Karas v. Liberty Ins. Corp.

335 Conn. 62

228 A.3d 1012

Steven KARAS et al.

v.LIBERTY INSURANCE CORPORATION

SC 20149

Supreme Court of Connecticut.

Argued December 18, 2018

Officially released November 12, 2019^*

Michael D. Parker, pro hac vice, with whom was Jeffrey R. Lindequist, for the appellants (plaintiffs).

Robert A. Kole, pro hac vice, with whom was Kieran W. Leary, for the appellee (defendant).

Paul R. Doyle and Kevin P. Walsh filed a brief for Connecticut Senator Paul R. Doyle as amicus curiae.

Wystan M. Ackerman filed a brief for the American Insurance Association et al. as amici curiae.

Thomas O. Farrish filed a brief for the Insurance Association of Connecticut as amicus curiae.

Ryan M. Suerth, Marilyn B. Fagelson, Proloy K. Das and Sarah Gruber filed a brief for United Policyholders as amicus curiae.

Robinson, C. J., and Palmer, McDonald, D'Auria, Mullins, Kahn and Ecker, Js.

PALMER, J.

In Beach v. Middlesex Mutual Assurance Co. , 205 Conn. 246, 532 A.2d 1297 (1987), this court determined that the term "collapse" in a homeowners insurance policy, when otherwise undefined, "is sufficiently ambiguous to include coverage for any substantial impairment of the structural integrity" of the insureds' home. Id., at 252, 532 A.2d 1297. In the present case, which comes to us on certification from the United States District Court for the District of Connecticut; see General Statutes § 51-199b (d) ;¹ we consider whether that definition pertains to the collapse provisions of the homeowners insurance policy issued by the defendant, Liberty Insurance Corporation, to the plaintiffs, Steven Karas and Gail Karas, who claim coverage for the cracking and crumbling of their concrete basement walls, and, if the definition set forth in Beach does apply, what degree of deterioration constitutes a "substantial impairment of the structural integrity" of those walls sufficient to trigger coverage. Id. We also consider whether, under Connecticut law, the coverage exclusion in the plaintiffs' policy for the collapse of the home's "foundation" unambiguously includes the basement walls of the home. We conclude, first, that the Beach standard applies to the plaintiffs' policy, second, that the "substantial impairment of structural integrity" standard requires proof that the home is in imminent danger of falling down, and, third, that the term "foundation" unambiguously encompasses the home's basement walls.²

The record certified by the District Court contains the following undisputed facts and procedural history. The plaintiffs, who purchased their home in the town of Vernon in 2010,³ are among hundreds of homeowners in northeastern Connecticut whose foundations were constructed using defective concrete manufactured by J.J. Mottes Concrete Company (Mottes). According to a study commissioned by the state of Connecticut and conducted by the Department of Consumer Protection, the stone aggregate used in Mottes concrete between 1983 and 2010 contained significant amounts of pyrrhotite, a ferrous mineral that oxidizes in the presence of water and oxygen to form expansive secondary minerals that crack and destabilize the concrete, resulting in its premature deterioration. See Department of Consumer Protection, State of Connecticut, Report on Deteriorating Concrete in Residential Foundations (December 30, 2016) pp. 1, 7–9 (Report on Deteriorating Concrete in Residential Foundations), available at http://crcog.org/wp-content/uploads/2016/12/report_on_deteriorating_concrete_in_residential_foundations.pdf (last visited November 6, 2019).

In October, 2013, the plaintiffs discovered that their basement walls were cracking and crumbling in the manner typical of Mottes concrete. On November 15, 2013, they submitted a claim to the defendant, which it denied. Thereafter, the plaintiffs commenced an action in the United States District Court for the District of Connecticut, alleging that the defendant had breached the collapse provisions of the policy by declining to compensate them for the purported collapse of their basement walls. The plaintiffs also alleged a breach of the covenant of good faith and fair dealing and violations of the Connecticut Unfair Insurance Practices Act (CUIPA), General Statutes § 38a-815 et seq., and the Connecticut Unfair Trade Practices Act (CUTPA), General Statutes § 42-110a et seq.

