Recognizing the public policy implications of an unsettled, recurring coverage issue involving crumbling concrete foundations in thousands of Connecticut homes, U.S. District Court Judge Stefan Underhill recently certified the following insurance coverage question to the Supreme Court of Connecticut:

What constitutes a “substantial impairment of structural integrity” for purposes of applying the “collapse” provision of this homeowners’ insurance policy?1

The situation in Karas is one shared by approximately 34,000 homeowners whose foundations were built with concrete from the J.J. Mottes Concrete Co. (“Mottes”). Mottes concrete contains a mineral called pyrrhotite. Over time the iron sulfide in the pyrrhotite reacts with oxygen and water, causing the concrete to expand, crack and turn into rubble.

In October 2013, the Karases discovered their basement walls were deteriorating in the manner typical of Mottes concrete. On November 15, 2013, they reported a claim to their homeowners’ insurer. The insurer denied the claim the same day, asserting the loss described was “deterioration” and therefore not ocvered under the policy.

On December 11, 2013, the Karases sued the insurer, seeking coverage for their foundation as a covered “collapse” under Connecticut law. They alleged it was only a question of time until their basement walls fell in due to exterior pressure from the surrounding soil.

The Karases’ policy contains familiar language pertaining to collapse events:

Collapse. We insure for direct physical loss to covered property involving collapse of a building or any part of a building caused only by one or more of the following:

* * * * *

b. Hidden decay;

c. Hidden insect or vermin damage;

d. Weight of contents, equipment, animals or people;

e. Weight of rain which collects on a roof; or

f. Use of defective material or methods in construction, remodeling or renovation.

* * * * *

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

The Karases relied on the material-impairment standard articulated in an earlier Connecticut Supreme Court case, which held that the term collapse in a homeowners’ policy was ambiguous if not defined, and any “substantial impairment of structural integrity” of a building was covered.2 While the Beach decision rejected the argument that “collapse” requires a sudden and complete falling in of a structure,” it did not define the parameters of “substantial impairment of structural integrity.”3

Judge Underhill explained in the Karas Certification Order that he applied the Beach standard in other rulings on concrete-collapse cases. For instance, in Roberts v. Liberty Mutual Insurance Company, Underhill interpreted Beach to require that a ‘collapse’ (i.e., a substantial impairment of structural integrity) must be proved by evidence that a building “would have caved in had the plaintiffs not acted to repair the damage.”4

Judge Underhill also noted his belief that the standard enunciated in Beach is relatively clear. Nevertheless, on these facts, and because this “unsettled question of state law raises important issues of public policy,” and is “likely—indeed, almost certain—to recur,” Judge Underhill decided at this juncture to seek further guidance from the Connecticut Supreme Court.

The Judge further wrote:

Connecticut’s highest court should have the opportunity to decide whether my interpretation of Beach was correct …. Determining the extent to which the substantial loss should fall on homeowners or on their insurers entails value judgments and important public policy choices that the Connecticut Supreme Court is better situated to make.

There are currently a dozen or more federal lawsuits pending along with over forty crumbling concrete cases in state court. It will be interesting to see how the Connecticut Supreme Court resolves this unsettled issue of policy construction and insurance law.
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1 Karas v. Liberty Mutual Ins. Co., No. 3:13-cv-01836, 2018 WL 2002480 (D. Conn. April 30, 2018).
2 Beach v. Middlesex Mutual Assurance Co., 205 Conn. 246, 252 (1987).
3 Id.
4 Roberts v. Liberty Mutual Ins. Co., 264 F. Supp. 3d 394, 410 (D. Conn. 2017); see Sansone v. Nationwide Mut. Fire Ins. Co., 47 Conn. Supp. 35, 39 (Conn. Super. Ct. 1999)(observing that whether a plaintiff has proven a substantial impairment is a question of fact).

  • Frank Lombard

    This case seems to focus the coverage question on the “collapse” of the foundation. Why would there be no mention of other damage to the home’s structure “resulting from” this defective material in the concrete? All these homes have experienced some “ensuing” damage, often the “ensuing damage” is how homeowners first discovered they have this condition. While home insurance policies exclude damage “caused by” defective materials, coverage is extended to “ensuing damage”. Why is that not part of this claim/case?

    These policies include a “reasonable steps” provision which requires the policyholder to take “reasonable steps” to protect their home from further damage. The only way to do that is to raise the structure so the defective concrete can be replaced. Shouldn’t the cost to raise the structure be a covered expense?

    • Verne Pedro

      Hello Frank, thanks so much for your insightful comments and feedback. You bring up solid points and questions about this case and the “ensuing loss” provision. There is not enough information to know what other coverage arguments have been asserted by the insureds in these concrete cases, but we are following the issue.
      I went back and looked at the Karases’ Complaint in this case to see if the insureds make any additional coverage arguments. The complaint, the insurers’ denial, and the Court’s certification order involve the definition and scope of collapse.

      With regard to reasonable steps, the Karases allege their contractor can replace certain portions of the foundation walls and at least for this claim raising the structure is not contemplated.

      • Frank Lombard

        Thank you for taking the time to respond. I have great sympathy for these impacted homeowners and suspect most are not aware of potential coverage in their home policies for a substantial portion of the costs they incur to correct this problem. I reference a report on this topic; a contractor with extensive experience with this problem, states most if not all these homeowners have experienced some kind of structural damage resulting from this defective material and the only way to prevent more damage is to raise the structure and replace the defective concrete. I suggest this is the key issue in these cases and no one appears to be focusing attention on it.

        http://www.nbcconnecticut.com/troubleshooters/What-to-Look-For-in-a-Crumbling-Foundation-406694855.html

        I look forward to your thoughts.