Equinox on the Battenkill Mgmt. Ass’n., Inc. v. Phi ladelphia Indem. Ins. Co., Inc., No. 315-8-13 Bncv (Wesley, J. Jan. 29, 2014).

[The text of this Vermont trial court opinion is un official. It has been reformatted from the origina l. The accuracy of the text and the
accompanying data included in the Vermont trial cou rt opinion database is not guaranteed.] VERMONT SUPERIOR COURT

SUPERIOR COURT CIVIL DIVISION Bennington Unit Docket No. 315-8-13 Bncv

Equinox on the Battenkill Management Association, Inc.

Plaintiff.

v.

Philadelphia Indemnity Insurance Company, Inc.

Defendant.

Decision and Order Denying Plaintiff’s Motion for S ummary Judgment and Granting

Defendant’s Cross-Motion for Summary Judgment

Background

Plaintiff, Equinox on the Battenkill Management As sociation, brings this declaratory judgment action against Defendant, Philadelphia Ind emnity Insurance Company, to determine coverage under a commercial general liability polic y which Defendant issued Plaintiff. Plaintiff manages condominiums in Manchester. In September 20 12, Plaintiff noticed damage to the

cantilevered balconies on some of its units. Plaint iff sought coverage for the repairs, which Defendant denied in February 2013.

Plaintiff’s cantilevered balconies have a history of repairs. Plaintiff replaced the untreated wood decking on the units with TREX planking. Plain tiff noticed water damage to some of the

balconies and added structural reinforcements. In S eptember 2012, Plaintiff noticed structural damage to the interior portions of some balconies. Plaintiff asserts that balcony M-7 collapsed and balcony K-3 partially collapsed. The damage was likely caused by moisture that rotted the structural support. The policy covers collapses tha t occur from hidden decay. Defendant disputes the damage was caused by “collapse” as defined by i ts policy. Defendant also asserts the balconies were built in an unprofessional manner ex empting any damage from coverage.

In support of its motion for summary judgment, Plai ntiff attached reports from engineering consultants. On October 23, 2013, Chris topher Benda, of Criterium LaLancette Engineers, produced a building inspection report. H e made the report from visual inspections, did not undertake any destructive or invasive testi ng, and acknowledged that the report was “not an exhaustive technical evaluation.” The report not ed the balconies suffered from water infiltration, insufficient reserve capacity, and an inadequate number of lag bolts. The report also notes cantilevered balconies often require continue d maintenance because of rot issues. A letter from Richard LaLancette emphasized Mr. Benda’s repo rt did not evaluate the property for code violations or identify design deficiencies. A lette r from Barbara Evans of Knight Consulting to

Alfred New further describes the balconies. Accordi ng to Ms. Evans, the balcony that allegedly2

“fully collapsed,” balcony M-7, had fallen approxim ately six inches. With repairs it sagged approximately two inches. The letter does not descr ibe what happened to balcony K-3.

The policy creates an exclusion for “collapse” exce pt as provided by additional coverage for collapse. The additional coverage for collapse covers losses caused by “hidden decay.” The policy also excludes losses caused by “faulty, inad equate or defective: (2) design, specifications, workmanship, repair, construction, renovation, remo deling, grading, compaction; (3) materials used in repair, construction, renovation...”

Plaintiff moved for summary judgment on October 28 , 2013. Plaintiff asserts the balconies collapsed from hidden decay. Plaintiff co ncedes there is a Vermont case that is unfavorable to its position. See Gage v. Union Mut. Fire Ins. Co. , 122 Vt. 246 (1961). Gage held that “collapse” means falling together into a flatt ened form. Id. at 248. Plaintiff argues the Court

should decline to follow Gage , or find it distinguishable, because the majority of courts have shifted away from its strict holding, and, further, the policy in this case is different from the policy in Gage

.

Defendant moved for summary judgment on December 4 , 2013. Defendant first argued the building damage was caused by defective constru ction, faulty design, and poor choice of materials. Under the exclusion for faulty design, t hey deny coverage. Second, Defendant argued,

under Gage , the balconies did not collapse.

