Insurance Contract Coverage Disputed

Bacewicz v. NGM Insurance Co.,    

2010 U.S. Dist. LEXIS 77682 (D. Conn. Aug. 2, 2010)

Homeowners brought this action alleging that their insurer breached an insurance contract by denying coverage for damage to their basement walls. Bacewicz v. NGM Ins. Co., 2010 U.S. Dist. LEXIS 77682, at *1 (D. Conn. Aug. 2, 2010). Specifically, the insureds noticed cracks of such severity that the insureds had to replace the basement walls to avoid a catastrophic collapse of the entire home. Id. at *5. The insurer moved for summary judgment, in part, asserting four arguments in support of its declination of coverage and raising a defense based on a time restriction to the insureds’ suit. Id. at *8.

Regarding the issue of whether the policy covered the loss, the insurer first argued that the loss was not covered because the policy excluded coverage for any loss to the foundation of the house, unless such loss was a direct result of the collapse of a building. Id. at *9. However, the court found that the term “foundation” as contained in the policy was reasonably susceptible to more than one meaning and a reasonable jury could find that the basement walls of the house did not constitute the “foundation” of the house. Id. at *11. Next, the insurer argued that the damage consisted of only “swelling, cracking and bulging,” which were excluded, and that a collapse did not occur. Id. The court disagreed and found that the term “collapse” was “reasonably susceptible to a reading that include[d] the type of damage that occurred” to the basement walls. Id. at *13-*14. Specifically, the court found that the term “collapse” was “sufficiently ambiguous to include coverage for any substantial impairment of the structural integrity of a building.” Id. at *15 (citation omitted). Third, the insurer argued that the loss was not covered because it was not caused by “hidden decay.” Id. at *16. Again, the court disagreed and found that a reasonable jury could find that the damage constituted “decay” -- a term that was not defined in the policy -- and that such damage was “hidden” because the insureds did not realize the severity of the damage until they removed interior paneling from the basement walls. Id. at *17. Finally, the insurer argued that summary judgment should be granted in its favor because the policy excluded loss caused by “[w]ater below the surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk driveway, foundation…” Id. at *18. The court denied summary judgment on the basis of this water damage exclusion because the insureds’ expert opined that water in the concrete mix of the basement walls would be sufficient for the reactive process to begin, which caused the loss. Id. at *19-*20.

The insurer also argued that the breach of contract claim was time-barred because the insureds did not bring their claim within one year after the date of loss, as was required by the “Conditions” section of the policy. Id. at *20. The court noted that in the absence of Connecticut precedent on point, the First Circuit, in Parker v. Worcester Ins. Co., 247 F.3d 1 (1st Cir. 2001), predicted that the Connecticut Supreme Court would employ the “discovery rule” in these circumstances. Id. at *21. Under the discovery rule, the limitations period would begin to run only when “a reasonable person would have learned of the injury or loss.” Id. The court declined to grant summary judgment after concluding that a reasonable jury could draw different conclusions as to when a reasonable person should have known that a substantial structural impairment was present in the house. Id. at *24.