A recent decision by the United States District Court in Springfield had to resolve a dispute between a church located in western Massachusetts and Wisconsin insurer, Church Mutual. The dispute was not over religious doctrine, but rather the interpretation of a property policy and whether the roof collapse was a covered collapse hazard or excluded construction defect.
In the case of Easthampton Congregational Church v. Church Mutual Insurance Company, the federal court ruled in favor of the local church, not by interpreting the good book, but by looking to the dictionary to determine what the word, “decay” in the policy meant concerning coverage for a collapse hazard.
Church Mutual, a specialized insurer of religious properties, and its insured
The defendant in the case, Church Mutual, is a nationwide insurer formed in Wisconsin in 1897, to insure religious institutions. Since its founding, the company, originally named the Wisconsin Church Mutual Fire Insurance Association, has grown into a 50-state insurer rated A by AM Best. Church Mutual claims to be the largest insurer of religious institutions in the United States insuring twice as many institutions as the second-largest insurer writing this class of business.
The plaintiff in the case, the Easthampton Congregational Church (“the Church”), is a religious institution in Hampshire County housed in a classic New England white steepled wood frame building with an adjacent function hall, called Fellowship Hall. The hall and the adjoining church building date back to the mid-19th century.
The Church’s property policy with Church Mutual
Church Mutual issued the Church a three-year policy of insurance for the policy period June 6, 2014, to June 6, 2017. The policy included among other coverages a Building and Personal Property Coverage Form, that provided indemnity to the Church “.. . for direct physical loss of or damage to Covered Property at the premises described in the Declarations Page caused by or resulting from any Covered Cause of Loss.” The Property Coverage limit of loss under the policy was $5,353,000.
The policy excluded property losses caused by defective construction or maintenance, but provided for additional collapse coverage for specific perils.
Fellowship Hall ceiling collapses after Sunday service
On Sunday, April 24, 2016, about 80 to 100 church members had gathered in Fellowship Hall for refreshments following Sunday service. Later that same Sunday, after the church attendees had left, the whole ceiling system of Fellowship Hall collapsed the seventeen feet to the floor below, filling the main 40×70-foot room with plaster, wood strapping and insulation, leaving only the ceiling joists in place.
At the time of the collapse, no one was in the building and the ceiling was not under any construction or renovation at the time.
After discovering the collapse, the Church immediately filed a claim with its property insurer, Church Mutual.
Forensic engineer for Church Mutual finds defective construction as the cause
On May 3, 2016, Church Mutual responded to the Church’s claim by having a civil engineer conduct a forensic investigation of the collapsed ceiling and its supporting joists to determine the cause or causes of the ceiling system failure.
The expert filed a report with his findings and conclusions on May 11, 2016.
The engineering expert’s May 11, 2016 report found that the collapsed ceiling had three layers.
- a first layer which was the original plaster ceiling was mounted on three-quarter-inch-thick boards, which were attached to the ceiling joists with rectangular tapered cut nails that penetrated the joists to a depth of approximately 13/4 inches;
- the second layer added some years later, consisted of one-quarter-inch-thick drywall nailed into narrow strapping that itself had been laid over the original plaster and secured by nails;
- the third and final layer added some years after the second layer consisted of 1/2 inch-thick 12X24 inch ceiling tiles attached directly to the surface of the second layer drywall.
In the expert’s opinion, the three ceilings in the ceiling system collapsed when the original cut nails attaching the first ceiling to the joists pulled out, leaving only holes in the bottoms of the ceiling joists.
The report found the collapse was caused by the progressive failure of the nail fasteners used to attach the layers of the ceiling to the ceiling joists due to the weight of the ceiling. The reason the nails could not support the ceiling system was that:
- The original nails inadequately secured the ceiling system to the roof joists; and,
- The attachment system of the multiple types of ceiling to the original building was inadequate and could not support the weight of all the additional ceilings.
Neither the Church nor Church Mutual learned when the first ceiling was installed with the nails into the roof joists.
Church Mutual’s denial of the Church’s ceiling collapse claim
On May 19, 2016, a little over a week after receiving the expert’s opinions regarding the ceiling collapse at Fellowship Hall, Church Mutual denied coverage for the ceiling failure.
Church Mutual did not dispute that the ceiling collapse was a loss that the policy would cover if none of the policy exclusions apply. However, Church Mutual advised the Church based upon the forensic engineer’s report that two exclusions barred coverage.
Church Mutual relied on the expert’s report finding the nails used to uphold the ceiling “were inadequate for the size/weight of the ceiling, and the ceiling system was not adequately fastened to the structure.”
In Church Mutual’s opinion, the inadequate fastening of the ceiling with tapered nails triggered a policy exclusion that barred coverage for property losses caused by “Faulty, inadequate or defective…(2) workmanship, repair, construction, renovation, remodeling…or (3) Materials used in repair, construction, renovation or remodeling; or (4) Maintenance;” of the property. (Exclusion (1) omitted). Additionally, Church Mutual also alleged that an additional exclusion for losses caused by “wear and tear or for any quality in property that causes it to damage or destroy itself” applied.
