In Leda Puhlovsky v. Rutgers Casualty Insurance Company, the Appellate Court overturned a trial court’s Order of summary judgment in favor of the insurer. The plaintiff owned a four-story commercial building in Paterson. In March 2008, the adjacent building collapsed and was ultimately demolished. The western brick wall of plaintiff’s building was built into the wood frame of the adjacent building, creating a common wall in between them. After the collapse of the adjacent building, a municipal engineer examined the plaintiff’s building and found it to be unsafe. City officials instructed the plaintiff to either demolish the building or repair it so as to conform to Code. She opted to demolish the building and afterwards filed a claim with her insurer, Rutgers Casualty, under the policy issued for the commercial property.
An engineer retained by Rutgers examined the building and determined that there had been gradual movement in the building in the past few years due to the earth sinking and settling and that the loss of support from the adjacent building exacerbated the condition. Plaintiff’s expert also inspected the building and determined that the damage occurred due to the partial collapse of the adjacent building and vibrations from demolition of the adjacent building. Rutgers eventually denied coverage under the policy’s exclusions for losses occasioned by the enforcement of any ordinance or law, or arising from neglect, faulty construction or earth movement. The trial court agreed with Rutgers’ position and granted summary judgment its favor.
The Appellate Court reversed and found that the exclusions in the policy did not apply to the specific circumstances of this case. Noting that insurance policy exclusions must be narrowly construed, the court determined that the “ordinance or law exclusion” did not apply to the facts of this case, since the building was not demolished at the direction of the City of Paterson. Rather, the City gave plaintiff the choice either to demolish the structure or immediately correct the hazards and render the building safe. Moreover, the exclusion in the Rutgers policy refers to code enforcement requiring the tearing down of any property, which is not what happened in this case. Further, similar exclusions in other policies have been construed to apply to the increased expenses incurred by an insured in repairing or rebuilding a damaged structure so as to bring it into compliance with a local code or ordinance.
Lastly, the Appellate court held that the motion judge’s reliance on the “earth movement” exclusion was not warranted in the context of a motion for summary judgment. Rather, the question of whether or not the settling, cracking or other disarrangement of plaintiff’s building occurred as a consequence of “earth movement” was a question of fact for a jury.
Thanks to Heather Aquino for her contribution to this post.