Nationwide Mut. Fire Ins. Co. v. Tomlin

• Decision Date: 05 December 1986
• Docket Number: Nos. 72725,72726,s. 72725
• Citation: 181 Ga.App. 413,352 S.E.2d 612
• Parties: NATIONWIDE MUTUAL FIRE INSURANCE COMPANY v. TOMLIN et al. TOMLIN v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY.
• Court: Georgia Court of Appeals

Page 612

352 S.E.2d 612

181 Ga.App. 413

NATIONWIDE MUTUAL FIRE INSURANCE COMPANY v. TOMLIN et al.

TOMLIN v. NATIONWIDE MUTUAL FIRE INSURANCE COMPANY.

Nos. 72725, 72726.

Court of Appeals of Georgia.

Dec. 5, 1986.

Rehearing Denied Dec. 19, 1986.

Certiorari Denied Feb. 24, 1987.

William A. Dinges, William D. Strickland, Decatur, for appellant.

H. Martin Huddleston, Decatur, Nancy K. Wasserman, Atlanta, for appellees.

BENHAM, Judge.

These cases involve an appeal by Nationwide Mutual Fire Insurance Company ("Nationwide") from the denial in a bench trial of its motion for judgment in its behalf in a suit concerning the interpretation of an "all risk" insurance policy (Case No. 72725), and a cross-appeal by the Tomlins contesting the trial court's application of the one-year period of limitation contained in the policy (Case No. 72726).

The following facts gave rise to this controversy. In June 1980, the Tomlins purchased a home in DeKalb County and, in the same year, purchased an "all risk" homeowners insurance policy from Nationwide. On October 15, 1983, the Tomlins discovered cracks in the exterior walls of their house and immediately reported the condition to Nationwide. Two months later, an adjuster visited the Tomlins' home and informed them that the condition was due to the settling of the foundation, which was not covered under the policy. Dissatisfied with the first determination and having observed a worsening of the condition of their home, the Tomlins requested that Nationwide send an engineer to view the condition. Within several weeks of the request, an engineer did inspect the property and on January 11, 1984, made a report to Nationwide, but not to the Tomlins, speculating that the problem might be caused by a decaying tree trunk under the foundation. On March 26, 1984, the Tomlins, with the help of neighbors, dug under a portion of the house and discovered that the damage was being caused by rotting logs and debris located beneath a cold joint ¹ under the foundation. A suit was filed against the contractor and several other agencies, which is not for consideration here, but on December 19, 1984, the Tomlins filed suit against Nationwide under the "all risk" insurance policy.

1. The most predominant of Nationwide's challenges enumerates as error the interpretation given by the trial court to the word "collapse" contained in the policy. The contractual language that relates to this enumeration reads as follows: "Part II of this Policy Insures Against all Direct Loss from the Following Named Perils: ... 11. Collapse of a building or any part thereof ... This Policy Does not Insure under Either Part I or Part II, Against Loss Resulting from: ... 9. Any of the following, except direct loss by fire, smoke, explosion, collapse of buildings ... resulting therefrom ... (d) settling, cracking, shrinkage, bulging, or expansion of pavements, patios, foundations, walls, floors, ceilings or roofs." (Emphasis supplied.)

The trial judge found in part as follows: "It appears the foundation was built on tree stumps. When the tree stumps decayed, the foundation began to sink. The exterior brick walls of the house have cracked and pulled away from the structure. Plaintiffs have installed wood supports against the walls to prevent them from falling ... The term collapse is not specifically defined in the insurance policy. The average consumer cannot ascertain from the policy whether 'collapse' means a single, total, structural failure as [appellant] contends or a gradual structural deterioration." Nationwide contends that the word "collapse" is controlling, that the condition complained of amounts to settling, which is excepted, and that the trial court erred in ruling that the word "collapse" as used in the policy is ambiguous. Citing Henderson v. Henderson, 152 Ga.App. 846, 264 S.E.2d 299 (1979), and a host of other cases, appellant contends that the trial court erred in not applying the plain, ordinary, and popular meaning of "collapse."

We begin our discussion of this matter by first determining if there is any ambiguity, for if the language is plain, unambiguous, and capable of only one reasonable interpretation, as Nationwide contends, there can be no construction of the contract. Wolverine Ins. Co. v. Jack Jordan, Inc., 213 Ga. 299, 302, 99 S.E.2d 95 (1957). An excellent etymology of the word "collapse" is contained in Govt. Employees Ins. Co. v. DeJames, 256 Md. 717, 261 A.2d 747 (1970). For purposes of determining if ambiguity exists here, we look not at "collapse" in isolation, but in the context of the whole policy and in relation to the claimed loss. In trying to resolve whether an ambiguity exists, we favor an approach similar to that used by the Supreme Court of New York in Barash v. Ins. Co. of North America, 114 Misc.2d 325, 451 N.Y.S.2d 603, 605 (1982): (1) Would it be unreasonable for an average person to give the meaning to "collapse" as urged by the insured?; and (2) Would the construction urged by the insurer be the only one that could be fairly placed on the word "collapse?" When viewing the policy as a whole, we agree with the trial court that an ambiguity does exist.

