Alexander Bardis v. Kitty Stinson

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-3454-12T3

ALEXANDER BARDIS and
MONICA BARDIS, APPROVED FOR PUBLICATION

Plaintiffs-Appellants, February 19, 2016

v. APPELLATE DIVISION

KITTY STINSON, STINSON
CLAIMS SERVICES, and
CUMBERLAND INSURANCE GROUP,

Defendants-Respondents.

_____________________________________________________________

Argued December 4, 2013 – Decided October 8, 2014

Before Judges Sapp-Peterson, Maven and
Hoffman.

On appeal from the Superior Court of New
Jersey, Law Division, Monmouth County, Docket
No. L-5738-11.

Constantine Bardis argued the cause for
appellants (Law Offices of Constantine Bardis,
LLC, attorneys for appellants; Mr. Bardis, of
counsel and on the brief).

Jacqueline Cuozzo argued the cause for
respondents (Methfessel & Werbel, attorneys
for respondents; Ms. Cuozzo and Marc L.
Dembling, on the brief).

The opinion of the court was delivered by

MAVEN, J.A.D.
 Plaintiffs Alexander Bardis and Monica Bardis appeal from

the January 25, 2013 Law Division order granting summary judgment

in favor of defendants Kitty Stinson, Stinson Claims Services

(collectively Stinson), and Cumberland Insurance Group

(Cumberland) (collectively Defendants). The trial court found

there was no coverage under plaintiffs' homeowner's insurance

policy for the collapsed basement wall and other damages to their

home allegedly caused by "hidden decay." The court also rejected

plaintiffs' argument that "hidden defects" allegedly resulting

from the faulty construction meant the same as "hidden decay," and

were thereby covered losses under the policy. We find a question

of fact regarding causation, and ultimately coverage, and

therefore, reverse and remand.

I.

We view the facts and all reasonable inferences therefrom in

the light most favorable to the party against whom summary judgment

was entered. Brill v. Guardian Life Ins. Co. of Am., 142 N.J.

520, 540 (1995). Plaintiffs are the owners and residents of a

home insured by Cumberland since 2008. The policy for general

liability and commercial dwelling insurance, provided coverage for

"direct physical" losses caused by, among other things, damage to

a building caused by the weight of ice, sleet or snow. A

supplemental provision provided further coverage for the "collapse

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of a building or any structural part of a building that ensues"

as a result of "hidden decay, unless such decay is known to an

insured prior to the collapse." (Italicized in original) The

supplemental provision also provided coverage for the collapse of

a building caused by the "[u]se of defective material or methods

in construction or repair if the collapse occurs during the

construction or repair."

On December 26, 2009, the right basement wall in plaintiffs'

old, single-family home collapsed. The basement had been added

to the home approximately twenty years earlier. Plaintiffs filed

a property loss claim with Cumberland which hired Stinson, an

independent insurance adjuster, to determine whether plaintiffs'

insurance policy covered the damage to their property. In a letter

dated January 19, 2010, Stinson informed plaintiffs that their

loss was not the result of a peril or cause of loss covered by

their policy. The claim was specifically declined because "the

damages sustained are a result of surface and subsurface ground

water, weight of ice, sleet, snow and collapse." The letter

referred to the relevant portion of the policy that sets forth the

exclusions upon which the denial was based. "Section ID, Losses

Not Insured, Paragraph 14" reads:

WEIGHT OF ICE SLEET, OR SNOW, AND RELATED
DAMAGE, AND COLLAPSE EXCLUSION

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 Damage to a . . . foundation . . . retaining
wall . . . caused by:

A. Freezing, thawing, pressure or weight of
ice, sleet or snow.

B. Collapse, other than collapse of a building
or any structural part of a building.

Stinson based its decision, in part, on the investigation of

Sinan S. Jawad, a structural engineer. Jawad inspected plaintiffs'

property on January 5, 2010. In his report, he noted there had

been "a significant rain storm and melting snow in the region on

the loss date." He defined hydrostatic pressure as "the pressure

of the soil and the water in the soil on the wall." The amount

of pressure placed on a structure depends upon the type of soil

present, as well as on the amount of water in the soil. Jawad

opined that "hydrostatic pressure, water, damaged the wall." With

respect to the structure of the property, Jawad reported that the

basement had been added years after the original construction, and

built over the crawl space. He noted the block walls used to

construct the basement are rarely used in modern construction

because they are prone to strength and water infiltration problems.

