Insurance Coverage For Collapse: How Has It Changed and Why?

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...ISO, is the American Association of Insurance Services (AAIS), in Wheaton, Illinois. Reproduced below is an example of how AAIS has addressed collapse coverage in its commercial property policy.

Commercial Property

ADDITIONAL COVERAGES

If otherwise covered under the Commercial Property Coverage, under items a. through f. above, we do not pay for loss to the following types of property unless the loss is a direct result of the collapse of a building or structure: outdoor radio, television, satellite, dish-type, or other antennas including their masts, towers, and lead-in wiring; outdoor awnings or canopies or their supports; fences; gutters and downspouts; yard fixtures; outdoor swimming pools; piers, wharves, and docks; beach or diving platforms or appurtenances; retaining walls; foundations; walks, roadways, and other paved surfaces.

Collapse does not include settling, cracking, shrinking, bulging, or expanding.

This does not increase the limit.

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Simultaneously as these policy wording changes were being made, various courts were making law on the meaning of collapse, and two contrary positions emerged.

Two Positions on the Meaning of Collapse

A series of court decisions in various states addressed the meaning of collapse and two opposing views emerged. The traditional or conservative view held that collapse involved either a falling down or caving in, into a flattened form of rubble, thus an actual collapse. The liberal view held that collapse involved a substantial impairment of structural integrity, without an actual collapse of the building or part thereof being necessary. However, it would likely be too broad a view to say that simply because a structure may be vulnerable to collapse at some indefinite time in the future that coverage would be triggered. Seemingly, it is more accurate to say that there must be a clear or imminent danger of collapse before collapse coverage would apply under the liberal interpretation.

One fairly recent case holding for the traditional view is 529 E. Broadway Condo. Trust v. Vermont Mut. Ins. Co., an unpublished decision of the Massachusetts Appeals Court. 4 In this case, an outside brick wall was detaching from the structure. The insurance adjuster concluded that the problem was a result of water infiltration. The court held that the detaching wall did not meet the definition of collapse, which, as established by case law in Massachusetts, includes “both a temporal element of suddenness and a visual element of altered appearance that comprises a structural collapse, distinct from the degenerative process causing the collapse.”

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