Bailey v. Hartford Fire Ins. Co., 828

• Decision Date: 09 November 1977
• Docket Number: No. 828,D,828
• Parties: Albert L. BAILEY, Jr., and Barbara J. Bailey, Plaintiffs-Appellants, v. HARTFORD FIRE INSURANCE CO., Defendant-Appellee. ocket 76-7564.
• Court: U.S. Court of Appeals — Second Circuit

Page 826

565 F.2d 826

Albert L. BAILEY, Jr., and Barbara J. Bailey, Plaintiffs-Appellants, v. HARTFORD FIRE INSURANCE CO., Defendant-Appellee.

No. 828, Docket 76-7564.

United States Court of Appeals Second Circuit.

Argued April 6, 1977.

Decided Nov. 9, 1977.

Max Ander, New York City, for plaintiffs-appellants.

Greenhill & Speyer, New York City, for defendant-appellee.

Before OAKES, Circuit Judge, and WYZANSKI ^* and HOLDEN, ^** District Judges.

HOLDEN, District Judge:

This is an appeal from the grant of summary judgment on motion by the defendant Hartford Fire Insurance Company in an action on the Home Owners Policy issued to the plaintiffs. The cause was commenced in the Supreme Court of the State of New York and removed to the United States District Court for the Eastern District of New York on the basis of diversity jurisdiction.

The property which the Hartford Fire Insurance Company undertook to insure for a three year period from July 12, 1974 is a single family dwelling on Staten Island. Prior to the loss on July 13, 1975, the property was supported by a reinforced concrete retaining wall that extended ninety feet along the rear of the property at a distance of five feet from the plaintiffs' rear wall. The loss sought to be recovered was sustained during a violent storm when about sixty feet of the retaining wall collapsed. ¹ The rupture of the retaining wall removed the lateral support from the foundation and the rear wall of the house that rested on the foundation, rendering the premises unsafe and uninhabitable.

The next day, July 14th, the Department of Buildings of the New York City Housing Development Administration directed the plaintiffs and their four children to vacate the dwelling. Later the agency issued a "Notice of Unsafe Building Structure, Order, Notice of Survey and Summons" which stated:

The above building is structurally unsafe due to collapse of ten feet high and fifty feet long section of concrete retaining wall at rear lot line, which has left rear foundation wall without adequate support and subject to undermining and possible collapse.

On November 20, 1975 the Supreme Court, Richmond County, issued an order which authorized demolition of the structure unless the owners obtained permission from the Department of Buildings to perform the work required to make the structure safe.

In their predicament the plaintiffs wrote the defendant seeking to recover their loss. When the claim was rejected the plaintiffs retained a consulting engineer to determine the cause of the sudden collapse of the retaining wall and its effect on stability and structural condition of the insured premises.

The engineer's report and its conclusions were adopted by Hartford and advanced to the court in support of its motion for summary judgment. ² The engineer's report and various photographic exhibits are referred to as the basis for the court's conclusion that there was no dispute about the controlling facts and no ambiguities in the language of the insurance contract. On these considerations, coverage was denied as a matter of law and the action was dismissed.

The Home Owners Policy, issued by the defendant Hartford, undertook to insure losses sustained at the plaintiffs' dwelling and included peril 14 which provides:

Collapse of buildings or any part thereof, but excluding loss to outdoor equipment, awnings, fences, pavements, patios, swimming pools, underground pipes, flues, drains, cesspools and septic tanks, foundations, retaining walls, bulkheads, piers, wharves, or docks, all except as the direct result of the collapse of building.

Collapse does not include settling, cracking, shrinkage, bulging or expansion.

