Agency Checklists usually reports only legal decisions of the Massachusetts state and federal courts. However, a decision of the Connecticut Supreme Court released on November 12, 2019, may have a direct effect on homeowners in parts of Hampden. Hampshire and Worcester Counties who have foundations that have materials from a quarry in Connecticut that sold aggregate for concrete with pyrrhotite.
Pyrrhotite foundations crumble after twenty years and now affect over 35,000 homes in CT and MA.
An Agency Checklists December 18, 2018 article entitled, “Will Massachusetts Insurers Be Next To Deal With Crumbling Foundation Claims?” we noted that Connecticut was in the midst of growing problems with houses involving crumbling foundations.
The crumbling foundation problem is unique to Northwest Connecticut and Southwestern Massachusetts and resulted from a single quarry that operated from 1983 to 2016. The quarry supplied aggregate for the concrete used in residential construction primarily for pouring foundations.
The materials supplied from this quarry had an unusually high concentration of pyrrhotite, a mineral that will, over a long period, react with oxygen and water seepage by expanding. This gradual expansion of the pyrrhotite in the concrete of the foundation will cause, over a period of years, the foundation to crack and fail.
Pyrrhotite foundations now being found in Massachusetts
The present estimate is that over 35,000 houses have pyrrhotite laden aggregate from this quarry in their foundations. As reported in Agency Checklists December 2018 article, “While the company mining the pyrrhotite delivered most of its concrete for Connecticut home construction, it also delivered concrete to towns in Hampden and Worcester counties. Homeowners in East Longmeadow, Monson, Palmer, Ware, Wales, and Hampden have reported foundation problems caused by pyrrhotite.”
The problem is not just a Connecticut problem. Masslive.com reported in a February 23, 2019 article, “With crumbling foundations, Western Mass. homeowners confront pyrrhotite in concrete” about a meeting in East Longmeadow of over one hundred homeowners concerned about pyrrhotite in their foundations. Reportedly, a realtor spoke of two sellers who had to cut sales prices after the problem was found: In one case, the discovery of pyrrhotite in the foundation resulted in sale price dropping from $410,000 to $225,000, and in the other sale the price went from $575,000 before the problem was discovered to just $302,000 after the problem came to light.
While the number of homes affected in Massachusetts by pyrrhotite is nowhere near as great as the number found in Connecticut, estimates have put the number of possibly affected homes as high as 1500.
Homeowners in Connecticut sought homeowner coverage for their “collapsing” foundations
The November 12 decision of the Connecticut Supreme Court arose from a Superior Court case in that state that had held that the term “collapse” in a homeowner insurance policy, when otherwise undefined, was “sufficiently ambiguous to include coverage for any substantial impairment of the structural integrity of a building.”
This decision gave hope to homeowners in Connecticut whose foundations had lost their structural integrity because of pyrrhotite’s expansion that they might have coverage under their homeowners policies.
The Connecticut Supreme Court noted their decision was of great moment because of the over 34,000 Connecticut homes with crumbling foundations. The justices formulated the questions they were to decide as:
- Is ‘substantial impairment of structural integrity’ the applicable standard for ‘collapse’ under the [plaintiffs’ homeowners insurance policy] provision at issue?
- If the answer to question one is yes, then what constitutes ‘substantial impairment of structural integrity’ for purposes of applying the ‘collapse’ provision of [the plaintiffs’ homeowners insurance policy?
- Under Connecticut law, [does] the [term] ‘foundation’ . . . in a [homeowners] insurance policy unambiguously include basement walls? If not, and if [that term is] ambiguous, should extrinsic evidence as to the meaning of ‘foundation’ . . . be considered?’.
Court rule the term “collapse” is ambiguous but that is not enough for coverage to apply
While the questions posed related to Connecticut law, the court was interpreting a standard homeowners policy’s terms. As a result, the justices’ decision could affect a similar case for coverage, if brought in Massachusetts by a Massachusetts homeowner.
However, in a thirty-two-page decision, the Connecticut justices dashed the hopes of most homeowners looking to their insurers for relief.
On the first question, the court did find that the term “collapse” was ambiguous and noted that one court had pointed out in 1970, that that the insurance “controversy surrounding the definition of ‘collapse’ began prior to 1960.” However, in answering the next two question, they put homeowner coverage beyond most insureds’ reach by ruling that under the second and third questions:
- ‘‘substantial impairment of structural integrity’’ standard requires proof that the home is in imminent danger of falling down, and,
- That, as to the third question, the term ‘‘foundation’ unambiguously encompasses the home’s basement walls.
In the first instance, most of the pyrrhotite affected homes were not in “imminent damage of falling down.” They were instead losing their structural integrity bit-by-bit.
In the second instance, the policy in question had a specific exclusion for a loss caused by the collapse of the home’s foundation. The homeowner had tried to avoid this exclusion by arguing the basement walls were not part of the “foundation.” The court’s decision explicitly found the common meaning of a “foundation” included the house’s basement walls.
Homeowners with pyrrhotite foundations will have to get relief elsewhere
The cost to repair a pyrrhotite foundation ranges between $150,000 to $250,000, according to the State of Connecticut. The Connecticut Supreme Court decision confirms that homeowners insurance will not be the source of that kind of repair cost. For affected homeowners in Massachusetts, as Agency Checklists pointed out in its December article, Massachusetts law seemed to provide little likelihood of any coverage for this type of “collapse” claim.
Any remedy will require a political solution. Connecticut has already instituted a government nonprofit insurer with some funding from insurers. See Agency Checklists’ article of January 15, 2019, “LBLN: Middlesex DA Gets Insurance Funds & CT Crumbling Foundations Fund, NY Approves PRAC-MAPFRE Deal.”
Hopefully, Massachusetts will provide some similar “lemon law” for homeowners in the bay state who have had the misfortune to have unknowingly bought a house with a crumbling foundation.
Frank Lombard CPCU ARM says
But the court did NOT say home insurers have no responsibility to these homeowners, they just said the defective foundations were not covered because they didn’t collapse.. Nothing was said about other structural damage to these homes which has ensued or resulted from the shifting defective material discovered in the foundation.. Every home has sustained some other “structural damage” and some homeowners have recovered the cost to repair this resulting damage, why not all homeowners??
And what about the expenses homeowners must incur to raise the structure so the defective concrete can be replaced? Homeowners policies REQUIRE the policyholder to take reasonable steps to protect their property from further damage following a loss. The only way to do that is to raise the structure to permit the replacement of the defective foundation. I believe a compelling argument can be made that the cost of these required “reasonable steps” should be a covered expense. And how about the additional living expenses these homeowners must incur for temporary housing while the repairs are being made? These additional expenses should be a covered expense as well.
Some of these claims are being honored, why not the claims of all homeowners? And why is that information not being shared with homeowners or their agents? Are these claims simply not being submitted properly?
How can you conclude this decision “dashes the hopes” of impacted homeowners? Or does it mean these homeowners should consider revising the way these claims are being submitted?..