Insured Was Entitled To Coverage Under Express Provision Of All-Risk Policy For Collapse Of Parking Garage That Was Caused By "Weight Of Rain," Even Where Weight Of Rain Was Not Dominant Cause Of Collapse
August, 2007
The Appellate Division, First Department recently held that an insured was entitled to coverage for collapse of a parking garage that was caused in part by “weight of rain” under an express provision in an all-risk, first-party property insurance policy, despite “weight of rain” not being the dominant cause of the collapse. Seward Park Housing Corp. v. Greater New York Mutual Insurance Co., 2007 WL 1365368, 2007 N.Y. Slip Op. 04055 (1st Dep’t May 10, 2007). In reaching this decision, the Court determined that the insurers failed to satisfy their burden of establishing that the claimed policy exclusion defeated the insured’s claim to coverage.
In this insurance breach of contract action, the Court was asked to consider whether the insured was obligated to comply with contract provisions in order to recover the replacement cost of a two-level parking garage that collapsed after a rainstorm in New York, New York. The insured, Seward Park Housing Corp. (“Seward Park”), was a residential cooperative apartment complex which included four high-rise apartment buildings and dozens of commercial stores, as well as a two-level garage comprised of an underground level and a partial above-ground level for approximately four hundred cars.
On January 15, 1999, the northern portion of the garage collapsed. In the week prior to the collapse, almost five inches of rain and freezing rain fell. Although the garage had a drainage system, several of the drains were clogged with ice, dirt and soil. The garage also contained supports placed on top of approximately ninety garage columns, but in multiple places, these supports were missing. The supports were designed and used to spread the load from the slab supporting the upper level of the garage, and to reduce stresses at the point that the columns met the slab that was the concrete roof of the lower level.
Five days after the collapse, the Department of Buildings ordered that the remaining portion of the northern section of the garage be demolished and that the entire garage, including the southern portion, be vacated. On June 24, 1999, the Department of Buildings ordered that the southern portion of the garage be immediately demolished. After completing construction, the insured alleged that the total cost of rebuilding the garage was approximately $19,000,000.00.
The insured/plaintiff made a claim for the loss with its insurer, Greater New York Mutual Insurance Company, under its all-risk, first party property policy. The claim was denied on December 29, 2000, resulting in this litigation. Coverage was denied based on the following exclusions: (1) ordinance or law; (2) hidden or latent defect; and (3) collapse.
The case was ultimately tried from January 29, 2004 through March 29, 2004. The jury awarded Plaintiff a total of $12,075,503.74 for replacing the garage. The insurer moved for judgment notwithstanding the verdict, which was denied by the trial court. On appeal, the insurer contended that any exception to the collapse exclusion, where it is “caused in part” by weight of rain, requires that the weight of rain be the dominant cause of the collapse, rather than just a contributing cause thereof. Moreover, the damages are not covered under the policy as they resulted from a hidden or latent defect. Finally, the insurer argued that the uncollapsed portion of the garage was not covered since it was damaged before the collapse, and its destruction was ordered due to construction defects.
The Court, in modifying the verdict, held that the trial court correctly determined the issue of causation and also correctly held that Defendant did not make out a case for a hidden or latent defect exclusion. The Court further ruled that the policy in question, under the section “Additional Coverage-Collapse,” provided that a covered cause of loss shall include collapse occurring “after construction, remodeling or renovation is complete and . . . caused in part by weight of rain . . . even if use of defective material or methods, in construction, remodeling or renovation, contributes to the collapse.” The Court stated that the policy did not require the “weight of rain” to be the dominant cause, and the policy could have clearly stated so had that been the intent of the parties. Thus, the policy unambiguously provided coverage where “weight of rain” is a partial cause of collapse.
Regarding the insurer’s claim that the collapse, nonetheless, fell within the policy’s exclusion for “hidden and latent” defects, the Court held that the insurer did not meet its burden of establishing that the policy exclusion defeated the insured’s claim to coverage. Additionally, the Court determined that the ordinance or law exclusion similarly did not apply.
Learning Point:
The Court in Seward Park followed existing law and found that the insurer failed to satisfy its burden of establishing that the claimed policy exclusions defeated the insured’s claim to coverage. Thus, the Court adhered to traditional rules of contract interpretation and enforced the policy language as written.
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