The meaning of the term collapse has undergone evolution both as an exclusion and as an insured peril under standard property insurance forms. Courts in the various jurisdictions have taken one of two general approaches in determining what constitutes a collapse. The most longstanding view is that collapse is a plain and unambiguous term susceptible to only a single meaning: “the sudden falling-in, loss of shape, or flattening into a mass of rubble” of a building. While courts taking this view do not always require that a building fall completely to the ground, they generally require a great deal of damage before collapse coverage will be triggered.
In contrast, some courts have found collapse to be ambiguous. Acknowledging that the traditional definition is one valid interpretation of the word, these courts nevertheless have expanded the definition to include “substantial impairment of the structural integrity” of a building. Upon a finding that two reasonable constructions of the word are available, these courts have adopted the broad meaning because that meaning typically is most favorable to the insured.
Unfortunately, the term structural integrity is not explicitly defined in the case law. A certain amount of disparity therefore exists among the “broad view” courts with respect to both the amount and type of damage necessary to trigger coverage. Some of these courts actually require caving or falling in before they will find a building’s structural integrity to be impaired. Others require only a danger of collapse, or, in a few cases, an attenuated possibility of collapse. Additionally, they may or may not require that the damage occur or be likely to occur “suddenly.”
As discussed above, a number of courts have taken the position that as used in a property insurance policy extending coverage to loss caused by “collapse of building or any part thereof,” the term “collapse” denotes a falling or reduction to flattened form. In sharp contrast to this interpretation, a more liberal line of authorities have adopted the view that under such a policy provision, there can be a “collapse” even though there is no falling, tumbling down, or reduction to rubble of the insured building or a part thereof. Under this view it is held that at least if brought about by unusual or extraordinary circumstances which the parties could not normally expect or foresee at the time they entered into the contract, the settling, cracking, bulging, or breaking of the insured building or any part thereof in such a manner as to materially impair its basic structure or substantial integrity constitutes a “collapse” within the purview of the policy. This view, based on the position that “collapse” is an ambiguous term, was adhered to, with slight variations in emphasis and language, by New Jersey courts.
In Ariston Airline & Catering Supply Co. Inc. v. Forbes, 211 N.J. Super. 472 (Law Div. 1986), Plaintiff Ariston was in the catering business, providing in-flight meal service to airlines. It owned and operated a large freezer warehouse facility constructed in 1979. In late 1982 and early 1983, the floor of the warehouse heaved and cracked, causing structural damage. Ariston brought suit to recover its losses from its insurance carriers. The court analyzed an insurance policy that, by its own terms, did not insure against loss or damage caused by or resulting from:
(C) errors of design, errors in processing, faulty workmanship or faulty materials, unless the collapse of the property or a part thereof ensues and then only for the ensuing loss.
The court found that the clear language meant the policy would exclude a loss caused solely by design or construction defect were it not for the exception relating to “collapse.” The court then went on to adopt the plain dictionary meaning of “collapse”. Oxford English Dictionary defines “collapse” as:
The action of collapsing, or of falling or suddenly shrinking together, breaking down, giving way, etc., through external pressure or loss of rigidity or support: originally a term of physiology and medicine.
Therefore, it determined that Ariston’s property “collapsed” in this sense and the policy exclusion did not apply.
In Fantis Foods, Inc. v. North River Ins. Co., 332 N.J. Super. 250 (App. Div. 2000), a declaratory action, the court applied New Jersey law to determine whether the condition of the insured’s building was in a state of “collapse” triggering coverage under its insurance policy. With the term “collapse” not explicitly defined in the policy, the court endeavored to determine its meaning. The court first noted the division of authority among the states regarding the definition of “collapse” and then outlined the majority view:
In American Concept Ins. Co. v. Jones, 935 F.Supp. 1220 (D.Utah 1996), the Court summarized several policies underlying the majority view: (1) if the insurer had intended to define collapse as meaning reduced to a flattened form or rubble, it could have done so in the contract; (2) although the policy stated that collapse did not include settling, cracking, shrinking, bulging or expansion, it was difficult to imagine a collapse that would not include some of these attributes; thus, the term could be interpreted as not including mere settling or cracking, but that which results in “substantial impairment of the home’s structural integrity”; (3) some dictionary definitions of “collapse” suggest that the term means a substantial impairment of the structure’s integrity; (4) to require a building to fall down before allowing coverage would be unreasonable in light of the insured’s duty to mitigate damages and would be economically unsound. Id. at 1227-1228.
The court found the majority view persuasive and decided to follow it. It held that under New Jersey law “the collapse peril insured against does not require that structures fall; rather, without any narrowing internal definition, such a policy must be taken to cover any serious impairment of structural integrity that connotes imminent collapse threatening the preservation of the building as a structure or the health and safety of occupants and passers-by”. See also Ercolani v. Excelsior Insurance Company, 830 F.2d 31, 34-35 (3d Cir. 1987) (“New Jersey courts would, and a diversity court must, read the collapse peril as covering a serious impairment of structural integrity making the wall no longer capable of supporting the house’s superstructure”).