On January 21, 2014, Plaintiff opposed Defendant’s motion for summary judgment. Plaintiff again argued Gage is not controlling because the law has evolved sinc e 1961 and Gage involved different policy language. Specifically, t he policy in Gage indicated “Loss by collapse shall mean only the collapse of the building(s) or any part thereof.” In contrast, the policy issued to Plaintiff covered “loss caused by or resulting f rom risks of direct physical ‘loss’ involving collapse of building or any part of buildings... Coll apse does not include settling, cracking, shrinkage, bulging, or expansion.” Further, Plainti ff argues there are disputed material facts concerning the construction of the balconies that p reclude summary judgment to Defendant in reliance on the exclusion for faulty design, workma nship or materials. Plaintiff filed a supplemental statement of disputed facts on January 22, 2014.

Standard of Review

The Court grants summary judgment “if the movant sh ows that there is no genuine dispute as to any material fact and the movant is e ntitled to judgment as a matter of law.” V.R.C.P. 56(a). The Court makes all reasonable infe rences and resolves all doubts in favor of the non-moving party. Lamay v. State , 2012 VT 49, ¶ 6, 191 Vt. 635. When interpreting a n insurance policy, the Court seeks to implement the plain mean ing of an insurance contract. Vt. Mut. Ins. Co. v. Parsons Hill P’ship , 2010 VT 44, ¶ 21, 188 Vt. 80. Where an ambiguity exists, the Court construes the policy in favor of the reasonable exp ectations of the insured. Id. Further, it is the burden of the insurer to show an exclusion applies. State v. CNA Ins. Cos. , 172 Vt. 318, 330 (2001).3

Discussion

The issue in these motions is the meaning of “coll apse.” As highlighted by the parties, Gage is the closest Vermont Supreme Court case to addre ss this issue. See 122 Vt. at 248. In Gage , Plaintiff sought coverage for a buckled ceiling, heaves in the floor, splintered linoleum flooring, bends in the plumbing, changes in the doo r frame, separation of the fireplace from the chimney, and movement away from the foundation. Id. at 247. The policy covered “collapse”, which “shall mean only the collapse of the building (s) or any part thereof.” Id.

In analyzing the meaning of “collapse”, the Suprem e Court first gave an example: shingles blowing off of a roof would not be a colla pse but the entire roof falling in would be a collapse. Id. at 248. The Court also quoted two dictionary defin itions. Id. From Webster, “collapse” means “to fall together suddenly, as th e two sides of a hollow vessel.” Id. From Century Dictionary, “collapse” means “to fall toget her or into an irregular mass or flattened form, through loss of firm connection or rigidity s upport of the parts or loss of the contents, as a building through the falling in of its side...” Id. Under these definitions, the damages claimed by the plaintiff were not due to “collapse,” as that t erm was used in the policy based on its evident meaning and usage. Id. at 248–49.

The Supreme Court noted but rejected a more expans ive definition of “collapse” recognized by the Kansas Supreme Court. Id. at 249; see Jenkins v. U.S. Fire Ins. Co. , 347 P.2d 417, 422 (1959). The Kansas Supreme Court defined “ collapse” as “the settling, falling, cracking, building or breaking of the insured build ing or any part thereof, in such manner as to materially impair the basic structure or substantia l integrity of the building...” Id. The Vermont Supreme Court found the definition of collapse in Jenkins “far too expansive.” Id.

In more than fifty years, our Supreme Court has no t had occasion to revisit its holding in Gage. However, Judge VanBenthuysen more recently consider ed the meaning of “collapse” in

an insurance contract. See Murphy v. Patriot Ins. Co. , No. 182062008, 2009 WL 9144510 (Vt. Super. Ct. Oct. 30, 2009) (VanBenthuysen, J.). The plaintiff’s homeowner’s policy covered collapse. Id. Collapse did not “include settling, cracking, shri nking, bulging or expansion.” Id. The plaintiff made claims for collapse for storm da mage, damage to the chimney, and damage caused by fungi. Id. The court applied the definition of “collapse” in Gage and granted summary judgment to the defendant. Id. The court quoted Gage , noting that Gage rejected the broad view of “collapse” upheld by the Kansas Supreme Court in Jenkins

. Id.

