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Belz v. Peerless Insurance Co.

United States District Court, D. Connecticut

September 2, 2016

STEPHEN BELZ and KARLA BELZ Plaintiffs,
v.
PEERLESS INSURANCE COMPANY Defendant

          RULING ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

          VICTOR A. BOLDEN UNITED STATES DISTRICT JUDGE

         This case arises out of an insurance dispute between Plaintiffs Steven and Karla Belz (the “Belzes”) and Defendant Peerless Insurance Company (“Peerless”). The Belzes experienced significant damage to their basement walls in the form of widespread cracking that threatened to compromise the structural integrity of their home. The Belzes filed an insurance claim with Peerless under the applicable homeowner's insurance policy with respect to the cracks in the basement walls, and Peerless denied coverage. Less than five months after the denial, the Belzes initiated this action.

         The Belzes have stated three claims against Peerless: (1) a breach of contract claim under the terms of the applicable homeowner's insurance policy; (2) a breach of the implied covenant of good faith and fair dealing; and (3) a violation of the Connecticut Unfair Insurance Practices Act (“CUIPA”) and the Connecticut Unfair Trade Practices Act (“CUTPA”). In January 2015, Peerless filed a motion for summary judgment with respect to all three of the Belzes' remaining claims. For the reasons stated below, Peerless' Motion for Summary Judgment is DENIED.

         I. STATEMENT OF FACTS

         The Belzes purchased their home in Vernon, Connecticut in 2001. In advance of the purchase in 2001, the Belzes were made aware of notable cracking in the basement walls through an initial home inspection report prepared by Home Quality Headquarters, Inc. (“HQH Report”). L.R. 56(a)(1) ¶ 17, ECF No. 53; L.R. 56(a)(2) ¶ 17, ECF No. 61. The HQH Report mentioned numerous cracks in the basement walls and recommended “monitoring for any significant changes.” Id. at ¶ 18. Before finalizing the purchase of the home, the Belzes hired an engineer, Hugh Mullan, P.E., to conduct an independent evaluation of the cracking in the basement walls. Id. at ¶ 6-8. In a report dated August 2001, Mr. Mullan ultimately concluded that the cracks did not threaten the structural integrity of the home. L.R. 56(a)(2) at 23; Mullan Rep. 2, ECF No. 53-6 (Exh. F). The Belzes began purchasing homeowner's insurance through Peerless, a member of the Liberty Mutual Group, in September 2004. L.R. 56(a)(1) ¶ 3; L.R. 56(a)(2) ¶ 3.

         In 2007, the Belzes installed “brightwall” wall panels in their basement to cover the cracks in the walls. Although there is no photographic evidence of the condition of the basement walls at the time of the brightwall installation, the Belzes insist that the cracks were no more severe in 2007 than they were in 2001 when the home was initially purchased. L.R. 56(a)(2) at 23. The Belzes further explain that they understood the cracks to be a cosmetic problem rather than a structural threat to the home, and that they chose to install the brightwall because it “made the ugly walls turn into white bright walls in the basement.” Dep. of Stephen Belz 30, ECF No. 53-7 (Exh. G). After the brightwall was installed, the cracks were no longer visible, and the cracks continued to be obscured from view until the brightwall was removed in or around April of 2013. As soon as the Belzes removed the brightwall in 2013, they discovered that the cracking had progressed substantially, to the point where the gaps in the wall were so big that Mr. Belz could reportedly put his finger through the wall. Id. at 55; Peerless Claims Notes 4, 7, ECF No. 53-10 (Exh. J).

         On May 9, 2013, the Belzes filed an insurance claim with Peerless with respect to the cracks in the basement walls. The insurance policy in place at that time states the following:

8. Collapse. We insure for direct physical loss to covered property involving collapse of a building or any part of a building caused only by one or more of the following:
a. Perils Insured Against in COVERAGE C - PERSONAL PROPERTY. These perils apply to covered buildings and personal property for loss insured by this additional coverage;
b. Hidden decay;
c. Hidden insect or vermin damage;
d. Weight of contents, equipment, animals or people;
e. Weight of rain which collects on a roof; or
f. Use of defective material or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation.

         Homeowner's Insurance Contract 58, ECF No. 53-1 (Exh. A). The term “collapse” is not explicitly defined in the contract.

         Within the same “Collapse” provision, the insurance policy also excludes the following from coverage:

Loss to an awning, fence, patio, pavement, swimming pool, underground pipe, flue, drain, cesspool, septic tank, foundation, retaining wall, bulkhead, pier, wharf or dock is not included under items b., c., d., e., and f. unless the loss is a direct result of the collapse of a building.

Id. The terms “foundation” and “retaining walls” are not explicitly defined in the contract. Additional exclusions are listed under “SECTION I - EXCLUSIONS, ” which states in relevant part:

2. We do not insure for loss to property described in Coverages A and B caused by any of the following. However, any ensuing loss to property described in Coverages A and B not ...

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