Having found the term at issue to be ambiguous, we must next determine whether the trial court correctly applied the applicable rules of construction. Travelers Ins. Co. v. Blakey, 255 Ga. 699, 342 S.E.2d 308 (1986). In construing the contract, the court must be guided by well-established principles of contract construction which require that where language is ambiguous in an insurance policy, it must be construed in a light favorable to the insured. OCGA § 13-2-2(5). We note also that the insurance policy itself, in addressing the issue of collapse provides a pictorial example, depicting a house with a sagging roof, which is something less than a complete collapse in the traditional sense of the word as urged by appellant.

Since this is a case of first impression in Georgia; that is, what does "collapse" mean in an "all risk" homeowners policy, we have considered approaches taken by other states in interpreting a homeowners policy. The majority view is best expressed in Higgins v. Conn. Fire Ins. Co., 163 Colo. 292, 430 P.2d 479, 480 (1967), which states that "the word [collapse] connotes a complete change in a structure, where the building loses its distinctive character as a building and when the substantial integrity of the building has been damaged to such an extent that it has been materially impaired and rendered uninhabitable ..." See also Olmstead v. Lumbermen's Mut. Ins. Co., 22 Ohio St.2d 212, 259 N.E.2d 123 (1970). A similar view was taken in Graffeo v. U.S. Fidelity, etc., Co., 20 A.D.2d 643, 246 N.Y.S.2d 258 (1964), where "collapse" was interpreted to include "an element of suddenness, falling in, and total or near destruction."

A contrary view is expressed in Govt. Employees Ins. Co. v. DeJames, supra, 256 Md. at 751, 261 A.2d 747, which defines "collapse" as "any serious impairment of structural integrity." Because that interpretation more realistically reflects the purposes of the policy, we adopt it as our own. In applying this test to the facts of this case, we conclude, as did the trial court, that the condition is covered under the policy. We further refine the definition in Govt. Employees Ins. Co. and announce that in this state, when "collapse" is not otherwise defined in an insurance policy, it shall be deemed as having occurred when there is a reasonably detectable serious impairment of structural integrity.

Nationwide proffers a host of cases in urging this court to adopt a plain meaning approach. We are unpersuaded by appellant's position, since each of the cases cited is distinguishable: in Higgins v. Conn. Fire Ins. Co., supra, there was no worsening of the condition as here. Olmstead v. Lumbermen's Mut. Ins. Co., supra; and Stewart v. Preferred Fire Ins. Co., 206 Kan. 247, 477 P.2d 966 (1970), were "named peril" policies as opposed to "all risk" policies. LaSalle Nat. Bank v. American Ins. Co., 14 Ill.App.3d 1027, 303 N.E.2d 770 (1973), dealt with an inherent rather than extraneous cause of collapse. New Zealand Ins. Co. v. Lenoff, 315 F.2d 95 (9th Cir.1963), dealt extensively with the meaning of "settling" rather than "collapse." Graffeo v. U.S. Fid. & Guar. Co., supra, followed the prior decisions of the New York court, which required an element of suddenness. There is no such requirement in Georgia.

We are more inclined to follow the lead of Great Eastern Cas. Co. v. Blackwelder, 21 Ga.App. 586, 94 S.E. 843 (1917), one of the earliest decisions in this state. In Great Eastern, in interpreting the meaning of the word "building," the court also mentioned "collapsed." In finding the insurance company liable, it held that in a contract of adhesion where the language is susceptible to two or more meanings, the meaning most favorable to the insured is to be preferred if it can be done without doing violence to the contract. Great Eastern, at 592, 94 S.E. 843, states: "It is not necessary for the plaintiff's recovery to show that the entire building collapsed." This view is in keeping with the decisions in Govt. Employees Ins. Co. v. DeJames, supra; Mattis v. State Farm Fire, etc., Co., 118 Ill.App.3d 612, 73 Ill.Dec. 907, 454 N.E.2d 1156 (5th Dist.1983); Rogers v. Md. Cas. Co., 252 Iowa 1096, 109 N.W.2d 435 (1961); Morton v. Travelers Indem. Co., 171 Neb. 433, 106 N.W.2d 710 (1960); Auto Owners Ins. Co. v. Allen, 362 So.2d 176 (Fla.App.1978); and Jenkins v. U.S. Fire Ins. Co., 185 Kan. 665, 347 P.2d 417 (1959). In light of our analysis, appellant Nationwide's enumeration of error is without merit.

Since we have announced a new rule, we see a need to explain the necessity for the rule over and beyond the normal rules of contract construction. The approach we take is in keeping with the law's general disfavor of penalties and in keeping with the rule of construction favoring the...