Equinox on the Battenkill Management Assn., Inc. v. Philadelphia Indemnity Ins. Co.

In this appeal, we are asked to decide whether our decision in Gage v. Union

Mutual Fire Insurance Co. remains good law with regards to the meaning of “collapse” and

whether Gage controls the result here. 122 Vt. 246, 169 A.2d 29 (1961). We conclude that the

policy language in this dispute is broader than the language in Gage and that therefore Gage does

not control. We reverse the trial court’s summary judgment and remand to resolve disputed

questions of fact and interpret the applicable policy language.

¶ 3. Management association manages a condominium complex in Manchester. Many

units in the condominium complex were constructed with cantilevered balconies. The balconies

have a history of repairs. In 2012, management association sought coverage for damage to the

balconies, which insurer denied. The 2012 insurance policy between management association

and insurer provides that insurer “will not pay for ‘loss’ caused by or resulting from . . . [f]aulty,

inadequate, or defective . . . [d]esign, specifications, workmanship, repair, construction,

renovation, remodeling, grading, [or] compaction” (the “defective-workmanship exclusion”).

However, the policy also provides that “if ‘loss’ by a Covered Cause of Loss results, [insurer]

will pay for that resulting ‘loss.’ ” In the endorsement entitled “Additional Coverage -

Collapse,” the policy provides, “We will pay for ‘loss’ caused by or resulting from risks of direct

physical ‘loss’ involving collapse of ‘buildings’ or any part of ‘buildings’ caused only by one or

more of the following: . . . [h]idden decay.” The policy defines “loss” as “accidental loss or

damage,” and “buildings” as “buildings or structures.” The policy does not define “collapse,”

except to exclude “settling, cracking, shrinkage, bulging or expansion.”

¶ 4. In its statement of undisputed facts submitted in support of its motion for

summary judgment, management association claimed that when it carried out a deck

replacement program in 2007 and 2008, it encountered certain structural problems at Unit I-4,

including water damage to sheathing and studs behind lower-level exterior clapboards and

cracking in several exposed joists beneath the second-floor balcony. Steps were taken to

strengthen the second-floor balcony. Management association discovered similar problems at

other units and took steps to reinforce the balconies at those units in 2008, 2010, and 2011.

According to the statement of undisputed facts, none of these repairs or improvements required

exposing balcony joists within the interior of the units.

¶ 5. Management association claims that it first discovered evidence of damage on the

interior portions of the cantilevered balcony joists in September 2012, while inspecting the

balcony at Unit K-3, which had undergone a “partial collapse.”1 Prior to this inspection, none of

the interior portions of any of the joists had been inspected or exposed. Management association

further claims that during this time, the balcony at Unit M-7 also suffered a “partial collapse.”

¶ 6. In October 2012, management association filed a first-party claim with insurer

under the “Additional Coverage” endorsement, alleging that hidden decay had caused the

damage. Management association seeks coverage for the balconies that are affected by the same

kind of damage that occurred at K-3 and M-7.2 The summary-judgment record reveals the

efforts of the parties to engage expert support for their respective positions regarding complex

questions of damage and causation. These efforts focused on the K-3 and M-7 balconies.

¶ 7. The association hired Criterium-Lalancette Engineers to conduct a visual

inspection later that month. Criterium-Lalancette noted significant evidence of moisture

infiltration in its October 23 report. The report recommended that the balconies be taken out of

service.

¶ 8. Management association claims that the M-7 balcony subsequently suffered a full

collapse at some point in November 2012. While securing the building against winter weather, 1 Insurer did not oppose management association’s use of the phrase “partial collapse” to describe the damage to the balconies. We note that “[t]he term ‘partial collapse’ . . . may be an epithet of convenience but it is not to be regarded as a term of construction.” Gage, 122 Vt. at 250, 169 A.2d at 31. In this case, as in Gage, “[t]he policy says nothing about ‘partial collapse.’ ” Id.

2 When questioned at oral argument, counsel for management association responded that there are approximately ninety balconies at the condominium complex, of which between twelve and fifteen are in “various stages of collapse.” The location schedule in the insurance policy lists over fifty residential buildings with multiple units, but does not indicate which units have balconies.



4

management association removed supporting jack posts and disconnected railings connecting the

balcony to the building, “resulting in the balcony falling to the deck below.”

¶ 9. Insurer hired Barbara Knight of Knight Consulting Engineers, Inc., to conduct an

inspection at the condominium to determine the cause of the damage to the balconies. Knight

conducted an inspection on November 2. Her report from November 12 noted that she did not

observe any rot on exposed areas of the balcony joists, but did opine that construction and design

issues contributed to the balcony failures. Insurer denied coverage for the damage to the

balconies in February 2013.