After receiving Church Mutual’s original coverage denial letter, the Church asked the insurer to reassess its denial based on Additional Coverage D of the policy, which defined and provided coverage for “collapse” that results in whole or in part from certain causes listed in that coverage part.
The Church argued Additional Coverage D provided coverage for the fallen ceiling because it provided coverage if the “collapse” was “caused by. .. [d]ecay that is hidden from view, unless the presence of such decay is known to an insured prior to collapse.”
Church Mutual did not dispute the Church had no prior knowledge of the weakening of the connection between the nails and the surrounding building materials in the ceiling before the failure of the ceiling on April 25, 2016. However, in an October 21, 2016 letter, the insurer stood by its denial. Church Mutual reiterated the loss from the excluded cause of defective construction or materials used in attaching the ceiling to the joists in Fellowship Hall and not from any “decay.”
Breach of contract suit filed by Church seeking $136 thousand and punitive damages
On or about April 21, 2017, the Church filed a Complaint in the Hampshire County Superior Court against Church Mutual for breach of contract and unfair claim practices under M.G.L. c. 93A. The suit sought $136 thousand in damages as well as treble damages and attorney fees for Church Mutual’s alleged violations of § 2, of c. 93A.
Church Mutual, in response, removed the state court lawsuit to the United States District Court as the Defendant, in the action of Easthampton Congregational Church v. Church Mutual Insurance Company.
Case turns of the meaning of the word, “decay” as used in the policy
Since the lawsuit presented a case for the magistrate judge to interpret the policy, the Church and Church Mutual cross-moved for summary judgment before the United States magistrate judge assigned to the case.
The magistrate judge noted the Additional Coverage D would only provide collapse coverage for the Church if the collapse were caused “in part” by “[d]ecay that is hidden from view” and unknown to the Church before the collapse. In that case, however, the policy would provide coverage “even if the use of defective material or methods, in construction” also contributed to the collapse.
To the magistrate judge, the question was whether the Church had produced evidence establishing that decay that was hidden from view and unknown to the Church.
The magistrate judge noted the term “decay” was not defined in the policy. Because the term was undefined, pursuant to legal precedent, the magistrate judge turned to dictionary definitions to find its ordinary meaning. Quoting both The Merriam-Webster Dictionary and the Oxford English Dictionary’s definitions of “decay,” the magistrate judge concluded the accepted definition of “decay” included both a broader concept of a gradual deterioration or decline in strength or soundness and a narrower concept of organic decomposition or rot.
To the magistrate judge, the most reasonable reading of the word “decay” as used in the policy was of ‘gradual deterioration or decline in strength or soundness’ and not of ‘organic decomposition’ or ‘rot.’
The magistrate judge noted the policy elsewhere uses the term “rot” in an exclusion for “‘Fungus,’ Wet Rot, Dry Rot and Bacteria.” Based on that policy usage, the magistrate judge stated, “If Church Mutual wanted to limit coverage for ‘collapse’ to collapse caused or contributed to by “rot,” as opposed to “decay,” it could have done so. It did not, and the only reasonable implication is that the plain and ordinary meaning of “decay” as used in the policy “encompasses decay in the broader sense of a gradual deterioration or decline in strength or soundness.”
The magistrate judge concludes the Church had no knowledge of ‘decaying’ connection of ceilings to joists
The next question for the magistrate judge became whether the Church had shown that the failure of the Fellowship Hall ceiling was caused, at least in part, by such a gradual deterioration or decline in strength or soundness.
The magistrate judge answered, “Yes,” citing Church Mutual’s expert report’s explanation that the smooth nails’ connection was subject to significant loss of strength over time due to a weakening of the wooden joists’ grip on the nails, which resulted in withdrawal. The magistrate judge held that this gradual decline in the strength of the connection between the building materials and the fasteners fits within the plain and ordinary meaning of the term “decay” when that term is construed to extend to gradual deterioration or a progressive failure in strength and soundness.
Since it was agreed the Church had no prior knowledge of the weakening and failing connection between the nails and the surrounding building materials in the ceiling before its collapse, the magistrate judge held the policy provided the Church coverage for the collapse.
Defective materials exclusion irrelevant to Additional Coverage D
Finally, the magistrate judge ruled Church Mutual’s position that the ceiling collapse was due to the use of “defective material or methods of construction, remodeling, or renovation” was irrelevant.
The magistrate judge found that the policy provided for collapses, such as the one in Fellowship Hall that occurred after construction, remodeling, or renovation was complete, had coverage under the policy if the collapse was “caused in part” by “decay” “even though defective material or methods, had been used in construction, remodeling, or renovation contributes to the collapse.”
The magistrate judge found this provision was an express grant of coverage under Additional Coverage D that Church Mutual could have avoided by limiting recovery “to collapses caused only by decay” or by excluding coverage “where decay contributed to the collapse…” (Emphasis in original).
The magistrate judge enters summary judgment for the Church
Based on her analysis, the magistrate judge granted the Church’s motion for summary judgment regarding coverage and denied Church Mutual’s motion for summary judgment.
Presently, the parties are scheduled for filing by the end of July, additional pleadings for judgment to enter for a sum certain if can they reach an agreement on damages.
