Washington State has long been a jurisdiction with no judicial pronouncement as to the meaning of the term “collapse” in a property insurance policy. This changed on June 18, 2015, when the Washington Supreme Court issued its decision in Queen Anne Park Homeowners Association v. State Farm Fire & Casualty Company, 2015 Wash. LEXIS 695. The issue came before the court by way of certification from the U.S. Court of Appeals for the 9th Circuit, which asked the Washington Court to answer this question:

What does “collapse” mean under Washington law in an insurance policy that insures “accidental direct physical loss involving collapse,” subject to the policy’s terms, conditions, exclusions, and other provisions, but does not define “collapse,” except to state that “collapse does not include settling, cracking, shrinking, bulging or expansion”?

In its discussion, the Washington Supreme Court found that the term collapse, as used in the insurance policy before it, was ambiguous. The court then adopted a definition of collapse, but the use of uncertain terms in its definition may lead to further ambiguity. The likely result will be yet more expensive litigation concerning older policies that contain similar collapse language.

The Queen Anne Park Condominium in Seattle was insured by a State Farm policy that covered the property for “accidental direct physical loss” unless excluded. The policy extended coverage to “any accidental direct physical loss to covered property involving collapse of a building or any part of a building caused by … hidden decay.” The coverage extension also stated that “collapse does not include settling, cracking, shrinking, bulging or expansion.” Other than this, the policy left the term collapse undefined.

In 2010, the Queen Anne Park Homeowners Association (HOA) presented State Farm with a claim under the policy for damage caused by hidden decay. The HOA’s engineer found hidden decay in some shear walls, and was of the opinion that the decay had substantially impaired the walls’ ability to resist lateral loads. The HOA believed that the areas of hidden decay suffered a substantial impairment of structural integrity and therefore, according to it, constituted a collapse that was covered by the policy. After State Farm denied the claim (the building remained standing), the HOA sued in federal court. The federal district court granted summary judgment to State Farm. The HOA appealed to the 9th Circuit, which certified the question of law to the Washington Supreme Court.

State Farm argued that collapse meant the structure’s complete falling to the ground, or at least a “significant falling or caving in that does not reach the ground.” The HOA promoted a much broader collapse definition, arguing that collapse meant “substantial impairment of structural integrity.” The HOA’s definition did not require an actual falling down or caving in of the structure. In fact, it did not require that the structure be dangerous or uninhabitable to be considered collapsed.

The Supreme Court decided that the term collapse in this insurance policy was ambiguous, meaning that it was subject to more than one reasonable interpretation. Without discussing the reasonableness of the alternative interpretations, the court found ambiguity by relying upon the diversity of definitions for collapse in judicial decisions across the country. The court noted that some courts have defined collapse as a falling down, falling together, or caving into an unorganized mass; others have defined it as substantial impairment of structural integrity; others as an imminent collapse that threatens the preservation of the structure or health and safety. Assuming that these interpretations were all reasonable, because other courts had adopted them, the court concluded that collapse therefore must be ambiguous.

The court referred to the established rule in Washington that undefined terms in an insurance policy must be interpreted according to the understanding of the average purchaser of insurance, and the terms should be given their plain, ordinary and popular meaning. Washington courts have traditionally then referred to standard English dictionaries for guidance as to the plain, ordinary and popular meaning of undefined terms. But the Supreme Court in Queen Anne Park cited to no dictionary definition and concluded that the undefined word collapse in an insurance policy is ambiguous “because it is susceptible to more than one reasonable interpretation, demonstrated by the range of reasonable definitions of ‘collapse’ adopted by various courts.” The court then adopted the HOA’s definition, finding it reasonable and preferable to State Farm’s definition, “because it comports with the common sense meaning of ‘collapse,’ which is evident from it having been adopted as the definition of ‘collapse’ by many courts across the country ….”

Having agreed with the HOA on the definition of collapse, and rejecting State Farm’s definition, the court acknowledged that the State Farm policy stated plainly that collapse had to mean something more than mere “settling, cracking, shrinking, bulging or expansion.” The court therefore concluded:

Considering the Policy as a whole, we conclude that “substantial impairment of structural integrity” means the substantial impairment of the structural integrity of all or part of a building that renders all or part of the building unfit for its function or unsafe and, in this case, means more than mere settling, cracking, shrinkage, bulging, or expansion.

The Queen Anne Park case provided the Supreme Court with an opportunity to clarify a contentious and confusing area of law. It responded by adopting a definition of collapse that includes the terms “substantial,” “impairment,” and “unfit for its function.” The court stopped short of discussing the meaning of these words, all of which can take on a wide range of meaning in scope or degree. Thus, the door may remain open for disagreement as to whether collapse has taken place, despite the court’s new definition. Fortunately, in recent years many insurers have added specific definitions of collapse to their policies, usually limited to a complete falling down of the structure.

The Queen Anne Park decision was not unanimous. Three of the court’s nine justices dissented, finding no ambiguity in the term collapse, based on dictionary definitions, and determining that “substantial impairment of structural integrity” is far removed from the ordinary meaning of collapse.