What you need to know about collapse
Collapse of a building structure is covered under many insurance policies as an additional coverage rather than a peril and unfortunately ambiguous policy language is strictly interpreted by insurance adjusters to fit a carriers criteria and as a result, many collapse claims are denied and require litigation in order to be resolved.
Collapse coverage is usually interpreted as an unexpected occurrence that results in a complete and abrupt falling down or caving in of a building, or any substantial part thereof, into a mass of ruined materials, which results in the unsafe conditions for habitability and many times results in the revocation of the building’s certificate of occupancy that is required for habitability and use classifications.
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THE COLLAPSE vs. WEIGHT of ICE, SNOW and SLEET CONFUSION
Do not confuse collapse coverage with Weight of Ice, Snow, and Sleet coverages. Incorrect claim filings under collapse instead of weight of ice, snow, and sleet typically result in coverage denials and may result in litigation against the filer and the policyholders’ carriers. (filer examples; public adjuster, risk manager, insurance broker, insurance consultant)
There are cases where insurance carrier’s prevail in court because the building’s structural elements, bulged split, sagged and separated, which may not meet the criteria for collapse coverage, especially if the structure was supported in order to avoid a collapse.
Depending on the danger of shoring up a building in imminent danger of collapse, failing to take action may also void coverage if a carrier demonstrates the policyholder failure to mitigate damages after discovering structural weakness. In other words, if a carrier can prove that shoring up a building would have prevented its collapse, your claim may be denied.
A carrier may also argue that the cost of rehabilitating damage by the weight of snow, ice, and sleet after shoring would be far less money than allowing it to collapse to the ground. Keep in mind that there is no “collapse coverage” for a building that is “near collapse” and the proper filing in such case should be the peril “Weight of Snow, Ice and Sleet.
Complying with your duties after a loss by shoring up a building to prevent a “complete collapse” supports a carrier’s cause for denial in a case of “near-collapse”, but willfully failing to shore up a building may violate a policy’s mitigation clause also result in a denial for a “complete collapse” even if proximate cause of the loss would have been covered under Weight of Snow, Ice, and Sleet. Don’t go it alone.
Depending on your policy type and its forms, coverage for collapse may extend to both your building and its business and or personal property.
The keyword for collapse coverage usually depends on it being a “complete” collapse.
Court decisions on policy language vary. One view can focus on policy definitions regarding “collapse” and or “complete collapse”. If the definitions or policy language are ambiguous liability may extend to the carrier and a policyholders interpretation of what a collapse represented when purchasing the policy may survive.
Insurance terms, conditions, and definitions can be written in plain language with great detail and leave no doubt to what is actually covered. Many policies have lengthy streightforward examples of their coverage, but others hide behind ambiguous well written legal jargon that raise issues of fact requiring litigation.
Ambiguous policy language gives dishonest carriers an advantage (wiggle room) to minimize payouts under threat of denial knowing that a policyholder’s cost to litigate is not affordable. Since many states do not allow policyholders to recover consequential and or punitive damages, policyholders don’t litigate to recover what is theirs. Carriers know that most attorneys won’t take an average property case on contingency alone and require thousands of dollars upfront for a lenghty multi-year battle.
During market conduct reviews by state regulators carrier’s pay (hefty but very affordable) fines to that state and stipulate not to repeat the offense, however, restitution to the policyholders may not be required.
If the cause of a complete collapse is related to a covered peril, (i.e., falling objects, gas explosion, fire damage, snow, sleet or ice), you should be covered, however if faulty workmanship, materials and or design of the structure results in a collapse, no coverage is afforded and your only course of action may be against a contractor or architect.
Below is a link to an interesting article written by an expert property and casualty attorney that may help explain these issues in greater detail.