Last week I was able to settle a claim involving the partial collapse of a roof on a commercial structure in Maryland. The primary issue was whether the partial collapse suffered by my client constituted a collapse under the policy’s definition of the term “collapse,” as the entire building had not fallen, but only a portion.
The policy included language similar to the following (which is typical in commercial policies):
a. With respect to buildings;
(1) Collapse means an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose;
(2) a building or any part of a building that is in danger of falling down or caving in is not considered to be in a state of collapse;
3) a part of a building that is standing is not considered to be in a state of collapse even if it has separated from another part of the building;
(4) a building that is standing or any part of a building that is standing is not considered to be in a state of collapse even if it shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.
The question present in my client’s case was whether the policy’s definition of collapse was ambiguous. It would be easy to imagine a scenario where subsection 1 and 2 could be equally applicable. A portion of a building could collapse, leaving the building uninhabitable but leaving a portion of the building standing and in danger of imminent collapse. Thus, both sections 1 and 2 of the definition are applicable and would ultimately lead to very different results.
Fortunately, Maryland courts have interpreted this exact policy language and declared it to be ambiguous. In Landmark Realty, Inc. v. American Insurance Company,1 the United States District Court in Maryland found that such “conflicting results produced by application of these collapse provisions create an ambiguity which precludes the granting of summary judgment to either party.” The court went on to note that “[w]hen a policy’s definition of collapse is ambiguous, Maryland courts adopt a liberal version of the term, which defines collapse as “any serious impairment of structural integrity.”2
This is good news for policy holders as the common law definition in DeJames will provide coverage to more policyholders than the ambiguous policy language.