Tague Alliance - Collapse Coverage Definition & Overview

The overview and descriptions below are provided by Rough Notes and they do a very good job of outlining the many considerations when it comes to Collapse coverage. Tague Alliance wants to help our SIAA member agencies stay informed. As an SIAA Master agency in California we see earthquake as a form of collapse...but generally not a frequent cause of collapse. It is important that insurance agents understand the nuances of coverage and we hope this overview of Collapse sheds more light on this intricate subject.

Direct loss to covered property that involves either total or partial collapse of a building is insured by most "broad" and "special" commercial and personal property forms. However, the coverage only applies if the loss is caused by a hazard (peril) listed in the policy. "Collapse" has been removed from the Perils Insured Against section of such forms and is included under the Additional Coverage section. (Please refer to the form used.) However, two issues that make consideration of collapse coverage so difficult are the facts that collapse is often created by sources of loss that are, by themselves, ineligible for coverage (such as construction problems, acts of insects, rotting, etc.) and that collapse is typically gradual rather than sudden. Therefore, the peril’s dependent nature makes its handling significantly different from other perils.
COLLAPSE AND COMMERCIAL PROPERTY
Generally, collapse is covered for commercial property when caused by:
· any one of the specified causes of loss: fire; lightning; explosion, windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; falling objects; weight of snow, ice or sleet; water damage
· breakage of building glass
· hidden decay
· hidden insect or vermin damage
· weight of people or personal property
· weight of rain that collects on a roof
· use of defective material or methods in construction, remodeling or renovation, but only if the collapse occurs during the course of the construction, remodeling or renovation
· if collapse occurs after construction, remodeling or renovation is complete and is caused in part by one of the causes listed above, the loss or damage is covered even if defective material or methods used during construction, remodeling or renovation, contributes to the collapse
For direct losses that do not involve collapse of the building or any part of the building but rather from some other type of collapse, there is coverage for otherwise covered personal property if:
1. the personal property that has collapsed is located inside an insured building and
2. the collapse was the result of an otherwise covered cause of loss

Example: A fire occurs in one section of Consumerland’s warehouse. The fire is put out, but it severely damaged the base of a 50 foot length of heavy duty shelving. The shelving collapses, destroying thousands of dollars worth of office equipment. Since fire caused the collapse, the damaged equipment is eligible for coverage.

Other types of property are covered for collapse if it is due to a covered cause of loss as listed above, but only if the damage or loss is a direct result of the collapse of a building covered by the policy form and the property damaged is also insured in policy. The other types of property are:
· outdoor radio or television antennas, satellite dishes, and their lead-in wiring, masts or towers
· awnings, gutters and downspouts
· yard fixtures
· outdoor swimming pools
· fences
· piers, wharves and docks
· beach or diving platforms or appurtenances
· retaining walls
· walks, roadways and other paved surfaces
Collapse is considered to be a sudden event; therefore, incidents involving settling, cracking, shrinkage, bulging, or expansion do not qualify.
The Additional Coverage for collapse does not in any way increase the limit of insurance provided in policy.

Example: Heavy monsoon-type rains pelted a covered building for more than two weeks. The weight of accumulated rain on the roof caused the building to collapse. As the building collapsed, it pulled down the satellite dish and several other antennas attached by lead-in wires, along with awnings, several outdoor light fixtures in close proximity, and portions of a fence. Further, the impact of the collapse damaged the adjacent sidewalk and parking areas. This all would be covered by the definition of collapse.

