PHILADELPHIA – A federal judge has granted summary judgment to Travelers Insurance, defeating litigation from Delaware County where it sought insurance coverage to the tune of $32 million, for damages it alleged it suffered when a 12-ton panel fell on one of its parking garages and adjacent buildings.
Delaware County, headquartered in Media, initially filed a complaint on May 1, 2019 in the Delaware County Court of Common Pleas against Travelers Property Casualty Co. of America of Hartford, Conn., alleging breach of contract, statutory bad faith and breach of the implied covenant of good faith and fair dealing.
The case was removed to the U.S. District Court for the Eastern District of Pennsylvania on June 4, 2019 by the defendant.
According to the complaint, the plaintiff owns a municipal parking garage in Media that was constructed in the 1970’s and on July 27, 2018, an incident occurred where a non-structural spandrel panel collapsed from the roof.
The suit stated no one was injured, but the garage and two adjacent structures, the Toal and Sweeney buildings, were severely damaged.
The plaintiff alleged it immediately notified the defendant of the incident and the defendant denied insurance coverage in October 2018, stating that the policy’s collapse exclusion applied and precluded any coverage.
In response to the complaint, the defendant filed an amended answer on May 20, 2020 asserting no less than 34 affirmative defenses.
Among them, that the plaintiff’s complaint fails to state a claim upon which relief can be granted; the plaintiff failed to set forth a cause of action under the policy upon which relief can be granted; the plaintiff’s complaint is barred by the terms, conditions, exclusions and/or limitations of the policy and Travelers denies having breached any contractual duty allegedly due and owing to plaintiff.
“Plaintiff’s claim is barred by the following provision found at Section C. Exclusions: ‘We will not pay for loss or damage caused by or resulting from any of the following: Collapse, including any of the following conditions of property or any portion of the property: (a) An abrupt falling down or caving in; (b) Loss of structural integrity, including separation of portions of the property or property in danger of falling down or caving in; or (c) Any cracking, bulging, sagging, bending, leaning, settling, shrinkage, or expansion as such condition relates to Paragraphs (a) or (b) above,” the defendant’s motion read, in part.
“Prior to the subject loss and at the time it contracted for the subject policy, plaintiff was aware of or reasonably should have been aware of conditions, deficiencies, and problems in the garage that caused the subject loss and therefore, plaintiff’s loss is barred by the known loss doctrine.”
The plaintiff is seeking declaratory judgment that Travelers must indemnify it under the terms of the coverage, in excess of $50,000, attorney fees and court costs.
Delaware County filed a pre-trial memorandum on April 3 of this year, arguing that a “hidden decay” caused the collapse.
According to the County, the cause of the spandrel collapse was “the failure of a series of welds, several of which could not be seen while the others were obstructed by what appeared to be zinc rich paint,” and “the failure of the welds were caused by a progressive hidden decay of the welds and connected steel elements that were subjected to cyclical loads throughout the life of the building.”
“The County has met its prima facie burden of showing that it suffered physical damages caused by an abrupt collapse due to hidden decay. That means that Travelers must disprove the application of the Abrupt Collapse Additional Coverage, not that the County must prove certain factors do not apply in order to demonstrate coverage,” the memorandum stated.
“Thus, for example, where the Abrupt Collapse Additional Coverage states that an ‘abrupt collapse’ is a covered cause of loss where there is ‘building decay that is hidden from view, unless the presence of such decay is known to an insured prior to collapse,’ the initial burden is on the County to show there was an ‘abrupt collapse’ caused by hidden decay – i.e., an ‘abrupt falling down or caving in of a building or any portion of a building with the result that the building or portion of the building cannot be occupied for its intended purpose.’ The burden is then on Travelers to prove that the policyholder knew of the decay that caused the abrupt collapse before it happened.”
The County sought $32,589,630 in insurance coverage for its damages, for the demolition and replacement of the parking garage and Toal and Sweeney buildings.
On April 5, Travelers filed its own pre-trial memorandum, citing “rust and corrosion” as the cause of the collapse and identifying the requested damages as being needed not just for coverage, but for the wholesale replacement of the damaged structures.
“Travelers’ position is that (1) The collapse was not caused by decay but, rather, rust and corrosion; (2) The rusted steel connection that failed was not hidden from view; and (3) The County was aware of the threat of damage from extensive rust and corrosion of welded steel connections in the garage for years before the incident,” the insurer’s memorandum stated.
“In fact, the County already had plans to replace the garage before the incident and its claim consists not of the cost to repair the failed panel but, rather, pre-loss estimates to replace the garage and two adjoining buildings in their entirety.”
The insurer then countered that the County was allegedly aware of structural problems in the garage dating back to 2013, after an inspection of the premises was conducted.
Both parties had motions for summary judgment pending before the Court.
UPDATE
U.S. District Court for the Eastern District of Pennsylvania Judge John M. Younge opted to grant summary judgment in favor of Travelers on Sept. 9.
“Travelers argues that based on the undisputed facts and record evidence, the County cannot support its contention that the decay of the Garage was hidden from view and unknown to the County, and no reasonable jury could find in the County’s favor on these issues. The Court agrees. As a threshold matter, we note that collapses not caused by hidden decay are excluded from coverage under the policy. Accordingly, if the incident was caused by ‘rust, or other corrosion, decay or deterioration’ that was not hidden, coverage would be precluded by the policy exclusion for ‘Other Types of Losses,’ which does not contain any exceptions,” Younge said.
“The undisputed record establishes that decay consisting of corrosion and deterioration was not only visible throughout the garage, it was known to the County since at least 2013. Applying these principles, and despite Travelers’ unwillingness to concede that rust, corrosion and deterioration constitute decay, we interpret decay to include these conditions. Accordingly, we are satisfied that decay for purposes of the Abrupt Collapse provision includes deterioration and corrosion.”
Younge found that the County “cannot meet its burden by simply asserting that it was unaware of the decay at the specific location of the incident, where it had been repeatedly informed for years by its structural engineering consultant that the same kinds of decay existed throughout the garage” – and that the objective test was whether “a reasonable insured under the same circumstances would have seen or otherwise been aware of the decay.”
“In this case, the undisputed evidence detailed in the factual background (and depicted in exhibit photographs) overwhelmingly establishes that decay was visible throughout the garage and well known to the County since no later than 2013. Thus, the collapse does not fall within the Abrupt Collapse Additional Coverage exception to the Collapse exclusion, and the County’s claim is therefore excluded. For same reasons, Travelers properly denied coverage, and all of the County’s claims against Travelers will be dismissed,” Younge said.
The plaintiff was represented by Pamela Dianne Hans, Allen R. Wolff, Ethan W. Middlebrooks and Nicholas M. Insua of Anderson Kill, in Philadelphia and New York City.
The defendant was represented by Adam B. Masef, Andrea R. Procton and Richard D. Gable Jr. of Butler Pappas Weihmuller Katz Craig in Philadelphia, plus Michael J. McLaughlin of Keane & Associates, in Hartford, Conn.
U.S. District Court for the Eastern District of Pennsylvania case 2:19-cv-02430
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com