United States District Court, M.D. North Carolina
MEMORANDUM OPINION AND ORDER
CATHERINE C. EAGLES, DISTRICT JUDGE.
January 14, 2018, there was a party at an apartment complex
owned by DENC, LLC, and leased to Elon University. During the
party, the concrete-floored breezeway supported by wooden
beams and connecting the second-floor apartments in one of
the buildings suddenly shifted downward by roughly one foot;
the concrete flooring cracked; debris and part of the
breezeway fell; and over one hundred students quickly left
the building. The applicable provisions in DENC's
insurance contract with Philadelphia Indemnity Insurance
Company cover this kind of collapse, and no exclusions apply.
Summary judgment on the coverage and breach of contract
issues will be granted in favor of DENC and against
Philadelphia. The motions for summary judgment related to
other claims will be resolved by separate order as time
2013, DENC purchased The Crest at Elon, an apartment complex
built in 2004. Philadelphia issued a commercial lines
insurance policy to DENC for “direct physical
loss” to The Crest, if the loss commenced during the
relevant policy period. The policy at issue here covered
November 25, 2017, to November 25, 2018. As an
“all-risk” policy, it covers risks unless they
are expressly excluded or limited by the policy itself.
See Doc. 32-8 at 112 (“Covered Causes of Loss
means Risks of Direct Physical Loss unless the
‘loss' is: 1. Excluded in Section B., Exclusions;
or 2. Limited in Section C., Limitations; that
follow.”); Doc. 34-16 at 11-12.
2020, the building at issue, has four apartments on each of
three stories, with the overall capacity for forty-eight
residents. Doc. 2 at ¶ 16; Doc. 14 at ¶ 16. In the
early morning hours on January 14, 2018, a large number of
students gathered on the second-floor breezeway of Building
2020 for a party. According to resident statements, party
attendees “started jumping in the breezeway when a
certain song had started playing, ” and “the
floor abruptly collapsed underneath the students.” Doc.
34-6 at ¶ 10; see also Doc. 34-7 at ¶
video, depicting two stairways on different sides of Building
2020, shows that from 1:12 to 1:16 a.m. on January 14, some
100 people left the building. Some walked quickly downstairs,
but others walked at a normal speed, talking with other
people or looking at their phones. A few students went back
upstairs, but-at least until the 1:20 am cutoff of the video
provided-the vast majority of students did not return to the
second floor. The surveillance video does not show the
second-floor breezeway itself. See Doc. 34-4 (notice
of manual filing of video); Doc. 34-5.
video, titled “Elon Student Video, ” shows a cell
phone recording of a young man jumping on a crack in a
concrete pathway, which Philadelphia states is Building
2020's second-floor breezeway after the January 14 event.
See Doc. 37 (notice of manual filing of video); Doc.
36 at 7-8. The video shows only that second-floor
view; it does not show the exterior of or underneath the
student reporters viewed the breezeway the morning after the
party. In their testimony, each characterized what happened
to the building as a “collapse.” Doc. 34-6 at
¶¶ 7-10; Doc. 34-7 at ¶¶ 7, 9-10. They
each observed that part of the breezeway had fallen to the
ground, and the rest was hanging down at least one foot. Doc.
34-6 at ¶ 9; Doc. 34-7 at ¶¶ 9-10. They each
saw a significant amount of debris on the ground below the
second-floor breezeway, and a large hole in the ceiling of
the first-floor breezeway. Doc. 34-6 at ¶ 9; Doc. 34-7
at ¶¶ 9-10. Philadelphia has not disputed these
the January 14 events, DENC immediately notified
Philadelphia. Doc. 2 at ¶ 32; Doc. 14 at ¶ 32.
Philadelphia retained an adjuster, William Nunn, who
inspected the breezeway on January 16. See Docs.
32-6, 32-11. A few days later, Mr. Nunn wrote to Philadelphia
that “[t]he sole and proximate cause of this loss is
water damage occurring over an extended period of time
causing the second floor breezeway to sag and the light
weight concrete finished [sic] to crack.” Doc.
32-11 at 3. Although he noted that “an area of the 2nd
floor breezeway was cracking and sagging, ”
id., he did not further describe the extent of the
January 16, 2018, the building had been condemned. Doc. 34-8.
Mr. Nunn retained a structural engineer, Steven Moore, to
assess the breezeway. Doc. 32-12 at 1. Mr. Moore visited The
Crest on January 31 and issued his report on February 8. Doc.
32-14 at 2, 4. He catalogued multiple ways in which water had
seeped into the breezeway's wood framing and photographed
the resulting biological growth and wood decay. Doc. 32-14 at
4-12. He did not describe the damage to the breezeway's
exterior, such as the distance it had fallen down or any
resulting debris on the ground, though he subsequently
testified that “it's obvious, visual to see that .
. . the area that dropped, [is] lower than it would have been
left in a usable condition.” Doc. 34-10 at 14.
report, Mr. Moore concluded that the building “has
sustained significant long-term water intrusion which
ultimately resulted in the wood framing (structural)
member's inability to support the dead (slab) and live
(occupant) loads.” Doc. 32-14 at 12. As the wood-frame
“structural elements of the breezeway” had
deteriorated, the concrete slab lacked the support it
required-and once it became a “suspended” slab,
it could no longer “carry weight.” Doc. 34-10 at
13. Mr. Moore attributed this water intrusion to the
“[f]ailure to properly install a water management
system on the walls, a properly integrated waterproof system
for the walkway slab and framing configuration, and improper
venting of the dryers.” Doc. 32-14 at 12. He
opined, therefore, that “[t]he damage is not the result
of a sudden, short-term event.” Id. He advised
that no one should use the breezeway in its current
condition. Id. at 13.
retained an engineer, Steven Allred, who did not issue a
report but who testified that the breezeway was sagging
because the concrete had broken. Doc. 32-17 at 11. The
damaged second-floor breezeway was “supported by the
remaining structure underneath it.” Id. at 12.
