Law Offices of

 Thomas E. Maloney, Jr.

 We are here to help     We are here to help     We are here to help

10 Madison Ave, Third Floor,   Morristown, NJ 07960

www.thomasmaloneylaw.com   973.538.4100   tmaloney@thomasmaloneylaw.com

   

 

 

The Adjuster's Advantage

A Newsletter Devoted to the Public Adjuster

 

Vol. 4,  No. 2                                                  February 18, 2014

 

COLLAPSE

 

As winter storms dump mountains of snow on our roofs, walks, driveways and highways, we can take some comfort in a recent decision by Judge Hillman in the U.S. District Court in New Jersey finding collapse coverage under a homeowner's policy. The opinion, rendered on December 31, 2013 in Tripodi v. Universal North America Insurance Company, is available on Justia.com and is worth adding to your treasure trove of rebuttal material. The opinion contains compact summaries of several areas of the law, including contract interpretation, waiver of defenses and bad faith.

 

FACTUAL BACKGROUND

 

In this case, hapless homeowners decided to construct a drainage system in their basement, consisting of a perimeter drain trench and sump pump. After 3 days of jackhammering the existing concrete slab and excavating 12" of earth around the interior perimeter in order to install a bed of stone and piping, the homeowners were awakened in the middle of the night by a loud noise coming from the basement. Upon investigation, they found that a block foundation wall had moved 2 feet into the basement, had broken the sheetrock and they were able to see outside of the house from inside the basement. A 911 call brought an emergency team from the municipality which immediately shored up the house to prevent further damage. The town then declared the home uninhabitable.

 

The homeowners then notified their insurance carrier, Universal, which promptly investigated and brought an "expert" (Vallas Associates) to the site within 3 days of the occurrence. The Vallas report concluded that the subject wall was no longer capable of supporting the mid-span center portion of the building, that the base of the basement wall had moved inward several inches and allowed for downward movement of the wall itself and that the wall had failed. Nonetheless, Universal denied coverage by letter a month later. The denial letter is not reported in the opinion.

 

DECISION

 

After about 18 months of litigation, the parties cross-moved for summary judgment. The Court's decision was predicated upon the specific language of the policy which defined "collapse" as "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 current intended purpose." Of note is the Court's recognition that a specific definition contained in the policy overrode the common law definition of the same term ("collapse").

 

Universal raised all of the policy terms defining what is not a collapse and tried to use the prompt shoring to work the facts into an exclusion from coverage. The Court refused to accept these arguments, finding all of the elements of the definition of collapse to have been met. The Court noted that the quick shoring up by the town prevented the entire wall from falling into a pile of rubble and it did not permit the insurer to take advantage of the protective measures to exclude coverage. The Court accordingly granted summary judgment to the homeowners on the question of liability under the contract. Of special note, the Court found that Universal waived all other policy defenses and exclusions by not articulating them in opposition to the insureds' motion for summary judgment. The decision turned solely upon the collapse provisions of the policy.

 

The decision does not end the matter. The issue of damages remains in dispute and the Court denied both parties' motions for summary judgment on bad faith, finding the record inadequate to render a decision. The Court did a nice job of articulating the bad faith standard under New Jersey law, noting the two-prong test of Pickett v. Lloyds in a wrongful denial claim: (1) the absence of a reasonable basis for denying benefits under the policy (i.e., a fairly debatable reason) and (2) the insurer's knowledge or reckless disregard of the lack of a reasonable basis for denying the claim. Surprisingly, the Vallas report did not supply the carrier with a reasonable basis to deny the claim, at least as to the collapse, the only issue before the Court.

 

PRACTICE POINTS 

  • It is refreshing to find a Court that will pierce through the sophistry of a carrier's arguments and not simply duck the issue by finding the existence of some question of fact to be resolved at trial. Kudos to Judge Hillman for taking the time to examine the record and write a thoughtful 32 page opinion. 
  • Once again, reading the policy language is crucial. In this instance, the specific definition helped the insured. The common law definition of collapse would have required the same conclusion, but the Court recognized that in contract interpretation the specific language controls. 
  • The denial letter was not part of the opinion and was not cited at length. Nonetheless, the Court found the failure of the carrier to raise any other specific defensive issues in opposition to the motion to be a waiver of all other defenses. In other words, on a motion for summary judgment, the opposing party has to raise every available defense to liability, even if the motion is directed to only one specific issue. 
  • It took two years for the insureds to reach the point of obtaining judgment on liability and the case is not over. The parties continue to litigate damages. The insureds at this point have to conduct depositions of the carrier's employees if they wish to pursue their claims for bad faith consequential damages (including attorney's fees). These insureds were lucky enough to be financially able to make the required repairs to their home without the carrier's money. They would now be able to demand an advance of the undisputed amount of the loss while they pursue the remainder of the case, although we would not be surprised to learn that the carrier refuses, contending that they will appeal the liability ruling when the case is concluded at the trial level. It takes a resolute insured to withstand the economic duress a carrier can exert! 

As always, if you or your insureds have any questions or encounter any similar issues, please feel free to contact us at 973-538-4100 or at tmaloney@thomasmaloneylaw.com. We are here to help!

 

Tom Maloney

Tom Maloney

 

Representing the Insured in:

  • Coverage Disputes
  • Claims
  • Investigations
  • Examinations Under Oath
  • Suits
  • Trials
  • Appeals
     

Statewide coverage

Associate Member New Jersey Public Adjusters Association

 

AV rated Attorney Martindale-Hubbell

 

Admitted: All State and Federal Courts in New Jersey; Third Circuit Court of Appeals; U.S. Supreme Court

 

Certified by the Supreme Court Of New Jersey as a Civil Trial Attorney - 1982

 

Qualified Mediator by the New Jersey Supreme Court

 

Pro Hac Vice Admissions:NY, NH, MD, USDC-SDNY,

Second Circuit Court of Appeals

 

Georgetown University Columbia Law School

 

DISCLAIMER: This newsletter contains the personal opinions of the writer and is not intended to and does not provide legal advice in any way, shape or form; does not create an attorney-client relationship between the writer and the recipient or any other person; and is offered without charge for informational purposes only. You should consult with an attorney of your own choosing in any matter in which you seek legal advice.