Do's And Don'ts Of Adjusting Roofing Collapse Claims
I've spent much of the last two weeks flying around the country (as we "speak", I'm at O'Hare) and have consistently been surprised by how much of the ground beneath my plane is blanketed with snow!
From the collapsed roof of the Metrodome in Minneapolis to the ice and snow that threatened to cancel last week’s Super Bowl, this year’s winter has taken a heavy toll. Nowhere has snow been a bigger problem than the Northeast, however, where the accumulated weight of several snowstorms since Christmas threatens roofs throughtout the region. As roofs weaken and collapse throughout the region, insureds are seeking coverage for their losses under homeowner’s and commercial property policies. I asked my partner Bill Schneider, who heads up our first party group and is a smart guy to boot (CPCU, etc.) for some practical tips on how insurers should be looking at these claims. Here are his thoughts:
Collapse claims present a variety of challenges to the loss adjustment process. Besides issues of coverage, collapse claims are extremely time sensitive because of the inherent danger of unstable buildings and the risk of further damage to covered property. Prompt coverage determinations and mitigation efforts can serve to expedite the loss adjustment to reduce ALE or business time element coverages. Accordingly, it is important to have a good understanding of the coverage and systematic approach in place to handle these losses.
Coverage for loss caused by collapse varies from coverage form-to-coverage form and from state-to-state. The following is intended to serve as a general overview about the peril of collapse and a discussion of the more common issues that arise in collapse loss scenarios.
Coverage for Collapse
Ordinarily, damage from collapse is excluded from the risks of direct physical loss insured by Coverage A in the standard homeowners insurance policy, as well as commercial property cause of loss forms such as the CP 10 30. However, most policies provide some form of additional coverage for loss caused by the peril of collapse, which applies on a limited, named perils basis only. For example, the Additional Coverage for collapse available in both the HO3 (04 91) and HO3 (10 00) forms, provide coverage for collapse caused by the weight of ice, snow and sleet, the main cause of the many recent roof collapses in New England. Similarly, most business and commercial property insurance policies will respond to collapse that results from the weight of ice and snow.
A threshold consideration is whether a collapse has actually occurred. Only where the loss is found to have resulted from the peril of collapse may an insurer rely on the exclusion and turn to the provisions of the additional coverage to determine its coverage obligations. In an “all risk” context, damage from the weight of ice and snow that does not involve collapse may very well be covered.
Check the Policy Form
When evaluating coverage for a collapse claim it is important to determine the specific policy form that governs coverage. For example, the HO3 (04 91) form does not define the term “collapse.” Instead, it only provides that “[c]ollapse does not include settling, cracking, shrinking, bulging or expansion.” Because there was no clear definition about what constituted “collapse” under this policy form, courts called upon to interpret the term collapse reached varying results. Some courts found the term unambiguous and ruled that collapse involves both a temporal element of suddenness and a visual element of altered appearance. Others concluded the term was ambiguous and held that mere "substantial impairment of the structural integrity" of a building is sufficient to constitute collapse.
ISO responded with additional structure and clarity for the peril of collapse in its newer property forms. For example, the 2000 edition of the HO3 policy form, as well as later versions of the CP 10 30 and standard Businessowners policy, more fully described what is and is not a collapse. This newer language provides that collapse is 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 the building cannot be occupied for its current intended purpose.” It further set forth circumstances that did not constitute collapse. Because the newer forms define collapse, older case law that interpreted the prior coverage forms does not offer much guidance to claim professionals evaluating coverage. Courts will hopefully construe the plain language of the newer collapse provisions to require that a building abruptly fall down or cave in to qualify as a collapsed building for purposes of coverage.
