(Article from Insurance Law Alert, April 2019)
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Last month’s Alert reported on a First Circuit decision holding that a collapse provision was ambiguous and must be interpreted in the policyholder’s favor. Easthampton Congregational Church v. Church Mut. Ins. Co., 2019 WL 851191 (1st Cir. Feb. 22, 2019). This month, a Washington appellate court relied on that decision and deemed a nearly-identical provision ambiguous. Feenix Parkside LLC v. Berkley N. Pac., 2019 WL 1514086 (Wash. Ct. App. Apr. 8, 2019).
The operative policy provision covered collapse caused by “[d]ecay that is hidden from view.” The coverage dispute centered on whether the undefined term “decay” was ambiguous. A Washington trial court ruled that it was not, finding that it could reasonably be interpreted to include only “some kind of decomposition.” Based on this interpretation, the trial court granted the insurer’s summary judgment motion, finding that the failure of the building’s roof system due to defective construction methods and excessive temperatures did not constitute “decay.”
The appellate court reversed, deeming the provision ambiguous. Citing Easthampton Congregational Church, the appellate court explained that “decay” could reasonably be interpreted broadly to include a gradual decline in soundness or strength. The court noted that if the insurer had intended to limit “decay” to organic rot, it could have expressly done so.