Further, the block walls are not strong in resisting hydrostatic

pressure. He also noted the basement was built without the

required underpinnings, which would violate present-day

construction standards.

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 Plaintiffs retained structural engineer Michael Pierce to

conduct a preliminary visual inspection. Pierce conducted his

inspection on July 26, 2010, after which he concluded as follows:

The collapse revealed that the
construction of the masonry sidewall consisted
of a concrete masonry unit foundation wall
"sistered" within the basement and alongside
a shallow bearing wall, which directly
supported the floor platform. It appears that
the interior "sister wall" was installed to
form the basement space after original
construction was completed. A masonry chimney
is located adjacent to the collapsed section
of wall and the chimney foundation appeared
to bear [sic] at the approximate level of the
shallow outer foundation wall.

It is my professional opinion within a
reasonable degree of engineering certainty
that the cause of the collapse was a lateral
bending failure due to excessive horizontal
loads. The original, shallow foundation wall,
the footing of the adjacent chimney, and
retained soil below the shallow wall, applied
a surcharge loading to the sister wall. The
excessive loading caused lateral displacement
of the sister wall, which undermined the
original shallow masonry foundation.

On December 14, 2011, plaintiffs filed a complaint in the Law

Division, alleging the basement wall collapsed due to hidden decay

and chimney weight deterioration causing $175,000 in damages.

Plaintiffs further claimed their insurance policy expressly

covered the cost of damage resulting from "hidden decay."

Plaintiffs demanded judgment against defendants in that amount,

"with interest and costs of suit." Defendants filed an answer on

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A-3454-12T3
January 11, 2012. They asserted, among other things, that

plaintiffs' claim "is barred because the loss in question is

excluded from the policy of insurance."

Plaintiffs and defendants moved for summary judgment.

Plaintiffs also moved to strike Jawad's report as a net opinion.

On January 25, 2013, the court ruled on the motions. The trial

court granted plaintiffs' motion to strike Jawad's report and then

addressed defendant's motion.

The court then issued an oral decision, granting summary

judgment in favor of defendants. The court found that plaintiffs'

sole support for their argument that "hidden decay" caused the

collapse, was defendants' expert testimony, which had been

stricken. The court found plaintiff provided no other evidence

that suggests the collapse was caused by decay or erosion.

The court also rejected plaintiffs' argument to interpret the

term 'hidden decay' to include hidden construction defects. The

court found the plain meaning of the term "decay" is not the same

as "defect." Further, the policy's failure to define the term

"decay" did not render it an ambiguous term. Moreover, the court

found that neither expert attributed the cause of the collapse to

decay. Instead, both experts indicated that the collapse "was

allegedly caused by defective construction of the wall and

foundation together with hydrostatic pressure and the property's

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shallow masonry chimney foundation." The policy provided that

coverage will only extend to collapses due to specific listed

sources, none of which is "soil and hydrostatic pressure."

Finally, the court found the policy specifically provided for

coverage of damages caused "by the use of defective material or

methods of construction, if the collapse occurs during

construction or repair." The court determined that the

construction occurred before the collapse, and therefore, the

collapse is not covered by the collapse provision. This appeal

followed.

We apply a de novo standard of review when evaluating whether

summary judgment was proper. Brill, supra, 142 N.J. at 540. As

does the motion judge, we first decide if there is a genuine issue

of material fact, and if none, whether the moving party is entitled

to judgment as a matter of law. Ibid.; Prudential Prop. Cas. Ins.

