Council Tower Ass'n v. Axis Specialty Ins. Co.

• Decision Date: 06 January 2011
• Docket Number: No. 09–3900.,09–3900.
• Parties: COUNCIL TOWER ASSOCIATION, Plaintiff–Appellant,v.AXIS SPECIALTY INSURANCE COMPANY; Jim Vavak, Defendants–Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

630 F.3d 725

COUNCIL TOWER ASSOCIATION, Plaintiff–Appellant,

v.AXIS SPECIALTY INSURANCE COMPANY; Jim Vavak, Defendants–Appellees.

No. 09–3900.

United States Court of Appeals, Eighth Circuit.

Submitted: Sept. 21, 2010.Filed: Jan. 6, 2011.

Joseph Robert Swift, argued, John Robert McLeod, on the brief, St. Louis, MO, for appellant.Melinda Kollross, argued, Chicago, IL, Clark H. Cole, St. Louis, MO, Edward Kay, Celeste A. Hill, Chicago, IL, on the brief, for appellee Axis.Henry F. Luepke, III, argued, St. Louis, MO, for appellee Vavak.Before WOLLMAN, LOKEN, and HANSEN, Circuit Judges.LOKEN, Circuit Judge.

Council Tower Association (“Council Tower”) commenced this action in Missouri state court against Axis Specialty Insurance Company (“Axis”), a Connecticut insurer, and Jim Vavak, an independent claims adjuster and Missouri resident. Council Tower asserts insurance coverage and related claims for losses incurred when a portion of the brick veneer covering the east wall of Council Tower's apartment building in St. Louis fell to the ground. Axis removed the case, and Council Tower moved to remand. See 28 U.S.C. § 1447(c). The district court ¹ denied the motion to remand and dismissed Council Tower's claims against Vavak, concluding that those claims were without merit and had been fraudulently joined to destroy diversity jurisdiction. Ruling on cross motions for summary judgment by Axis and Council Tower, the court granted summary judgment for Axis, concluding that Council Tower's loss was not covered under the all-risk policy's additional coverage for losses resulting from “collapse of a building or any part of a building.” Council Tower appeals both rulings. We affirm.

I. The Claims Against Axis.

The east exterior wall of Council Tower's twenty-seven-story building was covered with a decorative brick veneer, twenty-six stories tall, attached to the concrete wall by steel shelf angles and anchor bolts. In October 2005, during the policy's one-year coverage period, every brick below the eighth story of the east wall fell to the ground along with several of the supporting steel shelf angles. Council Tower filed a timely claim under the policy for reimbursement of its loss.

The Axis Commercial Property policy insured Council Tower's building against all “RISKS OF DIRECT PHYSICAL LOSS” except losses specifically excluded or limited. Excluded losses included wear and tear; decay, deterioration, and latent defect; settling, cracking, or expansion; faulty or defective design, construction, or maintenance; and “Collapse, except as provided below in the Additional Coverage for Collapse.” As relevant here, the Additional Coverage for Collapse provided:

1. We will pay for direct physical loss or damage to Covered Property, caused by collapse of a building or any part of a building insured under this Coverage Form, if the collapse is caused by one or more of the following ... b. Hidden decay....

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

After an investigation by independent insurance adjuster Vavak, Axis denied the claim on the ground that the loss was caused by inadequate design or construction and therefore excluded. When an expert reported that a loss of lateral stability had caused the bricks to “collapse somewhat vertically,” Council Tower commenced this lawsuit for breach of contract and vexatious refusal to pay its claim.

After substantial discovery, the parties filed cross-motions for summary judgment. Axis argued that the loss was excluded by the wear-and-tear and faulty-design-or-construction exclusions. Council Tower argued that the east-wall failure was a collapse of a part of the building caused by hidden decay of the anchor bolts; therefore, the loss was covered under the Additional Coverage for Collapse. Axis countered that the east-wall failure was not a covered collapse under Missouri law. The district court in a thorough opinion noted that collapse “is the only theory of recovery advanced by Council Tower” and concluded that this coverage theory failed because “there was no collapse under Missouri law.” Council Tower Ass'n v. Axis Spec. Ins. Co., No. 4:08–cv–1605, 2009 WL 3806994, at *4 (E.D.Mo. Nov. 12, 2009). The court granted Axis summary judgment and dismissed all claims. On appeal, Council Tower argues the court erred in concluding that the east wall's brick-veneer failure was not a collapse of a part of the building within the meaning of the Additional Coverage for Collapse.²

1. In this diversity case, we must apply Missouri law as declared by the State's highest court, the Supreme Court of Missouri. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Cincinnati Ins. Co. v. Bluewood, Inc., 560 F.3d 798, 801 (8th Cir.2009). Under Missouri law, it is well-settled that the interpretation of an insurance policy is a question of law. Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129, 132 (Mo. banc 2007). If the policy is unambiguous, it will be enforced as written. Bluewood, 560 F.3d at 802.

