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The Travelers Home and Marine Insurance Co. v. Walsh

United States District Court, N.D. Illinois, Eastern Division

March 14, 2017



          Joan H. Lefkow, U.S. District Judge

         The Travelers Home and Marine Insurance Company filed this declaratory judgment action to determine whether it has a duty to indemnify under a homeowner's insurance policy it issued to Patrick and Colleen Walsh. Cross-motions for summary judgment are pending, and the parties agree that the case can be resolved on the issue of whether the Walshes' loss was caused by a “collapse” as that term is defined in the policy. If so, Travelers is liable. The material facts are agreed. For the reasons stated below, the motion of Travelers is granted and the motion of the Walshes is denied.[1]


         As set out in the Joint Statement of Material Facts (dkt. 28), Travelers issued to the Walshes a homeowners insurance policy, effective from May 21, 2014 to May 21, 2015 (the Policy), providing certain coverage for loss and damage to the Walshes' house located on West Catalpa Avenue in Chicago (the Dwelling).

         The Dwelling was a one-and-one-half story brick bungalow built in the late 1920s. In 2014, the Walshes engaged a contractor to build a second story addition above the existing Dwelling and a two-story addition off the rear. After the work started, the Walshes agreed with the contractor to expand the project to lowering the existing basement floor to be level with the basement floor of the rear addition. The Walshes temporarily moved out of the Dwelling and intended to return after the construction was completed.

         In August 2015, as a result of the contractor's malfeasance, the foundation of the Dwelling was compromised, failed, and cracked, rendering the Dwelling structurally unsound and unsafe, both for use as a dwelling and for the completion of the project. Specifically, the west brick wall laterally displaced[2]; the first story floor/basement ceiling (including joists) sloped downward towards the west wall, and the second story floor moved. Cracks in the mortar and large gaps or separations opened-some through which daylight was visible-between the bricks and between bricks and window framing on the west wall, and there were cracks in the mortar and large gaps or separations between the bricks on the east wall. Cracks on interior walls, ceiling and archways were also observed. No wall had fallen over to the ground, however, and no one observed that anything had come off the Dwelling and fallen to the ground, such as bricks. Soon after observing these conditions, the contractor jacked and shored the west side of the Dwelling in order to support the load of the Dwelling, and he manually removed the bricks which had comprised the west exterior wall.[3]


         The Illinois Supreme Court applies the following rules of construction of insurance policy provisions:

The construction of an insurance policy and its provisions is a question of law. A court must determine the intent of the parties when construing the policy. To determine the meaning of the policy's words and the intent of the parties, the court must construe the policy as a whole, with due regard to the risk undertaken, the subject matter that is insured and the purposes of the entire contract. A policy term is not ambiguous because the term is not defined within the policy or because the parties can suggest creative possibilities for its meaning. In addition, a court cannot read an ambiguity into a policy just to find in favor of the insured. A policy provision is ambiguous only if it is subject to more than one reasonable interpretation. If a policy provision is unambiguous, however, a court must give the words of the provision their plain, ordinary and popular meaning.

Lapham-Hickey Steel Corp. v. Protection Mut. Ins. Co., 655 N.E.2d 842, 846, 166 Ill.2d 520, 211 Ill.Dec. 459 (1995) (internal citations and quotation marks omitted). Where the terms of a contract are clear, the court must ascertain the parties' intent solely from the language of the agreement. Commonwealth Ins. Co. v. Stone Container Corp., No. 99 C 8471, 2002 WL 31833862, at *4 (N.D. Ill.Dec. 16, 2002), citing, inter alia, LaSalle Natl. Trust, N.A. v. ECM Motor Co., 76 F.3d 140, 144-45 (7th Cir. 1996). But if the terms are ambiguous, the court may refer to extrinsic evidence to determine intent. Commonwealth Ins. 2002 WL 31833862 at *4.

         The Policy covers loss from collapse of all or part of the Dwelling resulting from the use of defective material or methods during construction, remodeling or renovation of the Dwelling. It defines “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[.]”[4]Excluded from “a state of collapse, ” however, is “a building or any part of a building that is in danger of falling down or caving in”; a part of a building that is standing, “even if it has separated from another part of the building”; and a building or any part of a building that is standing “even if it shows evidence of cracking, bulging, sagging, bending, leaning settling, shrinkage or expansion.” Two Illinois Appellate Court decisions have addressed “collapse” under a homeowners policy, both of which liberally construe the term. In Indiana Ins. Co. v. Liaskos, 697 N.E.2d 398, 297 Ill.App.3d 569, 231 Ill.Dec. 844 (1998), the court adopted the “modern view” that the term “is sufficiently ambiguous to include coverage for any substantial impairment of the structural integrity of a building” and “does not require complete destruction or falling in of the building or a part thereof nor would it require that the loss result from a sudden catastrophic occurrence.” Id. at 404 (internal citations omitted). In Gulino v. Economy Fire & Cas. Co., 971 N.E.2d 522, 2012 IL App. (1st) 102429, 361 Ill.Dec. 420 (2012), the court defined “entire collapse of a building” to include “caving in, ” meaning “to fall in or down esp[ecially] from being undermined.'” ¶ 18 (quoting Webster's Third New Int'l Dictionary 357 (1981)). The court reasoned that “caving in” “connotes the undermining of a structure that can be something less than a complete falling down.” Id.

         After Liaskos and Gulino, and until the Illinois Supreme Court decides differently, [5] the legal meaning of “collapse” in a homeowners policy, disregarding the exclusions, is the sudden impairment/undermining of a structure even if the structure has not completely fallen down. If this view is adopted, the Dwelling would be in a state of collapse.

         The Policy, however, has one additional exclusion from coverage that was not present in the policies addressed in Liaskos and Gulino. The Policy does not cover a loss from a collapse if the building remains standing, even if cracked, bulging, sagging, bending, leaning, settled, shrunk or expanded. Travelers argues that this difference in policy language distinguishes the instant case from Liaskos and Gulino, citing cases from other jurisdictions in support. The Walshes argue that the court should adopt the holding of Kings Ridge Community Ass'n, Inc. v. Sagamore Ins. Co., 98 So.3d 74 (Fl. App. 2012), that the term “standing” is ambiguous and should be construed to include a situation where a building or part of a building has significantly dropped in height or elevation from its previous level.

         In Kings Ridge, eleven roof trusses supporting a wing of a structure failed, causing the roof above the trusses and a drop ceiling below the trusses to deflect downward twelve inches. Id. at 78. The court found that the term “standing” means “upright on the feet or base; remaining at the same level, degree, or amount for an indeterminate period.” Id. (quoting Merriam-Webster's Collegiate Dictionary 1216 (11th ed. 2008)). It concluded that, after the loss incident, the trusses, ...

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