Collapse Insurance Claims - Commercial Property
Posted on Wed, Feb 02, 2011 @ 11:08 AM
Years ago, the insurance coverage for collapse was broad. Even the threat of a collapse was covered. However, insurance companies have gradually narrowed the definition to restrict the coverage to the most severe situations. As Public Adjusters, representing insured who have suffered losses, we have to deal with this issue, expecially in times of heavy snow.
The latest edition of the insurance form used by most insurance policies (CP 1030 June 2007) for commercial property limits coverage to an “abrupt collapse”. (Insurance companies can use other forms or different editions of this form. So this discussion may not apply to your policy.)
The CP 1030 (June 2007) form defines abrupt collapse as follows:
For the purpose of this Additional Coverage –Collapse, abrupt collapse means an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose.
The policy then provides a list of causes of the collapse that it will cover. This includes:
- hidden decay
- hidden vermin damage
- defective construction if the loss occurs during construction, remodeling or renovation
- weight of people, property
- rain that collects on a roof
So how will this be interpreted? As with most things in life, it depends.
Chip Merlin, an attorney who writes a blog on insurance matters, recently stated:
A senior claims executive explained how his company was paying collapse losses. Being familiar with the policy language, I explained that the company didn't have to pay partial collapse losses. He said he knew, but didn't want to lose good customers just because the ISO changes made paying under the collapse provision impossible. Not all claims organizations share that philosophy.
There may be other portions of the policy that could provide coverage for a loss. The devil is in the details on this issue and a careful reading of the policy is required before a final determination can made. Furthermore, court decisions may provide interpretations of the policy that can affect coverage.
I will discuss collapse for a home in a blog to follow.
For information on what to do after a loss to your property, check out this page. Any comments or questions, please respond below.