Among state courts, two competing interpretations of the term “collapse” have emerged. Many state courts limit the word “collapse” to its plain meaning, usually quoting or adopting a dictionary definition such as, “[t]o fall into a confused mass or into a flattened form by loss of rigidity or support; to break down, give way, fall in, cave in.” Eaglestein v. Pac. Nat'l Fire Ins. Co., 377 S.W.2d 540, 545 (Mo.App.1964), quoting The Oxford English Dictionary. The Missouri Court of Appeals has consistently followed this line of authority, holding that “collapse” is an unambiguous term in a property insurance policy, plainly meaning “a falling or reduction to a flattened form or rubble.” Williams v. State Farm Fire & Cas. Co., 514 S.W.2d 856, 859 (Mo.App.1974), quoting Eaglestein, 377 S.W.2d at 545; accord Heintz v. U.S. Fid. & Guar. Co., 730 S.W.2d 268, 269 (Mo.App.1987). However, other state courts have adopted a broader definition, concluding that the term “collapse” is ambiguous in this context and holding that there need not be rubble on the ground for a loss to trigger coverage. This test examines “whether there was a substantial impairment of the structural integrity” of a building or part of a building. Monroe Guar. Ins. Co. v. Magwerks Corp., 829 N.E.2d 968, 973 (Ind.2005).

The Supreme Court of Missouri has not addressed this issue. Though only that Court's decisions are controlling in a diversity case, we may not disregard decisions of the Missouri Court of Appeals unless we are “convinced by other persuasive data that the highest court of the state would decide otherwise.” West v. Am. Tel. & Tel. Co., 311 U.S. 223, 237, 61 S.Ct. 179, 85 L.Ed. 139 (1940). Here, both parties treated the Missouri Court of Appeals decisions as controlling in their cross-motions for summary judgment, as did the district court. We will do likewise. Applying this legal standard, we review the district court's denial of coverage and grant of summary judgment de novo.

2. The narrow issue before us is whether, under Missouri law, the falling of seven stories of a twenty-six-story exterior brick veneer was a “collapse of a building or any part of a building.” Without question, after the fall, there was some rubble on the ground, but the entire building was not “reduc[ed] to a flattened form.” Williams, 514 S.W.2d at 859. The question, then, is whether part of the building collapsed. It is clear that, under Missouri law, not every debris-producing event is a collapse of part of a building. Eaglestein, 377 S.W.2d at 544, quoting Gage v. Union Mut. Fire Ins. Co., 122 Vt. 246, 169 A.2d 29, 30 (1961).

As the district court noted, this question was directly addressed by the Missouri Court of Appeals in Williams:

The language [in the policy] “or any part thereof” obviously refers to “collapse” of a part of a building, not “partial collapse” of a part or the whole of a building. The falling or reduction to a flattened form or rubble of an attached garage, supporting foundation wall or roof would appear to be but a few examples of collapse of a part of a building.... “Where the claim pertains to a collapse of a part of a building, there must be a collapse of that part. A partial collapse of a part is entirely outside the contemplation of the parties to the insurance contract.”

514 S.W.2d at 859–60, quoting in part Gage, 169 A.2d at 31. Relying on this passage, which was cited favorably in Heintz, 730 S.W.2d at 269, the district court concluded that “the collapse of the lower seven stories of the brick veneer was not a collapse of a part of a building.” Though the issue is not free from doubt, we agree.

The issue is particularly doubtful because none of the three Missouri Court of Appeals decisions construing the term “collapse” involved losses from events that produced a significant quantity of rubble. Council Tower argues that the pile of bricks on the ground is enough to prove a covered “collapse.” But the above-quoted passage in Williams makes clear, as the district court held, that fallen bricks alone do not establish that “part of the building” collapsed. Here, we agree with the district court that the entire twenty-six-story brick veneer covering the east wall, which served a decorative but not a structural purpose, constituted a part of the building. See Ass'n of Unit Owners of Nestani v. State Farm Fire & Cas. Co., 670 F.Supp.2d 1156, 1164 (D.Or.2009) (“part” of a building is an “integral element” that is “essential to completeness”).

Whether the fall of seven stories of bricks constituted a collapse of this twenty-six-story decorative part of the building may be debatable, but the district court's conclusion is consistent with the few factually similar cases from other jurisdictions. See Nw. Mut. Ins. Co. v. Bankers Union Life Ins. Co., 485 P.2d 908, 909–10 (Colo.App.1971) (no collapse of a part occurred when seven veneer panels fell from the building's...