The Massachusetts Division of Insurance has recognized the potential impact of pyrrhotite-laden foundations on Massachusetts homeowners. The Division has issued Bulletin number 2021-12 entitled “Crumbling Foundations Due to High Concentrations of Pyrrhotite in Home Construction,” advising homeowner insurers about what the Division expects from them concerning this problem. The Division states that it has issued the Bulletin to “clarify its expectations about home insurance for those who may have pyrrhotite in their home’s foundation.”
The Bulletin addresses a growing home foundation failure problem in Worcester and Hampden County
The Bulletin addresses an emerging problem first reported in Agency Checklists’ article of December 18, 2018, “Will Massachusetts Insurers Be Next To Deal With Crumbling Foundation Claims?”
The Massachusetts pyrrhotite 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 an extended 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.
As reported in Agency Checklists’ December 18, 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 Bulletin advises homeowner carriers against adverse underwriting actions based on actual or possible pyrrhotite in a home’s foundation
The Bulletin seeks to ensure the stability of the home insurance market by advising insurers that homeowners should not lose their existing homeowner insurance policy “due to any concern that their home has or is suspected to have pyrrhotite in its foundation.”
The Division’s Bulletin states that its “expectation” is that insurers “will not cancel and not non-renew any Massachusetts home insurance policies due solely to the presence or suspicion of a foundation crumbling due to pyrrhotite in its construction.”
The Division’s Bulletin advises that the Division would “also not find it reasonable for a carrier to change a policyholder’s rating classifications or increase insurance rates solely because the policyholder is in a home that has a risk of a foundation crumbling due to pyrrhotite in its construction.”
The Bulletin affects twenty-one thousand homeowner policies for homes in Hamden, Hampshire, and Worcester counties
In 2020, a special commission formed by the legislature reported thirty-three Massachusetts cities and towns, either completely or partially, lay within a thirty-mile radius from the quarry supplying the pyrrhotite laced aggregate.
These municipalities include Agawam, Belchertown, Brimfield, Brookfield, Charlton, Dudley, East Longmeadow, Granby, Hampden, Hardwick, Holland, Holyoke, Leicester, Longmeadow, Ludlow, Monson, New Braintree, North Brookfield, Oxford, Palmer, South Hadley, Southbridge, Southwick, Spencer, Springfield, Sturbridge, Wales, Ware, Warren, Webster, West Springfield, Westfield, and Wilbraham,
The commission determined that in these towns during the time the Connecticut quarry operated, a total of just over thirty-six thousand homes were built. The commission identified twenty-one thousand homes built between 1982 and 2015 within the twenty-mile radius of the quarry, which had the greatest risk of defective foundations.
The report from the commission estimated the cost for foundation repairs to alleviate the pyrrhotite foundation problem exceeded $350 million.
The commission’s recommendation to remediate the problem proposed the state establish a captive insurer, like the one established in Connecticut. For more details on the commission’s report, See Agency Checklists’ article of February 11, 2020, “Special Commission Urges A State Captive Insurer To Solve $350 Million Crumbling Foundation Problem.”
The Bulletin avoids making “crumbling foundations” a covered peril
The Division’s Bulletin specifically states that the purpose of the Bulletin is not to make crumbling foundations caused by pyrrhotite a covered peril if such risk were not otherwise covered under a homeowner policy. The Bulletin’s purpose, as restated by the Division, is to “rather ensure the availability of coverage for other covered perils regardless of the presence or suspicion of a crumbling foundation caused by pyrrhotite in its construction.”
Under Massachusetts case law, the Bulletin’s disclaimer about it not changing coverage is redundant. In a 1998 decision, an insured urged the Appeals Court to find the policy term “collapse” ambiguous and, therefore, providing coverage for the “substantial impairment of the structural integrity of a building.” However, the Court declined, finding the policy in question did not cover ‘imminent’ collapse, as [the insured] argues; it only covers the collapse.”
Also, the Supreme Court of Connecticut, which had allowed more liberal interpretations of the term “collapse,” specifically found no coverage under homeowner policies for pyrrhotite foundation damage claims. See Agency Checklists’ article of November 19, 2019, “CT Decision Against Crumbling Foundation Coverage—Bad News for Some Massachusetts Homeowners.”
Do you want a copy of the Division’s Bulletin?
Click on the download link below the insert to access a copy of the full DOI Bulletin 2021-12.