The "Additional Exclusions" include exclusions 2 and 3 which declare that the policy does not insure against loss:

2. caused by, resulting from, contributed to or aggravated by any earth movement, including but not limited to earthquake, volcanic eruption, landslide, mudflow, earth sinking, rising or shifting; unless loss by fire or explosion ensues, and this Company shall then be liable only for such ensuing loss;

3. caused by, resulting from, contributed to or aggravated by any of the following:

a. flood, surface water, waves, tidal water or tidal wave, overflow of streams or other bodies of water, or spray from any of the foregoing, all whether driven by wind or not;

b. water which backs up through sewers or drains; or

c. water below the surface of the ground including that which exerts pressure on or flows, seeps or leaks through sidewalks, driveways, foundations, walls, basement or other floors or through doors, windows or any other openings in such sidewalks, driveways, foundations, walls or floors; unless loss by fire or explosion ensues, and this Company shall then be liable only for such ensuing loss, but these exclusions do not apply to loss by theft; . . . .

Judge Dooling concluded the subsurface water (Exclusion 3) was not involved. However, the court went on to hold that Exclusion 2, " any earth movement, including but not limited to landslide" when the words are given their exact meaning, caused the damage to the plaintiffs' dwelling and was an excluded cause. The court's decision on this point is based on the demonstration of the photographs submitted and the engineer's opinion that the direct cause of the injury to the plaintiffs' dwelling was the loss of lateral support due to the sudden removal of the earth between the rear wall of the building and the retaining wall. While the bare photographs contained in the record on appeal show a disruption of the earth that was once retained by the wall, there is no demonstration that the outward displacement caused the partial collapse referred to in the engineer's report. Beyond that, the inference drawn by the court was directly contradicted by the affidavit of the consulting engineer O'Connell in opposition to the defendant's motion for summary judgment. He there stated "There was no earth movement as there was no displacement of the center of gravity and the expansion and contraction involved did not represent any movement of soil which in the instance of the matter at bar remained in place." Earlier in the affidavit the plaintiffs' engineer stated he was "categorically of the opinion that the substantial damage involved was not due to any earth movement."

The record presents the issue of whether there was any earth movement within the intendment of the exclusion and, if so, whether such movement was the cause of the damage to the plaintiffs' home. See Gullett v. St. Paul Fire and Marine Ins. Co., 446 F.2d 1100, 1102 (7th Cir. 1971). ³ Although the inference reached by the court certainly is not without some logic, we are called upon to construe the matter addressed to the motion most favorably to the party against whom judgment was entered. E. g. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962). The moving papers and the opposing affidavits generate genuine and conflicting issues for trial which preclude disposition on these points by way of summary judgment. First National Bank of Arizona v. Cities Service Co.,391 U.S. 253, 289, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968).

That does not conclude our review since the grant of summary judgment was principally based on the premise that there was no collapse of the dwelling. On the strength of the engineer's findings, Judge Dooling held there was no collapse of the dwelling house as a matter of law and thus drained the controversy of any triable issue of fact. In reaching this result it is at once apparent, as Judge Dooling recognized, that there is a clear division in the courts of New York in dealing with the word "collapse." By any conspectus, the law of New York is unsettled on the point. ⁴

Despite the uncertainty that prevails among the courts of New York at the intermediate appellate level, the cases referred to in the margin express the general concept that "collapse," as written in the context of homeowner's coverage, means a sudden impact that is destructive of the structural integrity of the insured building. To be sure, no hard and fast rule has emerged in New York nor in other jurisdictions. See 72 ALR 2d 1287. In sum, the expression "collapse of buildings or any part thereof" in terms of insurance coverage, is a coat of varied colors. The question of what constitutes a collapse is largely one of degree. And there is nothing in the law of New York, as we have searched it, that requires the insured property be demolished nor reduced to rubble. The body of the law written in other jurisdictions is not so unyielding in the construction of policies drawn by an insurer to afford protection to homeowners. E. g. Government Employees Insurance Company v. De James, 256 Md. 717, 261 A.2d 747 (1970); Travelers Fire Insurance Co. v. Whaley, 272 F.2d 288 (10th Cir. 1959). ⁵

In the unsettled state of the law of New York on a point not yet addressed by the highest state court, in terms of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), our forecast of its future development precludes the absolute construction given to the insurance contract by the district court. Trial on the merits should not be thus...