Co. v. Boylan, 307 N.J. Super. 162, 167 (App. Div. 1998); R. 4:46-

2(c).

Plaintiffs argue that the wall's collapse after standing for

so long is evidence that the wall gradually declined in strength

over the twenty years since its construction, consistent with

hidden decay, a covered loss. Although the policy does not define

"hidden decay" plaintiffs contend the court erred by interpreting

the term too narrowly, to exclude hidden construction defects, and

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A-3454-12T3
by refusing to accord the plain and ordinary meaning of the term.

Plaintiffs contend that by doing so, the judge improvidently

decided issues of material fact, rather than restricting his

decision to whether such issues exist. We agree.

II.

We start our analysis by reference to well-settled principles

of insurance law. As a threshold matter, the interpretation of

an insurance contract is a question of law, Polarome Int'l, Inc.

v. Greenwich Ins. Co., 404 N.J. Super. 241, 260 (App. Div. 2008),

certif. denied, 199 N.J. 133 (2009), which "we decide independent

of the trial court's conclusions." Simonetti v. Selective Ins.

Co., 372 N.J. Super. 421, 428 (App. Div. 2004).

When interpreting the contract, we "examine the plain

language of the policy and, if the terms are clear, they 'are to

be given their plain, ordinary meaning.'" Pizzullo v. N.J. Mfrs.

Ins. Co., 196 N.J. 251, 270 (2008) (quoting Zacarias v. Allstate

Ins. Co., 168 N.J. 590, 595 (2001)). However, where an ambiguity

exists, it must be resolved against the insurer. DiOrio v. New

Jersey Manufacturers Ins. Company, 79 N.J. 257, 269 (1979).

If the controlling language of the policy will support two

meanings, one favorable to the insurer and one favorable to the

insured, the interpretation supporting coverage will be applied.

Corcoran v. Hartford Fire Ins. Co., 132 N.J. Super. 234, 243 (App.

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Div. 1975). Yet, an insurance policy is not ambiguous merely

because two conflicting interpretations have been offered by the

litigants. Rosario v. Haywood, 351 N.J. Super. 521, 530-531 (App.

Div. 2002) (citing Powell v. Alemaz, Inc., 335 N.J. Super. 33, 44

(App. Div. 2000). A genuine ambiguity exists when the "phrasing

of the policy is so confusing that the average policyholder cannot

make out the boundaries of coverage." Lee v. General Accident

Ins. Co., 337 N.J. Super. 509, 513 (App. Div. 2001).

Even if a particular phrase or term is capable of being

interpreted in the manner sought by the insurer, "where another

interpretation favorable to the insured reasonably can be made

that construction must be applied." Ellmex Constr. Co., Inc. v.

Republic Ins. Co., 202 N.J. Super. 195, 204 (App. Div. 1985),

certif. denied, 103 N.J. 453 (1986). In this regard, coverage

clauses should be interpreted liberally, whereas those of

exclusion should be strictly construed. Butler v. Bonner &

Barnewall, Inc., 56 N.J. 567, 576 (1970); Ellmex Constr. Co.,

Inc., supra, 202 N.J. Super. at 205. Finally, our analysis also

requires that any interpretation "fulfill the expectations of the

parties." Passaic Valley Sewerage Com'rs v. St. Paul Fire and

Marine Ins. Co., 206 N.J. 596, 608 (2011).

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A-3454-12T3
 III.

The question presented here is whether the basement collapse

was caused by "hidden decay," and if so, do any policy provisions

apply that would except or exclude coverage under the facts of

this case. "Section 1B – Supplemental Coverage, Paragraph 2"

provides coverage in the event of a collapse, and reads

Coverage is extended to cover the collapse of
a building or any structural part of a
building that ensues only as a consequences
of the following:

. . . .

B. Hidden decay, unless such decay is known
to an insured prior to the collapse.

. . . .