Example: However, there is no coverage when, as a result of the same monsoon, a mudslide occurred. The mudslide damaged the walls and lining of a swimming pool, filling it with mud, damaging pool equipment and fixtures. This would not be covered because the damage caused by a mudslide is not a covered cause of loss nor was the damage caused directly by the collapsed building.
COLLAPSE AND PERSONAL PROPERTY
There is coverage for direct physical loss to covered property involving collapse of a building or any part of a building caused only by one or more of the following:
1. Perils insured against in personal property (Coverage C). These perils apply to covered buildings and personal property for loss insured by this additional coverage;
2. Hidden decay;
3. Hidden insect or vermin damage;
4. Weight of contents, equipment, animals, or people;
5. Weight of rain which collects on a roof; or,
6. Use of defective material or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation.
Loss to an awning, fence, patio, pavement, swimming pool, underground pipe, flue, drain, cesspool, septic tank, foundation, retaining wall, bulkhead, pier, wharf, or dock is not included under items b through f above unless the loss is a direct result of the collapse of a building.
The same as with commercial property, collapse does not include:
· settling
· cracking
· shrinking
· bulging
· expansion

Example: After being built, a restaurant starts to settle and this causes cracks in the walls and foundation. Damage of this type would not be covered in the policy.

Also, just like commercial property, the personal property coverage does not increase the insurance limit that applies to the damaged covered property.
WHEN DOES "COLLAPSE" OCCUR?
"Collapse," as specifically covered under Additional Coverage in the various standard provisions of property insurance forms, does not include "settling, cracking, shrinkage (or shrinking), bulging or expansion." With this in mind, we may look to dictionary definitions and significant court rulings for guidelines in determining if a structure has "collapsed." Webster’s International Unabridged Dictionary defines collapse as follows:
"To fall or shrink together abruptly, as the sides of a hollow vessel; to cave in; to fall into a flattened state; often, with the idea of design, to fall into, or to be reduced to, a more compact form (this table collapses) .”
"To break down or fail abruptly and utterly; to go to pieces; as, his health and plans collapsed together.”
"To cave in; crumble suddenly"
"To suffer a physical collapse; to fall suddenly helpless."
COURT DECISIONS
A major problem throughout the years has been the determination of the nature or degree of structural damage that must occur before a structure can be considered to have "collapsed" per a policy’s definition. Various courts have contributed much to our present understanding and determination of when coverage is applicable.
Courts have relied heavily on dictionary definitions, those meaningful and acceptable to the average person, in deciding cases involving application of insurance policies to losses. Though now more than 40 years have passed, it was a 1964 decision that substantially influenced how courts and insurers continue to handle this issue. What the courts said about "collapse" was more important than the cases’ particulars.
Graffeo et al. v. United States Fidelity & Guaranty Co., N. Y. Supreme Court, Appellate Division, decided January 6, 1964, was concerned with an "all risks" Homeowners policy. The court said:
"It is our conclusion that there was not a ‘collapse’ of the premises within the intendment of the policy (see Gage v. Union Mutual Fire Insurance Co., 122 Vt. 246; Employers Mutual Fire Ins. Co. v. Nelson, 361 S.W. 2d 704 Tex.). The Appellate Division in the Third Department has interpreted the ‘collapse’ of a building as used in an insurance policy to include ‘an element of suddenness, a falling in, and total or near total destruction.’ (Weiss v. Home Insurance Co., 9 A D 2d 598.). It is true that there is a minority view which construes ‘collapse’ as a ‘sinking, bulging, cracking, pulling away of the wall’ (Travelers Fire Insurance Co. v. Wahley, 272 F. 2d 288, applying Kansas law). The latter construction, however, if applied to the instant case, would do violence to other provisions of the policy, particularly the basic exclusionary clause with respect to settling, etc. Only recently the principle has been reaffirmed that courts cannot construe a particular provision of an insurance policy in such a way as to emasculate the clear intent of its other provisions. (Walters vs. Great American Indemnity Company, 12 N. Y. 2d 967.)”
"Since we find that there was no collapse within the purview of the policy, its basic exclusionary clause with respect to settling is applicable."
COLORADO CASE