Cases from other jurisdictions vary on the meaning of “collapse.” See What constitutes "collapse" of a building within coverage of propert y insurance policy , 71 A.L.R.3d 1072.

Plaintiff cites Malbco Holdings, LLC v. AMCO Insurance Co. arguing the modern trend is to follow Kansas’s broad definition of collapse. See 629 F.Supp.2d 1185, 1195 (D. Or. 2009). However, the case law is too fragmented for such ea sy classification. For example, a homeowner sought coverage for imminent collapse of a deck und er a homeowner’s policy that defined collapse as falling into pieces and did not include settling or cracking. Rosen v. State Farm Gen.

Ins. Co. , 70 P.3d 351, 353 (Cal. 2003). The California Supr eme Court rejected the homeowner’s claim as excluded by the plain language of the poli cy. Id. at 357. On the other hand, the Connecticut Supreme Court considered a case where a homeowner sought coverage for collapse4

because of damage to the structural integrity of hi s home. See Beach v. Middlesex Mut.

Assurance Co. , 532 A.2d 1297, 1300–01 (Conn. 1987). The court fo und the policy did not unambiguously require a sudden cave-in in order to trigger coverage, and therefore declared coverage in effect under the circumstances presente d. Id. at 1301. 1

Under Vermont law, the insurance policy in this ca se excludes coverage because Plaintiff did not suffer a collapse. Plaintiff can not escape the gravamen of the holding in Gage , which is binding precedent as applied to the circumstances h ere. “Collapse” means the building or a portion of the building must fall down or flatten. See 122 Vt. at 248. Plaintiff has offered no evidence of a collapse of this sort, as to either b alcony M-7 or balcony K-3, thus the damages claimed by Plaintiff are too far removed from colla pse to support coverage. See id. The report by Ms. Evans indicates that balcony M-7, the balcony t hat Plaintiff claims collapsed, sagged six inches. Sagging six inches is not a collapse under Gage

. See id. Plaintiff provides even less information about the alleged partial collapse on b alcony K-3. These vague assertions and a characterization of the damage as collapse are insu fficient to survive a motion for summary judgment.

The Court does not adopt the more expansive defin ition of “collapse,” urged by Plaintiff as the current majority view, because Gage explicitly considered the reasoning of Jenkins and rejected it as too broad. See id. at 249. Concurring with Judge VanBenthuysen’s opin ion in Murphy, this Court affirms that Gage is still good law. See 2009 WL 9144510.

The Court is not persuaded that the differences be tween the policies here as compared to Gage help Plaintiff. The policy in Gage defined “collapse” as “only the collapse of the building(s) or any part thereof.” 122 Vt. at 247. I n this case, the policy covers “loss caused by or resulting from risks of direct physical ‘loss’ invo lving collapse of building or any part of buildings... Collapse does not include settling, crac king, shrinkage, bulging, or expansion.” The exclusion of collapse for settling, cracking, shrin kage serves to limit the meaning of collapse, not to expand it. The reasoning of Gage therefore still excludes coverage for the balconie s.

Defendant is entitled to summary judgment because the balconies did not collapse. There are no material disputed facts and Defendant is ent itled to judgment as a matter of law. See V.R.C.P. 56(a). For the same reason, Plaintiff is n ot entitled to summary judgment. The Court does not reach the question of the cause of the dam age to the balconies.

1 There are even a few cases concerning damage to bal conies, although their holdings are not particularl y useful

here. See, e.g.

, Island Breakers v. Highland Underwriters Ins. Co. , 665 So.2d 1084, 1085 (Fla. Dist. Ct. App. 1995) (finding disputed facts on the “the nature, extent, and cause of the damage found in some of the balco nies of the condominium building.”); W. Am. Ins. Co. v. Chateau La Mer II Homeowners Ass ’n, Inc. , 622 So.2d 1105, 1107–09 (Fla. Dist. Ct. App. 1993) (remanding for fact find ing on whether insect damage was hidden).5 Order

The Court DENIES Plaintiff’s motion for summary judgment. The Court GRANTS Defendant’s motion for summary judgment. Defendant shall submit a proposed judgment within 10 days of this entry.

Dated and signed electronically at Bennington, Verm ont on January 29, 2014

John P. Wesley Superior Court Judge