Like Mr. Moore, he did not describe how far it had fallen
down or how much of it was attached to the building. Mr.
Allred also concluded that the damage to the breezeway's
supporting wood trusses was due to moisture from the dryer
vents, which vented “to an enclosed space” rather
than outside the building. Id. at 13.
eventually denied coverage for DENC's losses. This case
parties agree that North Carolina law applies in interpreting
the insurance contract between DENC and Philadelphia. DENC,
as the insured, “has the initial burden of bringing
itself within the insuring language of the policy.”
John S. Clark Co., Inc. v. United Nat'l Ins.
Co., 304 F.Supp.2d 758, 764 (M.D. N.C. 2004) (quoting
Hobson Constr. Co., Inc. v. Great Am. Ins. Co., 71
N.C.App. 586, 590, 322 S.E.2d 632, 635 (1984)). “[T]he
burden then shifts to the insurer to prove that a policy
exclusion excepts the particular injury from coverage.”
Alliance Mut. Ins. Co. v. Dove, 214 N.C.App. 481,
483, 714 S.E.2d 782, 784 (2011). “Recovery will be
allowed under a policy affording ‘all risks'
coverage for all losses of a fortuitous (external) nature not
resulting from misconduct or fraud, unless the policy
contains a specific provision expressly excluding loss from
coverage. The term ‘all risks' is not to be given a
restrictive meaning.” Cleveland Const., Inc. v.
Fireman's Fund Ins. Co., 819 F.Supp.2d 477, 481
(W.D. N.C. 2011) (quoting Avis v. Hartford Fire Ins.
Co., 283 N.C. 142, 146, 195 S.E.2d 545, 547 (1973)).
interpretation of language in an insurance policy is a
question of law for the courts. Guyther v. Nationwide
Mut. Fire Ins. Co., 109 N.C.App. 506, 512, 428 S.E.2d
238, 241 (1993). Courts construe any ambiguities in
insurance contract provisions against the insurer.
Markham v. Nationwide Mut. Fire Ins. Co., 125
N.C.App. 443, 454, 481 S.E.2d 349, 356 (1997); see also
Guyther, 109 N.C.App. at 512, 428 S.E.2d at 241. Indeed,
the fact that the parties cannot agree on the meaning of a
particular term in a policy “is some evidence that a
term is ambiguous, ” and so “is the fact that
courts in various jurisdictions have a difference of opinion
regarding what definition to give a policy term.”
Id. Moreover, “as our courts are not favorably
disposed toward provisions limiting the scope of coverage,
exclusions are to be strictly construed to provide the
coverage which would otherwise be afforded by the
policy.” Markham, 125 N.C.App. at 454, 481
S.E.2d at 356.
undisputed that the loss here is excluded by several
exclusions in the policy.That is not the end of the question,
however, as the policy contains an endorsement entitled
“Collapse - Exclusion and Additional Coverage
Re-stated.” Doc. 32-8 at 181- 83. That provision both
provides coverage in certain circumstances and excludes
coverage in others, in a confusing morass of definitions,
exclusions, and exceptions.
many insurance policies, the policy here includes provisions
that are elsewhere deleted and modified. While there is
language about “collapse” in the body of the
policy, it is later deleted in favor of the Collapse
Endorsement at issue here.
Collapse Endorsement begins with exclusions of coverage for
“collapse, including an abrupt falling down or caving
in.” Doc. 32-8 at 181 at § I(B)(2)(i)(1).
Later on the same page, however, it says that “if
collapse results in a Covered Cause of Loss, we will pay for
the loss, ” and specifically provides that the
exclusion “does not apply to collapse caused by weight
of people or personal property, ” Doc. 32-8 at 181 at
§ I(B)(2)(i)(b)(iv), and that the exclusion does not
apply “to the extent that coverage is provided under
the Additional Coverage - Collapse.” Doc. 32-8 at 181
at § I(B)(2)(i)(a). The referenced “Additional
Coverage - Collapse” language follows, and it provides
coverage “only” for “an abrupt collapse,
” defined as “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.” §
excluded coverage for “abrupt”
“collapse” in § I(B)(2)(i)(1), and then
given back coverage for “abrupt collapse” in
§ II(D)(1), the Additional Coverage section of the
Collapse Endorsement again takes it away in some situations
or limits it in others. § II(D)(2), II(D)(3). In §
II(D)(2), the Collapse Endorsement provides coverage for loss
“caused by abrupt collapse of a ‘building' or
any part of a ‘building' if such collapse is caused
only by one or more of the following, ” including:
a. “Building” decay that is hidden from view,
unless the presence of such decay is known to an insured
prior to collapse;
. . .
d. Use of defective material or methods in construction,
remodeling or renovation if the abrupt collapse occurs after
the construction, remodeling or renovation is complete, but
only if the collapse is caused in part by:
(1) A cause of loss listed in 2.a.; . . . or
(4) Weight of people or personal property.
II(D)(2). Neither “cause” nor “caused
by” is defined in the Definitions section of the
policy, Doc. 32-8 at 35 at § IV; see also Id.
at 112-22, and neither party has directed the Court's
attention to any other place in the 183-page policy where the
word “caused” or the phrase “caused
by” are defined.
§ II(D)(3), Philadelphia further restricts covered
losses, stating that the Additional Coverage - Collapse
“does not apply to”:
a. A “building” or any part of a
“building” that is in danger of falling down or
b. A part of a “building” that is standing, even
if it has separated from another part of the
c. A “building” that is standing or any part of a
“building” that is standing, even if it shows
evidence of cracking, bulging, sagging, bending, ...