¶ 10. Management association requested that insurer reconsider and provided additional

evidence. Knight reviewed the additional evidence, including photographs of where the balcony

joists penetrated the building wall that revealed internal rot. Based on the additional evidence,

Knight issued a supplemental report in April 2013 that attributed the structural failure to rot and

deterioration of the joists.

¶ 11. In May 2013, insurer reaffirmed its no-coverage position. In its second denial

letter, insurer raised objections to management association’s claim under the policy’s

endorsement for “Additional Coverage” for “collapse.” Insurer claimed that the cantilevered

balconies did not actually collapse, and also that, even if the 2012 damage did fit within the

definition of “collapse,” the cause could not be for causes listed in the endorsement because

management association allegedly had knowledge of defects in the balconies as early as 2007.

¶ 12. Legal proceedings began in August 2013 when management association filed an

action for declaratory judgment in the Superior Court, Civil Division, Bennington Unit.

Management association sought an order declaring that the policy provides coverage for the

balconies’ failure. In its answer, insurer denied coverage for the damage and asserted as

defenses the exclusions and limitations in the policy, as well as the objections it raised in its

claim-denial letters. Management association filed a motion for summary judgment, arguing



5

that: (1) the damage to the balconies qualified under the policy’s “collapse” coverage; (2) the

defective-workmanship exclusion did not apply to its claim; and (3) the facts do not support

insurer’s claim that management association knew as early as 2007 that the balconies were

structurally impaired.

¶ 13. Insurer filed a cross-motion for summary judgment, arguing that the damage to

the balconies was not covered under the additional coverage provision because non-enumerated

causes contributed to the damage: defective construction, faulty design, poor choice of materials,

and rot. Moreover, insurer argued that the balconies did not collapse as that term was defined in

Gage, 122 at 248-49, 169 A.2d at 30. Insurer also responded to management association’s

argument that an exception to the defective-workmanship exclusion applies to the damage.

¶ 14. Management association opposed the cross motion, arguing that the language of

the policy is distinct from the language at issue in Gage. Management association also argued

that whether faulty workmanship contributed to the balcony failures was a disputed material fact

that precludes granting summary judgment on the grounds that the defective-workmanship

exclusion applied. Management association filed a statement of disputed material facts in

support of this argument—the statement refers to an affidavit from David Capen, a building

contractor, which refutes Barbara Knight’s opinion that the balconies were constructed

improperly. Furthermore, management association argued that even if insurer could prove

defective construction was a contributing factor to the balconies’ damage, the defective

workmanship exclusion would not apply because of the provision providing additional coverage

for collapse.

¶ 15. The superior court never reached these arguments and did not address the

question of disputed facts. The court denied management association’s motion and granted

insurer’s cross-motion, concluding that insurer was entitled to judgment as a matter of law. The

court based its decision on the meaning of “collapse,” concluding that the damage to the



6

balconies did not fit within the definition from Gage. The decision did not reach the parties’

other arguments regarding the defective-workmanship exclusion or the cause of the damage.

With regard to management association’s contention that the language of its policy with insurer

substantially differed from the policy in Gage, the court stated only that “[t]he exclusion of

collapse for settling, cracking, shrinkage serves to limit the meaning of collapse, not to expand

it.” The court did not interpret any other policy language or the remaining language in the phrase

“risks of direct physical loss involving collapse.” This appeal followed.

¶ 16. In deciding whether summary judgment is proper, we apply the same standard as

the superior court. Messier v. Metro. Life Ins. Co., 154 Vt. 406, 409, 578 A.2d 98, 99 (1990). If

genuine issues of material fact exist, we reverse a grant of summary judgment. Id.

“[I]nterpretation of an insurance policy, like other contracts, is a question of law. Our review is

therefore nondeferential and plenary.” Coop. Ins. Cos. v. Woodward, 2012 VT 22, ¶ 8, 191 Vt.

348, 45 A.3d 89 (citation omitted). In interpreting the language of an insurance policy, “we look

at all the provisions . . . together and view the policy in its entirety.” McAlister v. Vt. Prop. &

Cas. Ins. Guar. Ass’n, 2006 VT 85, ¶ 17, 180 Vt. 203, 908 A.2d 455.