In support of their claims, the plaintiffs relied on the following provisions in their homeowners insurance policy: "SECTION I—PERILS INSURED AGAINST ... We insure against risk of direct loss to property described in Coverages A and B only if that loss is a physical loss to property. We do not insure, however, for loss ... [i]nvolving collapse, other than as provided in Additional Coverage 8 ...." Additional Coverage 8, in turn, provides in relevant part: "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: a. [Certain perils identified elsewhere in the policy, including fire, lightning, windstorm, hail, explosion, riot, civil commotion and volcanic eruption]; b. [h]idden decay; c. [h]idden insect or vermin damage; d. [w]eight of contents, equipment, animals or people; e. [w]eight of rain which collects on a roof; or f. [u]se 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 an awning, fence, patio, pavement, swimming pool, underground pipe, flue, drain, cesspool, septic tank, foundation, retaining wall, bulkhead, pier, wharf or dock is not included under items b. c., d., e., 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." According to the plaintiffs, they are entitled to payment under these policy provisions because the deterioration of the concrete within their basement walls constitutes hidden decay that has so substantially impaired the walls' structural integrity that they are in a state of collapse as we defined that term in Beach .

In connection with the present action, the plaintiffs retained the services of David Grandpre, a structural engineer who has been retained in more than sixty cases involving Mottes concrete. In his deposition, Grandpre testified that the plaintiffs' foundation had "the most severe cracking problem" of any of the Mottes foundations he had inspected and that the basement walls were bowing inward approximately two inches. Grandpre opined that the chemical reaction occurring within the concrete cannot be arrested and that the only remedy is to replace the basement walls. At Grandpre's recommendation, the plaintiffs installed wood shoring to reinforce the walls. Grandpre testified that, without the shoring, the home "might become unsafe at some time in the near future." When pressed on when the basement walls might become unsafe, Grandpre responded that he did not think he could "say within a reasonable degree of engineering certainty" that the walls will fall down "within the next 100 years," although he thought that it is likely that they will do so within that time frame "based on the fact that portions of the wall are already crumbling and falling to the floor ...."

The defendant filed a motion for summary judgment, asserting, inter alia, that the loss claimed by the plaintiffs is excluded under the provisions of the policy that expressly preclude coverage for the collapse of a building unless it results from one of several specified causes, none of which, the defendant argued, was applicable to the plaintiffs' claim. The defendant further argued that the plaintiffs' reliance on our definition of the term "collapse" in Beach was misplaced because the collapse provisions of their policy and the parallel provisions of the policy at issue in Beach , although similar, are sufficiently different to render Beach inapplicable to the present case. The defendant also maintained that, under Beach , a policyholder cannot establish a substantial impairment of a building's structural integrity without proof that the building is in imminent danger of falling down, and, because the basement walls of the plaintiffs' home are in no such danger, the plaintiffs cannot prevail on their claim, even if the Beach standard is applicable. Finally, the defendant asserted that the plaintiffs' claim fell within an express exclusion in the policy for loss caused by collapse of the home's foundation because, according to the defendant, it cannot reasonably be disputed that a home's basement walls are part of the foundation.

The District Court denied the defendant's motion for summary judgment as to the plaintiffs' breach of contract claim but granted it as to the plaintiffs' remaining claims.⁴ Thereafter, the defendant requested that the District Court seek this court's guidance by way of certification with respect to the following three questions:

"1. Is ‘substantial impairment of structural integrity’ the applicable standard for ‘collapse’ under the [plaintiffs' homeowners insurance policy] 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 plaintiffs' homeowners] insurance policy?

"3. Under Connecticut law, [does] the [term] ‘foundation’ ... in a [homeowners] insurance policy unambiguously include basement walls? If not, and if [that term is] ambiguous, should extrinsic evidence as to the meaning of ‘foundation’ ... be considered?"⁵ Karas v. Liberty Ins. Corp. , Docket No. 3:13-cv-01836 (SRU), 2018 WL 2002480, *4 (D. Conn. April 30, 2018).

The District Court granted the defendant's certification request only as to the second question; id., at *5 ; concluding that guidance as to the meaning of "substantial impairment of structural integrity" was warranted because "[n]o Connecticut appellate...