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"Hidden decay" in first party policy held not to be limited to organic decomposition

The First District Court of Appeal addressed the question of whether a property insurance policy covering collapse of a building due to "hidden decay" applies to the unexpected failure of wooden roof trusses with no evidence of rot.

The Court of Appeal concluded that coverage cannot be ruled out merely because the trusses were not rotten. "An insurer promising coverage for collapse due to 'hidden decay,' without limiting the scope of the term to organic decay, is liable on claims for any collapse caused by a concealed process of gradual loss in the strength of building materials, unless other policy terms limit coverage."

In this case, "the insured could reasonably expect coverage for an imminent collapse caused by the weakening roof trusses, unless the failure was caused by defective materials or construction methods."

The appellate court noted that the dictionary defined "decay" to include a general sense of gradual deterioration in strength or soundness, not just rot or organic decomposition. "If Hartford [the insurer] did not intend to create a reasonable expectation of coverage for collapse due to 'natural decline,' it could have used a term other than 'decay'."

The appellate court also affirmed the jury's verdict against Hartford for the costs of temporary shoring based upon evidence that Hartford's adjuster had "authorized" the temporary shoring. Plaintiff's "insurance expert testified that in the insurance industry the term 'authorized' means the insurer will pay for an item."

Hartford offered "no alternative explanation for what it might have meant when it 'authorized' the shoring, other than that it was assuming financial responsibility." Plaintiff testified that he detrimentally relied upon Hartford's promise because he would have done the shoring himself or would have looked into demolishing the building.

(Stamm Theatres, Inc. v. Hartford Cas. Ins. Co. (First Dist., October 31,2001) 2001 WL 1337599.)