¶ 17. We agree with management association that the language of the policy in this case

and the policy in Gage have different meanings. We therefore conclude that the superior court

erred in granting summary judgment on the ground that “the balconies did not collapse.” The

court’s error lies in interpreting the insurance policy in a way that equates its language with the

meaning of “collapse” that we adopted in Gage and then basing its decision solely on that

interpretation. The language in the Gage policy specifically covered “all direct loss to the

property by . . . [c]ollapse.” Gage, 122 Vt. at 246, 169 A.2d at 29. The language of the policy

between management association and insurer provides that insurer will pay for “ ‘loss’ caused by

or resulting from risks of direct physical ‘loss’ involving collapse of ‘buildings’ or any part of

‘buildings.’ ” (Emphasis added.)



7

¶ 18. The difference in language is great. The language in the policy between insurer

and management association plainly contemplates damage beyond the definition of “collapse”

that we adopted in Gage. Because it covered only “collapse,” the insurance policy in Gage

provided coverage only where there had been damage such as a “falling in, . . . loss of

shape, . . . [or] reduction to flattened form or rubble of the building or any part thereof.” Gage,

122 Vt. at 249, 169 A.2d at 30-31 (quoting Cent. Mut. Ins. Co. v. Royal, 113 So. 2d 680, 683

(Ala. 1959)).3 Here, however, the policy contains additional language beyond “collapse.” The

balconies may incur damage from a “risk of direct physical ‘loss’ involving collapse” even

where they have not detached and completely fallen away from the buildings. (Emphasis added).

The court gave no consideration to the additional language, and so the question therefore remains

whether the damage to the balconies falls within this policy’s coverage.

¶ 19. We are not alone in finding that the language of the policy in this case—“ ‘loss’

caused by or resulting from risks of direct physical ‘loss’ involving collapse”—has a broader

meaning than the language in Gage. Confronted with policies containing similar or identical

language to the policy at issue here, other states have concluded that such terms are at least

ambiguous, leading to coverage conclusions in favor of those insured. Such language may even

expressly expand the scope of coverage if a court finds that a catastrophic failure is imminent or

3 In deciding Gage, we cited Royal, a decision from the Supreme Court of Alabama, as being particularly illuminating. Gage, 122 Vt. at 246, 169 A.2d at 30. Royal concluded that no collapse had occurred where cracks had developed in a building’s walls and foundation. 113 So. 2d at 683. A subsequent decision from the Court of Civil Appeals of Alabama determined that a “sufficient and actual collapse . . . [that] destroy[ed] the structural integrity of the building” occurred where termite damaged caused a house’s floor to sag about eight inches but did not “reduce the house to flattened form or rubble.” Fid. Cas. Co. of N.Y. v. Mitchell, 503 So. 2d 870, 871 (Ala. Civ. App. 1987). The insured in Mitchell presented evidence that the building was so severely damaged that it could not be safely inhabited. Id.; see also State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 325-26 (Ala. 1999) (discussing Royal and Mitchell and finding no “collapse” coverage where insured failed to present “evidence indicating that any part of their home had actually fallen in, i.e., collapsed, or that the structural integrity of their home was so damaged that their home was unfit for human habitation”).



8

that the insured building’s structural integrity has degraded to the point where it cannot be safely

and reliably used.

¶ 20. The Supreme Court of South Carolina has interpreted the language at issue to

have a broader meaning than a policy that covers only “collapse.” Ocean Winds Council of Co

Owners, Inc. v. Auto-Owner Ins. Co., 565 S.E.2d 306, 307-08 (S.C. 2002). In determining the

question of when coverage is triggered under a policy that covered “risks of direct physical loss

involving collapse,” the court held that the “phrase is more expansive than the word ‘collapse’

and appears to cover even the threat of loss from collapse.” Id. The court determined that “a

requirement of imminent collapse is the most reasonable construction of the policy clause

covering ‘risks of direct physical loss involving collapse.’ ” Id. at 308.

¶ 21. The Supreme Court of Pennsylvania has also considered a policy that provided

coverage for “damage caused by or resulting from risks of direct physical loss involving collapse

of a building or any part of a building.” 401 Fourth St., Inc. v. Investors Ins. Grp., 879 A.2d 166,

168 (Pa. 2005). The court did not limit itself merely to the meaning of “collapse,” but rather

focused on the phrase, “risks of direct physical loss involving collapse.” Id. at 172. The court

concluded that the term is ambiguous in that “the provision contemplates broader coverage than

policy language simply employing the term ‘collapse.’ ” Id. at 174. Construing the term in favor

of the insured, the Pennsylvania high court held that a policy providing coverage for risks of

direct physical loss involving collapse covers “damage caused by the falling down, or imminent

falling down of a building or part thereof.” Id.