F. Use of defective material or methods of
construction or repair if the collapse occurs
during the construction or repair.

[(Italicized in the original).]

The policy does not define "hidden defects" or "hidden decay."

Plaintiffs argue the term "hidden decay," given its "plain

and ordinary meaning, encompasses the cause of the collapse.

Merriam-Webster's Dictionary1 defines "decay" as follows:

1) to decline from a sound or prosperous
condition

1
MERRIAM WEBSTER DICTIONARY, http://www.merriam-
webster.com/dictionary/decay. (Last visited September 12, 2014.)

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A-3454-12T3
 2) to decrease usually gradually in size,
quantity, activity, or force

3) to fall into ruin

4) to decline in health, strength, or
vigor

5) to undergo decomposition

Our courts endorse the use of dictionaries or thesauruses to

determine the ordinary meaning of words in insurance policies.

E.g., Boddy v. Cigna Prop. & Cas. Cos., 334 N.J. Super. 649, 657

(App. Div. 2000) (explaining that a thesaurus can help a court to

ascertain the ordinary meaning of a word). Because the

Merriam-Webster definition for decay suggested by plaintiffs

encompasses a gradual decline in strength, the court should also

define hidden decay as a gradual decline in strength to give it

its ordinary meaning. Longobardi v. Chubb Ins. Co., 121 N.J. 530,

537 (1990).

This approach comports with our principle of construing

insurance contracts according to the reasonable expectations of

the insured. As we explained in Bromfeld v. Harleysville Ins.

Co., 298 N.J. Super. 62 (App. Div. 1997), a trial court should

consider the reasonable expectations of the insured in determining

coverage. Id. at 78. This is so even if the court finds that a

policy does not specifically insure the loss. Ibid. The court

should also consider "whether the reasonable expectations of the

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insureds is that their homeowner's policy covers them for such a

catastrophe." Ibid. Arguably, plaintiffs could have reasonably

expected that their homeowner's insurance policy would cover a

gradual decline in strength of their basement wall, followed by

its sudden collapse, after it stood for over twenty years.

A careful review of the record indicates support for

plaintiffs' claim that a gradual decline in strength within the

walls, or "hidden decay" caused the loss. Viewing the evidence

in the light most favorable to plaintiffs, it suggests that the

collapsed wall gradually declined in strength. The basement was

constructed approximately twenty years before the wall collapsed.

Pierce opined that the wall's collapse was caused by a "lateral

bending failure due to excessive horizontal loads." He explained

that "excessive loading caused lateral displacement of the sister

wall, which undermined the original shallow masonry foundation."

The trial court found that because the expert evidence

established that the wall did not collapse during construction,

even though improper construction methods were used years earlier,

the loss was excluded from coverage, consequently no genuine issue

of material fact existed. We disagree with that premise.

In Bromfeld, we considered a homeowner's insurance policy

containing identical language to the one at bar. Additionally,

the facts of that case are strikingly similar to the facts in the

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present case. There, the plaintiffs-insureds discovered that

their basement wall had collapsed after a rainstorm that occurred

while seven inches of snow covered the ground. Bromfeld, supra,

298 N.J. Super. at 65. Plaintiffs retained an expert who testified

in his deposition that:

[T]he wall collapsed due to the additional
loads applied eccentrically to the foundation
wall due to the installation of the wood deck
combined with the unusually high snow/ice
loads coupled with wind. The wall collapsed
catastrophically due to the lack of any
available tensile bond strength of the
interior shell of the masonry.

[Ibid.]

The plaintiffs' expert also prepared a report that further

explained how the recent addition of a deck, which caught the

snow, magnified existing structural problems with the basement

wall, causing it to collapse. Id. at 65-66. In sum, the

plaintiffs' expert opined that the basement collapsed for two

reasons: (1) "improper construction methods," Id. at 71; and (2)

"the recent construction of a deck [that] transmitted the weight

of ice and snow onto the house frame immediately above the

foundation, and that pressure upon the exterior face of the wall."

