Hurricane Sinks Property Damage Claim for Building (NJ)

If a building falls into a hole, and no one can prove what caused it, is there insurance coverage? The Appellate Court answered the latter question in Ashrit Realty, LLC, et al. v. Tower National Insurance Company, where plaintiffs sought coverage for damage to their building from defendant Tower National Insurance Company, who insured the property.

Plaintiffs’ property initially sustained damage in a storm in August 2011. Hurricane Irene followed just two weeks later. Thereafter, a large hole formed as a result of a collapsed pipe which ran beneath the property. Once the pipe collapsed, leaking water caused substantial soil erosion, which led to the collapse of the rear portion of the building.

The trial court granted summary judgment to defendant as to all requests for coverage under the policy. Plaintiffs appealed, alleging that the court misinterpreted the policy and that a genuine dispute of material fact precluded summary judgment.

Defendant denied coverage based on an exclusion in the policy. Under the insurance policy, damage caused from hidden pipe decay was covered. However, any damage caused by soil erosion and water damage was not covered. The policy also included an anti-concurrent/anti-sequential clause. This clause excludes coverage in situations where a covered event and an excluded event contribute to a single loss.

Defendant hired expert consultants to determine the cause of the damage. The engineers determined that the cause of damage was the result of progressive soil erosion arising from the partial failure of the buried pipe. The experts for both plaintiffs and defendant agreed that the pipe partially collapsed. Plaintiffs argued that the building collapse was directly caused by the collapsed pipe and not the subsequent soil erosion.

The appellate court determined that contrary to plaintiffs’ assertions, plaintiffs’ expert never challenged the argument that soil erosion occurred. Consequently, the appellate court ruled that where there are two or more identifiable causes that contribute to a single property loss, the insured may recover unless there is an anti-concurrent or anti-sequential clause in the policy. Unfortunately for plaintiffs, the Tower National Insurance Company contained such a provision.

Thanks to Steve Kim for his contribution.

For more information, contact Denise Fontana Ricci at .