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New Jersey homeowner entitled to coverage due to undefined term in policy

February 23, 2016

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In the recent decision of <a href="http://www.judiciary.state.nj.us/opinions/a3454-12.pdf"><em>Bardis v. Stinson</em></a>, the New Jersey Appellate Court reviewed whether defendant Cumberland Insurance Company properly denied insurance coverage to a plaintiff homeowner.
The plaintiff homeowner alleged property damage to their home due to a basement wall collapse.  Cumberland Insurance, the homeowner’s insurer, denied coverage, stating that the loss was caused by defective construction of the foundation wall and hydrostatic pressure, neither of which triggered coverage under the policy.
Plaintiff initiated suit alleging bad faith, and demanding insurance benefits from Cumberland. In their complaint, plaintiff claimed that they were entitled to coverage under a supplemental collapse coverage provision that provided coverage for collapse based on hidden decay. The term “decay” was undefined in the Policy.  Plaintiff’s engineering expert examined the home, and opined that the collapse was caused by defective construction of the foundation wall combined with excessive loads from retained soil and an adjacent masonry chimney.
Cumberland filed a motion for summary judgment, and plaintiff opposed the motion, arguing that the cause of the loss was a hidden decay which triggered coverage under the policy.   The trial court agreed that the collapse was not covered under the policy, and granted the defendant’s motion.
On appeal, the court reversed, finding that the term “decay” is ambiguous. Accordingly, the court found that the cause of the collapse could constitute a “decay”, triggering coverage under the policy.
Courts will typically rule in favor of the insured when there are ambiguous provisions in an insurance policy.
Thanks to Heather Aquino for her contribution to this post.
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