STEVEN KARAS et al. v. LIBERTY INSURANCE CORPORATION, SC 20149
United States District Court for the District of Connecticut
Federal Certification; Insurance; Whether “Substantial Impairment of Structural Integrity” is the Applicable Standard for “Collapse” Under Homeowner’s Insurance Policy; What Constitutes “Substantial Impairment of Structural Integrity” for Purposes of Applying Policy’s “Collapse” Provision; Whether Terms “Foundation” and/or “Retaining wall” Unambiguously Include Basement Walls. The plaintiffs purchased a house in Vernon, and they purchased a homeowner’s insurance policy from the defendant, Liberty Insurance. Several years after purchasing the house, the plaintiffs learned that cracks in the concrete basement walls of their house were caused, at least in part, by a chemical reaction leading to the deterioration of the concrete. The plaintiffs submitted a claim under their policy, and the defendant denied the claim on the ground that the plaintiffs’ policy does not afford coverage for deterioration. Thereafter, the plaintiffs brought an action against the defendant in the United States District Court for the District of Connecticut (District Court), alleging that the defendant breached the insurance contract in denying coverage. The insurance policy provides that the defendant “insure[s] 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; . . . f. Use of defective material or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation. Loss to . . . foundation [and/or] retaining wall . . . is not included under items b. . . . and f. unless the loss is a direct result of the collapse of a building. Collapse does not include settling, cracking, shrinking, bulging or expansion.” The parties are in dispute as to whether the deterioration of the basement walls constitutes a collapse as contemplated by the insurance policy. The plaintiffs contend that the deterioration constitutes a collapse pursuant to Beach v. Middlesex Mutual Assurance Co., 205 Conn. 246 (1987), where the Supreme Court held that the term “collapse” in a homeowner’s insurance policy, when undefined, is “sufficiently ambiguous to include coverage for any substantial impairment of the structural integrity of a building.” The defendant contends that the collapse provision in the policy is not ambiguous and therefore that “substantial impairment of structural integrity” is not the applicable standard here. The Supreme Court accepted the following questions of law certified by the District Court pursuant to General Statutes § 51-199b: (1) Is “substantial impairment of structural integrity” the applicable standard for “collapse” under the contract of insurance provision at issue? (2) If the answer to question one is yes, then what constitutes “substantial impairment of structural integrity” for purposes of applying the “collapse” provision of the homeowner’s insurance policy at issue? (3) Under Connecticut law, do the terms “foundation” and/or “retaining wall” in a homeowner’s insurance policy unambiguously include basement walls? If not, and if those terms are ambiguous, should extrinsic evidence as to the meaning of “foundation” and/or “retaining wall” be considered?