Facts
- A homeowner discovered severe deterioration in two attached decks, which a contractor described as in a state of imminent collapse.
- The homeowner submitted a claim under a homeowner’s policy providing additional coverage for “collapse.”
- The policy limited collapse coverage to “direct physical loss” involving “the sudden, entire collapse” of a building or part of a building and defined collapse as “actually fallen down or fallen into pieces.”
- The insurer denied coverage because the decks had not actually fallen down or fallen into pieces.
- The homeowner sued for breach of contract and breach of the covenant of good faith and fair dealing.
- After the trial court ruled for the homeowner on coverage, the insurer appealed; the intermediate appellate court affirmed based on public policy favoring coverage for imminent collapse.
- The state supreme court granted review.
Issues
- Whether a homeowner’s policy that defines “collapse” as “actually fallen down or fallen into pieces” covers imminent collapse when a structure is dangerously deteriorated but has not fallen.
- Whether a court may expand coverage beyond clear policy language based on generalized public policy concerns such as safety and loss prevention.
Decision
- The supreme court reversed the judgment for the homeowner and directed entry of judgment for the insurer.
- The policy’s collapse coverage applied only to an actual collapse as expressly defined, not to imminent collapse.
- Public policy concerns could not justify rewriting clear and explicit insurance contract terms.
- Because no covered collapse occurred, the homeowner could not establish a covered loss; the related bad-faith claim therefore failed.
Legal Principles
- Insurance policies are interpreted under ordinary contract rules; clear language is enforced as written and given its ordinary meaning unless the policy provides a definition.
- When a policy explicitly defines a disputed term, that definition controls, and courts do not treat the term as ambiguous in the abstract.
- Courts may not rewrite unambiguous insurance provisions to enlarge coverage based on generalized public policy concerns.
- Where a peril is excluded except as specifically restored by an “additional coverages” provision, the restored coverage is limited to the scope and definition stated in that additional coverage.
Conclusion
The court held that an insurance policy defining “collapse” as “actually fallen down or fallen into pieces” limits coverage to actual collapse and does not cover imminent collapse, and it rejected the use of public policy to expand unambiguous policy language.