A Common Sense Approach to First Party Collapse Coverage
Summary judgment was recently granted to State Farm in the case of Ass'n of Unit Owners of Nestani v. State Farm Fire & Cas. Co., 2009 U.S. Dist. LEXIS 102150 (D. Or. 2009). At issue was potential collapse coverage for substantial and pervasive decay damages at the Nestani Condominiums in Gresham. The State Farm policy provided “collapse” coverage, but only in the event of a “sudden, entire collapse of a building or any part of a building.” The policy defined “collapse” as “actually fallen down or fallen into pieces.”
State Farm raised several issues at summary judgment, including: (1) whether plaintiff had produced any evidence of a collapse commencing during the policy period; (2) whether a “collapse” caused by decay over many years qualified as “sudden”; and (3) whether substantial decay, and even disintegration, of portions of structural members constituted an “entire collapse” of a “part of a building.”
Chief Judge Ann Aiken ruled for State Farm on all of the above issues. She held that plaintiff failed to establish “specific facts to show loss commencing during the Policy period.” Although plaintiff had elicited testimony from State Farm’s expert that the decay of structural members was progressive and, therefore, portions of some structural members likely fell into pieces during the policy period, the court declined to “assume, based on speculative probability, that a structural member fell into pieces during the Policy period.” Plaintiff’s failure to “identify a specific instance of collapse that occurred during the Policy period” was fatal to the claim.
Next, the court rejected the insured’s argument that the term “sudden” meant “unintended” pursuant to the Oregon Supreme Court’s interpretation of the phrase “sudden and accidental” in St. Paul Fire & Marine Insurance Co. v. McCormick & Baxter Creosoting, Inc., 324 Or 184, 213, 923 P2d 1200 (1996). Instead, based on the context of the Policy, which included an exclusion for water damage that occurs “over a period of time,” the court held that “sudden” meant “marked by or manifesting abruptness or haste” or “made or brought about in a short time.” Because the decay at the Condominiums had indisputably occurred over many years, the alleged collapse was not “sudden.”
Finally, the Court held that “[i]n the context of this Policy, a ‘part’ is ‘an essential portion or integral element.’” Accordingly, the complete disintegration of portions of structural members did not constitute an “entire collapse” of a “part of a building.” The Court wrote: “[P]laintiff’s interpretation of ‘part’ to include lesser ‘portions’ would render the term ‘entire’ meaningless and be contrary to the mandate that the court give effect to all terms of the Policy.”
- Submitted by Brian Hickman of Gordon & Polscer, LLC.
