The meaning of the term “collapse” in a first-party property insurance policy may often be litigated. My colleague, Nicole Vinson has written previous blogs specific to the topic of collapse coverage. In Experts and Photos – Clearing Up Collapse Coverage, Part V, she explained the two different doctrines involving collapse coverage:
The traditional view holds collapse is covered when there is either a falling down or a caving-in – into a flattened form of rubble. But the liberal view holds a collapse happens when there is a substantial impairment of structural integrity, without an actual collapse of the building or part thereof being necessary.
Last week, the Washington Supreme Court rendered a decision on the meaning of the term collapse when it is undefined in a policy.1 In this particular case in Seattle, Washington, a condominium association submitted a claim to its carrier, State Farm, when it discovered “hidden decay” on the two-story building’s supports. State Farm denied coverage under the Policy on the basis that a “collapse” did not occur. The association argued that the inspection revealed decay that the association believed had caused “substantial impairment to the structural integrity” of the buildings during applicable insurance policy periods. In September 2011, the association filed suit in Washington federal court for declaratory relief and breach of contract and moved for summary judgment under the argument that the term “collapse” when undefined in an insurance policy means “substantial impairment of structural integrity.” The Ninth Circuit Court of Appeals certified a question to the Washington State Supreme Court to define what “collapse” means in an insurance policy under Washington state law when an insurance policy covers “accidental direct physical loss involving collapse” but does not otherwise define the word except to say that ‘‘collapse does not include settling, cracking, shrinking, bulging or expansion."
The Court adopted the more liberal view of collapse and explained:2
Here the insured requests that "collapse" be interpreted to mean "substantial impairment of structural integrity." We largely agree. Of the definitions offered to us, substantial impairment of structural integrity is both reasonable and the most favorable to the insured. Based on the language of the Policy, however, we caution that "collapse" must mean something more than mere "settling, cracking, shrinking, bulging or expansion." ER at 142. Also, we note that "structural integrity" of a building means a building’s ability to remain upright and "substantial impairment" means a severe impairment. Taken together, "substantial impairment" of "structural integrity" means an impairment so severe as to materially impair a building’s ability to remain upright. Considering the Policy as a whole, we conclude that "substantial impairment of structural integrity" means the substantial impairment of the structural integrity of all or part of a building that renders all or part of the building unfit for its function or unsafe and, in this case, means more than mere settling, cracking, shrinkage, bulging, or expansion.
This means that in Washington, a building can merely be structurally unsafe and does not necessarily have to be on the verge of falling down in order to meet the definition of collapse.