Plaintiffs Alexander and Moinica Bardis suffered a loss on December 26, 2009 when the right basement wall of their 20 year old single family home collapsed. They filed a property loss claim against their homeowner’s policy with Cumberland Insurance Group (“Cumberland”). After investigation, Cumberland determined that the loss was not the result of a peril or cause of loss covered by its policy and issued a declination letter. The plaintiffs filed suit in Bardis v. Cumberland Insurance Group, 2014 N.J. Super. Unpub. LEXIS 2414 (App. Div. Oct. 8, 2014), seeking coverage under Cumberland’s policy for this loss.
Cumberland denied the loss, alleging that the collapse was a result of surface and subsurface ground water, weight of ice, sleet, snow and collapse, which is excluded under the policy. Plaintiffs, however, claimed that the basement wall collapsed due to hidden decay and chimney weight deterioration, which is covered by the policy. Although the trial court struck the plaintiff’s expert report as a net opinion, plaintiffs argued that the wall’s collapse, after having stood for so long evinced a gradual decline in strength over the 20 years since its construction, which is consistent with hidden decay, a covered loss.
While the trial court judge granted summary judgment to the defendants, finding no coverage under the policy, the Appellate Division disagreed.
First, the Appellate Division pointed out that there is no definition of the term “hidden decay” in the policy. Using the definition in the dictionary for “hidden decay,” which included a gradual decline in strength, the court used this ordinary meaning in interpreting this term. This approach is consistent with the principle of construing insurance contracts according to the reasonable expectation of the insured. The appeals court found that, arguably, the plaintiffs could have reasonably expected that their homeowner’s policy would cover a gradual decline in strength of their basement wall, followed by its sudden collapse.
The Appellate Division found that based upon the facts of the case, the loss could have been caused by a hidden decay (covered loss) or it could have been caused by improper construction methods (excluded loss). Based upon this fact issue, coupled with the insured’s likely reasonable expectation of coverage for the collapse of a basement wall, the appeals court reversed the trial court’s decision and remanded the matter back to the trial court for trial on these issues. This matter would need to be decided by a jury.