Sherman v. Safeco Insurance Company of America, Colorado Court of Appeals, No. 82CA-1311, June 16, 1983, confirmed that "collapse" need not be total. Judgment denying an insured’s claim for the collapse of a residence under Homeowners insurance, which provided coverage for "collapse of buildings or any part thereof," was reversed. The trial court had construed the term "collapse" to mean a complete falling down of the building, and since the insured’s residence did not completely fall down, concluded that a collapse did not occur. The appellate court, however, construed "collapse" as not necessarily involving a complete falling down, and also stated that the policy provided for collapse not only of the entire building but also of "any part thereof."
MISSOURI CASE
Eaglestein v. Pacific National Fire Insurance Co., Kansas City Court of Appeals, Missouri, February 3, 1964, also involved "all risk" coverage on a dwelling and comparable cracking of walls, etc. The court said:
"14 C.J.S., p. 1316, defines ‘collapse’ as follows: ‘To break down or fail abruptly and utterly, to cave in; to close by falling or shrinking together, to fall together, or into an irregular mass or flattened form, through loss of connection or rigidity and support of the parts or loss of the contents, as a building through the falling in of its sides.’”
"The policy on which this suit was brought did not insure against ‘collapse’ and stop. It carried a plain exclusion of ‘settling, cracking, shrinkage or expansion of pavements, foundations, walls, floor or ceilings’ from coverage.”
"We believe that the policy provisions are not ambiguous, certainly not under the factual situation before us. In our opinion, the phraseology used has a clear and commonly understood meaning and hence needs no construction over, above and beyond its plain meaning. We regard the opinions of those appellate courts denying coverage under a `collapse clause’ in those instances where the walls cracked or settled as being better reasoned and as having reached more logical results. We concur with the conclusion of the trial judge that plaintiff’s casualty, as shown by the evidence, is not covered by the policy."
OHIO CASE
The Ohio Supreme Court asserted, in the case of Olmstead, Trustee, v. Lumbermens Mutual, that there is no ambiguity in the word "collapse." The case was decided May 27, 1970 on appeal from the Hamilton County (Ohio) Court of Appeals. In summary, the court stated that, "The word, in its plain, common and ordinary sense, means a falling down, falling together, or caving into an unorganized mass."
Let’s look at one final court case regarding collapse:
"COLLAPSE" HELD COVERED ONLY ACCORDING TO ITS POPULAR MEANING
A "broad form" homeowner’s policy contained the following insuring provision: "We cover direct loss to the property owner insured under the Dwelling and Personal Property Coverage caused by ...13. Collapse of buildings or any part of a building....Collapse does not include settling, cracking, shrinkage, bulging or expansion...."
The insured filed a claim when large cracks and bulges were observed in the living room ceiling after he and his wife had lived in the house for nine years. A contractor he hired to inspect the damage reported that the sheetrock had separated from the truss or rafter, but could not determine the cause of the separation. The insurer denied the claim on the basis of "no coverage." In the course of litigation, the insured appealed a trial court judgment in favor of the insurance company.
The insurer contended that "collapse" means total destruction or caving in and further pointed to the specific policy language that, with respect to coverage provided, the named peril does not include "settling, cracking, shrinkage, bulging or expansion."
Citing various precedents and authorities, the appeal court said that the familiar rules of construction require the terms used in insurance policies "to be construed in their plain, ordinary and popular sense." Referring to Webster’s Third New International Dictionary 443 (1961) for such meaning, the court found "collapse" defined as follows:
"1: to break down completely: fall apart in confused disorganization: crumble into insignificance or nothingness: disintegrate ...2: to fall or shrink together abruptly and completely: fall into a jumbled or flattened mass through the force of external pressure: fall in... 3: to cave in, fall in, or give away: undergo ruin or destruction by or as if by falling down." Other definitions examined were similar.
The court said: "Applying the ordinary meaning of the word to the facts as found, the ceiling clearly has not ‘collapsed.’ Accordingly, there is no coverage under the policy, and the trial court is affirmed."
Editor’s Note: "Collapse" has been removed from the Perils Insured Against section and is included under the Additional Coverages section of policies used by numerous companies. The change is to make it clear that "collapse" is covered only when caused by specified perils enumerated with respect to Coverage C, plus several other stated causes.
(Owens et ux., Plaintiffs, Appellants v. Tennessee Farmers Mutual Insurance Company, Defendant, Appellee. Tennessee Court of Appeals, Eastern Section. C.A. No. 127. June 9, 1989. CCH 1989-90 Fire and Casualty Cases, Paragraph 1933.)