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Kowalyshyn v. Excelsior Insurance Co.

United States District Court, D. Connecticut

February 13, 2018

SHAWN M. KOWALYSHYN, et al., Plaintiffs,
v.
EXCELSIOR INSURANCE COMPANY, et al. Defendants.

          RULING ON DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT

          Jeffrey Alker Meyer, United States District Judge

         This case is brought by plaintiff homeowners, Shawn and Kim Kowalyshyn, against their homeowner insurance providers, Peerless Insurance Company and Kemper Independence Insurance Company. Plaintiffs allege that their insurers failed to pay for damages to the basement walls of their home caused by cracking and deteriorating concrete. Plaintiffs allege that this constitutes a breach of contract, a breach of the implied covenant of good faith and fair dealing, and unfair practices in violation of the Connecticut Unfair Trade Practices Act (CUTPA) and the Connecticut Unfair Insurance Practices Act (CUIPA). Both insurers have moved for summary judgment on all of plaintiffs' claims. For the reasons described below, I will grant Peerless's motion for summary judgment in its entirety, and grant in part and deny in part Kemper's motion for summary judgment.

         Background

         Plaintiffs purchased a home in Willington, Connecticut in July of 2007. Doc. #51 at 2. The home has a concrete foundation, as well as a second concrete foundation wall covering the original foundation. Doc. #62-3 at 6. In connection with this purchase, plaintiffs commissioned a home inspection report. Id. at 4. The report did not note cracking in the foundation, but did note the presence of the second concrete foundation wall. Doc. #69-1 at 20. The home inspector wrote that it appeared that the second wall had been poured as a result of damage caused by backfilling. Id. Plaintiffs were aware that a second foundation wall had been poured but did not believe this reflected that the home was structurally unsound. Docs. #62-3 at 6, #62-4 at 5.

         Plaintiff Shawn Kowalyshyn was aware of minor, hairline cracks in the exterior foundation at the time he purchased the house in 2007. Doc. #62-3 at 6. Plaintiffs purchased a homeowners' insurance policy from Peerless for the period of July 2007-July 2008.[1] Doc. #51 at 2. Plaintiffs later purchased a homeowners' insurance policy from Kemper that began in November 2007 and continues to the present. Id. at 11.

         Plaintiffs first noticed extensive cracking in the basement walls of their home in August 2015 after they learned from news reports about widespread problems of defective concrete used to build homes in Connecticut. Doc. #51 at 2. An investigation of the cracking revealed that the basement was constructed with defective concrete that likely originated from J.J. Mottes Concrete Company. Id. at 3. This concrete includes a high level of pyrrhotite, which causes swelling and cracking in the concrete when exposed to oxygen and water. The basement walls will continue to deteriorate and eventually crumble as a result of the faulty concrete. Ibid.

         Plaintiffs' expert evaluated the home on April 12, 2016. Ibid. The only way to salvage the home would be to replace the foundation, which is projected to cost approximately $200, 000. Id. at 5.

         Plaintiffs notified Peerless of the condition on September 23, 2015. Id. at 4. Peerless's policy covers “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: . . . (b) Hidden decay; . . . (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.” Doc. #51-1 at 10. On September 25, 2015, Peerless denied coverage for the claim. Doc. #51-2. The denial letter noted that Peerless only covered the home for the year of 2007-2008 and that Peerless could no longer inspect the damage that had occurred as of that time. Id. at 2. The letter also cited a series of exclusions under the policy, but did not clarify or explain which exemptions Peerless believed applied or why.

