6 Montague LLC, (Montague) owned a 20-unit apartment building and had an insurance policy underwritten by New Hampshire Insurance Co. (New Hampshire). The policy defined building to include “attached additions and extensions”. Coverage included collapse due to hidden decay. The policy excluded damage caused by “wear and tear, deterioration, mold, and wet or dry rot”. In the spring of 2010, during an inspection following a tenant vacating an apartment, the Property Manager noticed that the attached wooden terrace was sagging and separating from the building. Montague filed a claim with New Hampshire Insurance.

New Hampshire denied the claim because the damage was due to the wear and tear, rust or corrosion and wet or dry rot, which is excluded from coverage. The upper-level terrace condition was a result of a 2^nd-floor support beam failure and this did not fall within the scope of collapse. The beam was encased in the fascia of the building and not visible. Montague filed for declaratory judgement and New Hampshire filed a cross-complaint for judgment and dismissal of Montague’s grievance.

Testimony was heard from inspectors, photographers, and engineers. The evidence clearly supported visual decay of the beam that was located below the involved beam. The condition of the terrace was also shown to be visible from the roof of the premises. The wooden terrace itself was shown to be deteriorated and rotting.

The court found in favor of New Hampshire because the decay was shown to be a progression over time and that it was visible; therefore, coverage was excluded under the policy. Montague’s complaint was dismissed.

6 Montague, LLC v New Hampshire Insurance Co, 122 A.D.3d 451, Supreme Court, Appellate Division, First Department, New York, November 13, 2014