Ocean Winds Council v. AUTO-OWNER INS. CO

• Decision Date: 17 June 2002
• Docket Number: No. 25485.,25485.
• Citation: 565 S.E.2d 306,350 S.C. 268
• Parties: OCEAN WINDS COUNCIL OF CO-OWNERS, INC., Plaintiff, v. AUTO-OWNER INSURANCE COMPANY, Defendant.
• Court: South Carolina Supreme Court

350 S.C. 268
565 S.E.2d 306

OCEAN WINDS COUNCIL OF CO-OWNERS, INC., Plaintiff,
v.
AUTO-OWNER INSURANCE COMPANY, Defendant

No. 25485.

Supreme Court of South Carolina.

Heard April 3, 2002.

Decided June 17, 2002.

350 S.C. 269

W. Jefferson Leath, Jr. and Timothy W. Bouch, both of Leath, Bouch & Crawford, L.L.P., of Charleston; and W.H. Bundy, Jr., of Smith, Bundy, Bybee & Barnett, P.C., of Mt. Pleasant, for plaintiff

Robert H. Hood, Robert H. Hood, Jr., and Deborah H. Sheffield, all of Hood Law Firm, L.L.C., of Charleston, for defendant.

Justice MOORE.

We accepted this certified question to interpret a property insurance policy providing coverage for "risks of direct physical loss involving collapse of a building or any part of a building."

FACTS

Plaintiff (Ocean Winds) seeks payment from defendant (Insurer) under collapse coverage in its policy which provides:

5. ADDITIONAL COVERAGES

d. COLLAPSE

We will pay for loss or damage caused by or resulting from risks of direct physical loss involving collapse of a building or any part of the building caused only by one or more of the following:

...

(2) hidden decay;

(3) hidden insect or vermin damage

...

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

Ocean Winds alleges its buildings have suffered "substantial structural impairment" from hidden decay as a result of water infiltration and termite damage although the buildings have not yet fallen to the ground. Insurer contends coverage is not triggered until the buildings have actually fallen to the ground. Ocean Winds commenced this action in federal district court which certified this question to us:

350 S.C. 270

In order to trigger coverage [under the policy quoted above], is it required: 1) that the building or part of the building fall to the ground or be reduced to flattened rubble; or 2) that the building manifest substantial structural impairment, but has not yet fallen to the ground or been reduced to flattened rubble

ISSUE

When is coverage triggered under the policy clause providing coverage for "risks of direct physical loss involving collapse?"

DISCUSSION

As noted by several authorities, the word "collapse" as used in property loss insurance policies has spawned much litigation. See generally Annot., What Constitutes "Collapse" of a Building Within Coverage of Property Insurance Policy, 71 A.L.R.3d 1072 (1976). The modern trend is to find the word "collapse" ambiguous and construe it to mean a "substantial impairment" of the building's structural integrity. Courts finding the word unambiguous, on the other hand, have generally construed it to mean "a falling in, loss of shape, or reduction to flattened form or rubble." See, e.g., American Concept Ins. Co. v. Jones, 935 F.Supp. 1220 (D.Utah 1996); Fantis Foods, Inc. v. North River Ins. Co., 332 N.J.Super. 250, 753 A.2d 176 (2000); Rankin v. Generali—U.S. Branch, 986 S.W.2d 237 (Tenn.App.1998) and cases cited therein. In light of this conflict, the federal district court...