         Plaintiffs notified Kemper of the condition on September 22, 2015. Doc. #51 at 12. Kemper's policy also covered collapse in its “Additional Coverages” section, although the definition of collapse was amended during the course of coverage in 2011. One definition of “collapse” applied for 2007-2011, and an updated definition applies from 2011 forward.[2]Kemper's old policy from 2007-2011 covered collapse that caused “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: . . . (b) Hidden decay; . . . (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.” Doc. #51-3 at 15. The policy clarified that collapse did not include “settling, cracking, shrinking, bulging or expansion.” Ibid. In a section entitled “Perils Insured Against, ” the policy covered all “risks of direct loss” to covered property with specific enumerated exclusions. Doc. #51-3 at 17. The exclusions included loss caused by “inherent vice, latent defect” or “settling, shrinking, bulging or expansion, including resultant cracking” of “foundations, walls, floors.” Id. at 18. In another section entitled “Exclusions, ” the policy excluded coverage for “faulty, inadequate or defective . . . materials used in … construction.” Id. at 21.

         Kemper's new policy from 2011 and onward altered the definition of “collapse” to be “an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its current intended purpose.” Doc. #61-2 at 3. The policy stated that “collapse” did not extend to a structure that is merely “in danger of falling down or caving in” or one that “shows evidence of cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion.” Ibid.

         Kemper conducted an investigation of plaintiffs' claim, including an inspection of the home on September 28, 2015. Doc. #51-4 at 2. Kemper denied coverage for the claim on January 14, 2016. Doc. #51-4. Kemper's denial letter cited multiple reasons as the basis for denial and explained why Kemper believed that the claim was not covered under its policy. Id. at 7-8.

         Discussion

         The principles governing the Court's review of a motion for summary judgment are well established. Summary judgment may be granted only if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(a). I must view the facts in the light most favorable to the party who opposes the motion for summary judgment and then decide if those facts would be enough-if eventually proved at trial-to allow a reasonable jury to decide the case in favor of the opposing party. My role at summary judgment is not to judge the credibility of witnesses or to resolve close contested issues but solely to decide if there are enough facts that remain in dispute to warrant a trial. See generally Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (per curiam); Pollard v. New York Methodist Hosp., 861 F.3d 374, 378 (2d Cir. 2017).

         Peerless Insurance Company

         Peerless argues that even if plaintiffs' loss would otherwise be covered under the policy, there is no dispute of material fact that the loss did not occur during the very limited period of time that its policy was in effect for plaintiffs. Peerless's policy includes a provision limiting coverage for “property damage” that “occurs” during the policy period. Doc. #51-1 at 21. The relevant loss in this case is the collapse of plaintiffs' home. I assume for purposes of this argument that “collapse” in the Peerless policy includes “substantial impairment of the structural integrity” of the home. See Beach v. Middlesex Mut. Assur. Co., 205 Conn. 246, 252 (1987); see also Roberts v. Liberty Mut. Fire Ins. Co., 264 F.Supp.3d 394, 409 (D. Conn. 2017) (discussing widespread adoption of Beach standard and “in the absence of a contrary policy definition-a building has ‘collapsed' by suffering a substantial impairment of structural integrity if it would have caved in had the plaintiffs not acted to repair the damage”) (internal quotation marks and brackets omitted). I further assume that the extensive map cracking in plaintiffs' foundation constitutes substantial impairment of the structural integrity of plaintiffs' home. Nevertheless, I agree with Peerless that there is no dispute of material fact that any collapse can be proved to have occurred during the narrow time frame in which Peerless insured plaintiffs' home.

         Plaintiffs do not know precisely when the substantial cracking in their basement concrete took place. Plaintiffs' expert indicated that he had previously testified that a foundation with this type of defective concrete would be substantially impaired after 10 to 14 years, which would place the map cracking during the years of 1999-2003. Doc. #62-5 at 8-9. Plaintiffs' expert further testified that, given his experience with this concrete condition, he believed that the map cracking would have been present in plaintiffs' foundation walls by 2007. Id. at 10. But he also noted that the 2007 home inspector report did not mention the cracking, which he believes the inspector would have noted had the cracking been present at the time. Id. at 12. Additionally, plaintiff Shawn Kowalyshyn testified that he only noticed minor spider cracking in the walls in 2007. Doc. #62-3 at 6. The expert further testified that he determined “with a high degree of engineering certainty” that the ...


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