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Second Circuit Holds that “Collapse” Provision in All Risks Policy does not Cover Severely Cracked, but Still Standing, Basement Walls

April 9th, 2019 Insurance Contracts, Insurance Coverage, Property Insurance No Comments »

Homeowners and All Risk policies often provide coverage for “collapse” of all or part of a structure. Is coverage for “collapse” limited to an abrupt collapse of a wall or building, or does it include situations where cracking or crumbling has substantially impaired the structural integrity of the wall or building, but has not resulted in the structure’s literal collapse?

The answer to that question may depend on how the insurer defined “collapse.” For example, in Beach v. Middlesex Mutual Assurance Co., 205 Conn. 246 (1987) the Connecticut Supreme Court held that a policy that provided coverage for “collapse,” but did not define what that term meant, was ambiguous, and thus included coverage for the “substantial impairment of the structural integrity of a building.” 205 Conn. at 251, 253.

In Valls v. Allstate Ins. Company, ___ F.3d ___, No. 17-3495-cv, slip op. (2d Cir. April 2, 2019), the U.S. Court of Appeals for the Second Circuit, applying Connecticut law, and construing a collapse provision that defined “collapse” in some detail, held that provision did not provide coverage for extensive cracking of basement walls, which may have substantially impaired the structural integrity of the walls, but did not result in their literal “collapse.” See slip op. at 14.

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