¶ 22. More recently, the Supreme Court of South Dakota took up the question in a case

involving an insurance policy with identical language. Zoo Props., LLP v. Midwest Family Mut.

Ins. Co., 2011 S.D. 11, ¶¶ 3-4, 797 N.W.2d 779. That court agreed with the Supreme Court of

South Carolina in deciding that a term extending coverage to “loss or damage caused by or

resulting from risks of direct physical loss involving collapse” was ambiguous. Id. ¶ 11 (citing



9

Ocean Winds, 565 S.E.2d at 308). The South Dakota high court construed the phrase to be

broader than the language used in the Gage policy, which required the court to interpret only a

single word, “collapse.” Id. ¶¶ 11-12. Like the high courts of South Carolina and Pennsylvania,

the Supreme Court of South Dakota also interpreted the language at issue to include imminent

collapse. Id. ¶ 12.

¶ 23. While these three jurisdictions include “imminent collapse” within the meaning of

“risks of direct physical loss involving collapse,” other jurisdictions have taken different

approaches when interpreting policies with the same language. Indeed, the Supreme Court of

South Carolina observed that other states’ constructions fall across a wide spectrum. Ocean

Winds, 565 S.E.2d at 308. At one end of the spectrum is the most stringent interpretation, which

still requires “actual collapse.” See Heintz v. U.S. Fid. & Guar. Co., 730 S.W.2d 268, 269 (Mo.

Ct. App. 1987) (interpreting policy containing “risk of direct physical loss involving collapse”

language and concluding that “[a] condition of impending collapse is insufficient”). At the other

end is the most lenient interpretation, which covers mere “substantial impairment” of the

building. See Am. Concept Ins. Co. v. Jones, 935 F. Supp. 1220, 1228 (D. Utah 1996)

(construing same language to require that insured show only issue of material fact that covered

building “sustained substantial impairment to its structural integrity” to successfully oppose

motion for summary judgment). In between either extreme are states that have construed the

phrase to require “imminent collapse.”

¶ 24. We reject the most stringent interpretation requiring actual collapse. The single

word “collapse” and the phrase “risk of loss involving collapse” cannot mean the same thing.

We also reject as overly broad an interpretation that requires only “substantial impairment.” In

choosing the middle ground, we conclude that “a risk of direct physical loss involving collapse”

means a risk of imminent collapse.



10

¶ 25. Having reached this conclusion, we are not in a position to determine whether

there is coverage for the damaged balconies. The superior court’s decision is insufficient for us

to construe or deny coverage as a matter of law given the disputed cause, nature, and extent of

the damage. There are obvious factual disputes between the parties. On remand, the court must

resolve questions of fact about the damage claimed. Summary judgment is therefore

inappropriate.

¶ 26. In addition to the question of whether a policy covering “risk of direct physical

‘loss’ involving collapse” covers the damage to the balconies in this dispute, our conclusion also

reopens questions of construction that the superior court never reached. Even applying the “risk

of imminent collapse” standard to the facts, the court may determine that the policy language is

ambiguous as a matter of law and construe the ambiguity favorably for management association.

Cf. Fireman’s Fund Ins. Co. v. CNA Ins. Co., 2004 VT 93, ¶ 9, 177 Vt. 215, 862 A.2d 251

(“Any ambiguity will be resolved in the insured’s favor, but we will not deprive the insurer of

unambiguous terms placed in the contract for its benefit.”). The court can make this

determination only once it has resolved the factual issues. The court may also need to determine

whether the defective-workmanship exclusion operates to deny coverage. On remand, the court

must therefore resolve questions of fact about the damage before deciding whether the policy

provides or excludes coverage. These issues are for the court to determine in the first instance.

In short, by basing its decision solely on its conclusion that the damage was not caused by “collapse,” as we interpreted the word in Gage, the disputed facts apparent from the summary-judgment filings alone make clear that a number of unresolved legal and factual issues remain, including: (1) whether the damage to the balconies constitutes losses caused by or resulting from risks of direct physical loss involving collapse; (2) whether this policy language when applied is ambiguous as a matter of law; (3) what caused the damage; and (4) whether the defective-workmanship exclusion applies to the claim. Although our own interpretation of insurance policy language is plenary and non-deferential, we decline to address these questions in the absence of the superior court’s initial construction of the policy provisions in the context of its findings regarding all relevant facts. Reversed and remanded for further proceedings consistent with this opinion.