COLLAPSE (Definitions and Interpretations)

(July 2022)

Two issues make consideration of collapse coverage difficult. One is that collapse is often created by sources of loss that are, by themselves, ineligible for coverage (such as earth movement, flood, construction problems, acts of insects, rotting, etc.) Two, collapse is typically gradual rather than sudden. Therefore, the peril’s dependent and progressive nature makes its handling significantly different from other perils.

WHEN DOES "COLLAPSE" OCCUR?

"Collapse," as specifically covered under Additional Coverage in the 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 cave in, crumble suddenly"

"To suffer a physical collapse; to fall suddenly helpless."

Complex claims are often settled by litigation. Over the years, state courts have interpreted collapse differently. Some have ruled that collapse only applies to abrupt events in which structural property has suddenly fallen into rubble (or flattened condition). Other courts have been significantly more expansive, including situations that involve near or imminent collapse. Imminent collapse typically involved situations where a structure has experienced visible detachment or displacement that is visible to the naked eye and which is a threatening condition.

In response to such decisions, policy language was addressed to make it clearer that only sudden collapse was eligible for coverage.

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. This is accomplished by first excluding most collapse coverage then adding it back as an Additional Coverage. This is done to try to make it clear that "collapse" is covered only when caused by perils specifically referenced in that section.

COLLAPSE AND COMMERCIAL BUILDINGS AND STRUCTURES

Generally, collapse is covered for commercial buildings and structures 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

· 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 there is coverage if defective material or methods used during construction, remodeling or renovation, contributes to the collapse. This applies only if this is caused in part by one of the causes listed above or from the weight of people or personal property or the weight of rain that collects on the roof

The collapse must be abrupt. This means that gradual falling down of structural property is not covered. There is also no coverage when a building appears to be ready to collapse. Even when a building is condemned and untenantable because it is in imminent danger of collapsing, there is no coverage.

Related Court Case: Policy Is Ambiguous About Collapse

For direct losses that don’t 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 all of the following apply:

1. The personal property that has collapsed is located inside an insured building and

2. The collapse was the result of one of the covered collapse causes of loss listed above.

3. The damaged property wasn’t one of the listed properties in the following paragraph.

Example: A fire occurs in one section of Consumerland’s warehouse. The fire is put out, but it severely damages the base of a 50-foot length of shelving. The heavy 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 building property are covered for collapse if it is due to a covered collapse cause of loss as explained earlier, but only if the damage or loss is a direct result of the collapse of a building. That building must be covered under the policy and the damaged property must also be insured under the 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 several days. 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 if improper construction methods or material had been used in constructing the building.

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 COMMERCIAL PERSONAL PROPERTY

Personal property can be covered for collapse in one of two ways. First, it is covered if damaged by a covered collapse of a building in which it is located. The second way is that it is covered when the personal property collapses but the building does not. Coverage in this situation applies only if all of the following apply:

The personal property that has collapsed is located inside an insured building.
The collapse was the result of one of the covered collapse causes of loss listed in the building section above.
The damaged property wasn’t one of the listed properties that is not covered in the building section except when the building itself collapses.

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.

As with the commercial building and structure collapse coverage, collapse does not include:

· Settling

· Cracking

· Shrinking

· Bulging

· Expansion

Example: Several large pots are located in the atrium of a large hotel and filled with ornamental trees. The pots disintegrate after a number of years. Several trees, due to loss of support, fall and damage the hotel's lobby. A collapse claim is filed but denied because the damage was due to roots pushing against the pots causing them to bulge and crack.

COLLAPSE AND PERSONAL (RESIDENTIAL) PROPERTY

Residential property is covered in a manner that is quite similar to the approach used for commercial property. Collapse is excluded under a policy’s main coverage section and then limited coverage is provided under a separate provision. It is often deemed an additional coverage; however, any payment made under a typical collapse provision reduces a given policy’s applicable insurance limit.

As is the case with commercial property, residential protection is provided only for abrupt incidents, does not include any gradual sources or conditions, and must be triggered by certain sources of loss such as:

· Hidden decay

· Hidden insect or vermin damage

· 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

Also similar to the commercial coverage approach, other types of property are eligible for coverage, but only when such property is damaged directly by collapsed property.