Id. at 73.

As in the case at bar, defendants in Bromfeld argued that the

policy did not provide coverage because the collapse was caused

by improper construction of the deck. Ibid. In relevant part,

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we rejected that argument, explaining that, "if the actual collapse

was caused by the weight of ice or snow, the [snow collapse

provision] would appear to cover plaintiffs." We explained that

the actual cause of loss constituted a jury question. Ibid.

By analogy, here, the actual cause of loss could have been

covered, as hidden decay, or it could have been a loss specifically

excluded from coverage, improper construction methods. Following

the rationale in Bromfeld, the fact that plaintiffs' basement wall

was built using improper construction methods twenty years ago

should not have ended the inquiry as to the existence of a genuine

issue of material fact.

While plaintiffs' theory and interpretation of the term

"hidden decay" may not fall squarely within the covered collapses

of a building, it also does not fall within any exclusion or

exceptions to a peril insured against. Thus, if the collapse was

due to poor or defective construction methods used to construct

the basement foundation wall system combined with the factor of

twenty years of hydrostatic pressure and excessive loads upon the

improperly supported foundation walls, then plaintiffs may be

covered.

"The natural assumption of a homeowner when he or she

purchases a homeowner's policy is to assume that he or she is

covered by a comprehensive policy that will protect him or her

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A-3454-12T3
from an unexpected event, such as a basement collapse." Ibid. at

74; see Campbell v. Norfolk & Dedham Mut. Fire, 682 A.2d 933 (R.I.

1996) (finding a material issue of fact as to whether collapse of

portion of basement wall was covered under homeowner's policy

based upon ambiguity of material terms employed in homeowner's

policy, where ordinary purchaser of policy could have reasonably

understood its provisions as insuring against such collapse, even

if exclusion required that any loss to foundation result from

complete collapse of building).

Certainly, a reasonable jury could infer from Pierce's

testimony that the continuous hydrostatic pressure upon the soil

around the home caused the wall to collapse at its weak point,

where the prior construction joined the masonry chimney to the

shallow foundation wall. The jury could also conclude that the

wall gradually weakened or decayed before collapsing.

We agree with our dissenting colleague that "one cannot force

a square peg in a round hole;" however, because the term "hidden

decay" was not defined in defendant's policy, it represents neither

a square peg nor a round hole. By not defining the term, defendant

failed to seize the opportunity to clearly and precisely delineate

the parameters of this coverage. The effect of the motion judge's

decision was to write a lesser policy than the one plaintiffs

purchased.

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 Moreover, we note the motion judge did not address plaintiff's

reasonable expectation argument. "The fundamental principle of

insurance law is to fulfill the objectively reasonable

expectations of the parties." Werner Industries, Inc. v. First

State Ins. Co., 112 N.J. 30, 35-36 (1988). Our Supreme Court has

described the general rule of construction in searching for the

reasonable expectations of the insured as follows:

[I]nsurance policies are complex contracts of
adhesion, prepared by the insurer, not subject
to negotiation, in the case of the average
person, as to terms and provisions and quite
unintelligible to the insured even were he to
attempt to read and understand their
unfamiliar and technical language and awkward
and unclear arrangement . . . . We have
stressed, among other things, the aim that
average purchasers of insurance are entitled
to the broad measure of protection necessary
to fulfill their reasonable expectations; that
it is the insurer's burden to obtain, through
its representatives, all information
pertinent to the risk and the desired coverage
before the contract is issued; and that it is
likewise its obligation to make policy
provisions, especially those relating to
coverage, exclusions and vital conditions,
plain, clear and prominent to the lay[person].

[Harr v. Allstate Ins. Co., 54 N.J. 287, 303-
304 (1969).]

