This was originally published on the SGR Blog.
Was Loss Covered by Insurance Policy or Barred by Exclusion?
Homeowners’ insurance policies cover generic enumerated risks, on the one hand, but also expressly exclude certain coverages, on the other. As a recent case illustrates, a Court may be required to determine whether a particular loss is covered or excluded.
Evan and Jennifer Klein owned a home in Suffolk County insured under a homeowner’s insurance policy issued by State Farm Insurance Company. During the coverage period, the Klein’s in-ground swimming pool collapsed, causing damage to the pool walls, brick border, and patio area surrounding the pool. They submitted a claim for coverage under the policy.
State Farm disclaimed coverage for the portion of the claim involving damage to the pool walls, brick border, and patio area surrounding the pool on various grounds, including based upon a clause in the policy that excluded loss caused by “collapse.” Thereafter, the Klein’s filed suit against State Farm to recover damages for breach of contract and for a judgment declaring that the carrier was liable to them for damages resulting from its failure to adequately investigate and fully pay their claim.
State Farm moved for summary judgment dismissing the complaint. The Supreme Court granted the motion. The Kleins appealed.
In construing policy provisions defining the scope of coverage pursuant to a policy of insurance, courts first look to the language of the policy. The unambiguous terms of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such terms is a question of law for the court. Exclusions or exceptions from coverage must be specific and clear in order to be enforced. And, if the terms of the policy are ambiguous, any ambiguity must be constructed in favor of the insured and against the insurer.
The appeals court held that State Farm established its prima facie entitlement to judgment as a matter of law dismissing the breach of contract cause of action by demonstrating that the “collapse” exclusion of the policy was unambiguous and clearly applied to the Klein’s loss. Under the plain language of the policy, loss to property caused by “collapse” was excluded from coverage except where, at a minimum, the collapse involved “the collapse of a building or any part of a building.” Here, the evidence demonstrated that the Kleins loss was attributable to the collapse of their in-ground pool, which was not “a building or any part of a building,” thereby rendering the exception to the “collapse” exclusion under the policy inapplicable to their loss. In opposition to State Farm’s prima facie showing, the Kleins failed to raise a triable issue of fact.