage and affirmed dismissal of the complaint in this case and several others. The court found no ambiguity because the policy expressly circumscribed the definition of “collapse” with several qualifying terms. The court summarized the policy as requiring that collapses be “entire,” sudden,” and “accidental.” The court construed “sudden” to include the temporal meaning of abruptness or brevity. Thus, said the court, the gradual erosion and cracking of the basement walls was not sudden. The inclusion of the words “sudden and accidental” in the collapse provision, held the court, was sufficient to bar coverage.
Additionally, coverage also was barred because the damage was not an entire collapse. The court stated that whatever the term “entire collapse” means, it must entail more than mere cracking, because cracking was expressly excluded under the policy. The court did concede that gradual deterioration could cause a sudden collapse that would be covered, but there had to be a sudden collapse for gradual decay to come within coverage. The court concluded that the horizontal and vertical cracking in the basement walls did not constitute a covered collapse under the policy and because of that the policyholders’ claims against the insurer necessarily failed.
If and when the policyholders’ basement wall collapses, then, perhaps, there will be coverage.