Absent unusual circumstances not present here, we cannot imagine

a homeowner, who has purchased homeowners insurance, who would not

expect the policy to cover a basement collapse. See Bromfield,

supra, 298 N.J. Super. at 74.

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 As noted, where the insured's loss can be viewed in two ways,

basic principles of insurance law instruct us to interpret coverage

provisions broadly, to construe exclusions and limitations

narrowly, and require that we view this loss in the manner that

brings it within the policy's coverage. E.g., Progressive Cas.

Ins. Co. v. Hurley, 166 N.J. 260, 272-74 (2001) (citation omitted).

And to the extent the policy terms at issue here are ambiguous,

long-accepted principles of interpretation applicable to insurance

contracts require us to construe this policy language against the

drafter, in favor of the insured, and in accordance with the

insured's reasonable expectations. See, e.g., Gibson, supra, 158

N.J. at 669-71. The evidence, as viewed at summary judgment,

should be construed in favor of coverage under the terms of the

policy. A genuine issue of material fact is presented as to the

cause of the collapse and the application of the insurance policy.

As there is a bonafide dispute as to the cause of the

collapse, that issue must be resolved by a jury. Simonetti, supra,

372 N.J. Super. at 432 (finding factual question existed as to

whether rainstorm caused some or all of damage to plaintiffs' home

and stating that issues of causation are for jury to resolve).

Thereafter, it will be up to the trial court to interpret the

policy, and, if necessary, the reasonable expectations of the

insureds (plaintiffs). Bromfeld, supra, 298 N.J. Super. at 79.

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Accordingly, we reverse the grant of summary judgment in favor of

defendants and remand for further proceedings consistent with this

opinion.

Reversed and remanded. We do not retain jurisdiction.

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__________________________________________

SAPP-PETERSON, P.J.A.D., dissenting

There is no ambiguity in the terms of the commercial dwelling

policy issued to plaintiffs. As such, defendants properly denied

plaintiffs' claim for first party insurance benefits arising out

of a basement wall collapse. I respectfully dissent, substantially

for the reasons expressed by Judge David Francis Bauman in his

January 25, 2013 oral opinion. I add the following brief comments.

Judge Bauman reasoned, "the plain meaning of the term 'decay'

is not the same as the plain meaning of the term 'defect.'"

Plaintiffs' expert, Michael Pierce opined:

[T]he cause of the collapse was a lateral
bending failure due to excessive horizontal
loads. The original, shallow foundation wall,
the footing of the adjacent chimney, and
retained soil below the shallow wall, applied
a surcharge loading to the sister wall. The
excessive loading caused lateral displacement
of the sister wall, which undermined the
original shallow masonry foundation.

When later deposed, Pierce explained that "this foundation

wall had hidden defects that would not have been immediately

obvious to somebody doing an inspection inside the basement prior

to the collapse." He identified the hidden defects as the "shallow

exterior," meaning "the crawl space foundation." He expressed:

If in fact it was originally constructed
as a crawl space, it would have had a shallow
exterior foundation wall that only went down
to possibly below frost depth. I suspect that
 a basement was constructed at this house at a
later time, and instead of extending the
outside foundation wall to the bottom level
of the basement floor, they simply constructed
a sister wall on the interior side of the
exterior wall. So the exterior wall was not
supported at the base of the foundation wall
that would be the basement foundation wall.

He opined further that this manner of construction "certainly

would not be the proper way of constructing a basement foundation

wall system" and testified there were "excessive horizontal loads

[coming] from soil pressure on the wall in addition to the

surcharge load from the chimney."

Neither in his expert report nor during his deposition did

Pierce attribute the cause of the collapse to "decay" much less

"hidden decay." Moreover, the opinion on the cause of the

building's collapse as expressed by defendants' expert, whose

report, plaintiffs successfully moved to bar, also did not

attribute the building's collapse to "hidden decay." A "defect"

connotes imperfection from the outset, while "decay" connotes a

decline from a condition that was originally sound. One cannot

force a square peg into a round hole.

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