Queen Anne Park Homeowners Ass'n v. State Farm Fire & Casualty Co.

González, J.

¶1 The Ninth Circuit has asked this court to answer:

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?”

Queen Anne Park Homeowners Ass’n v. State Farm Fire & Cas. Co., 763 F.3d 1232, 1235 (9th Cir. 2014). Rather than adopt a fixed definition of “collapse” for all insurance contracts, we apply Washington law to interpret the ambiguous term “collapse” in the insurance contract before the Ninth Circuit. We conclude that in the insurance contract, “collapse” means “substantial impairment of structural integrity.” “Substantial impairment of structural integrity” means substantial impairment of the structural integrity of a building or part of a building that renders such building or part of a building unfit for its function or unsafe and, under the clear language of the insurance policy here, must be more than mere settling, cracking, shrinkage, bulging, or expansion.

Facts

¶2 Queen Anne Park (QAP) is a two-building condominium in Seattle that was insured under a State Farm Fire and Casualty Company policy (Policy). The Policy was in effect from October 18, 1992 to October 18, 1998.

¶3 The Policy covered “accidental direct physical loss” to insured property, unless the loss was excluded or limited. *488Appellant’s Excerpts of Rs. (ER) at 136, 138-40. An “[e]x-tension of [c] overage” covered “any accidental direct physical loss to covered property involving collapse of a building or any part of a building caused only by one or more of the following: ... (2) hidden decay.” Id. at 141-42. The coverage extension also provided that “[c]ollapse does not include settling, cracking, shrinking, bulging or expansion.” Id. at 142. Neither the Policy nor its extensions otherwise defined the term “collapse.”

¶4 The QAP homeowners’ association (HOA) filed a claim with State Farm in 2010, claiming that QAP had collapsed, which the HOA interpreted to mean “a substantial impairment of the structural integrity of any portion or component of the building.” Appellee’s Suppl. Excerpts of Rs. at 5. The HOA claimed that QAP had “several areas of hidden decay” and that the HOA“believe[d] that these and other areas suffered a substantial impairment of structural integrity during [the] policy periods.” Id. The HOA’s claim was based on an HOA engineer finding hidden decay in some shear walls (plywood/gypsum sheathings), which he opined had substantially impaired the walls’ ability to resist lateral loads. ER at 119-22. After conducting its own inspections, in 2011, State Farm denied the HOA’s claim and concluded that “[a] loss involving collapse” had “not commence [d] in any policy term” and that various exclusions to coverage applied. Id. at 218 (emphasis omitted).

¶5 The HOA filed suit in the Western District of Washington, seeking declaratory relief and damages for breach of contract. The Western District of Washington granted summary judgment in favor of State Farm. The HOA appealed to the Ninth Circuit. The Ninth Circuit certified a question of state law to this court. Queen Anne Park Homeowners Ass’n, 763 F.3d at 1235.

Analysis

¶6 RCW 2.60.020 authorizes this court to accept certified questions from federal courts. “Certified questions *489from federal court are questions of law that we review de novo." Bradburn v. N. Cent. Reg’l Library Dist., 168 Wn.2d 789, 799, 231 P.3d 166 (2010) (citing In re F5 Networks, Inc., 166 Wn.2d 229, 236, 207 P.3d 433 (2009)). “We do not consider the legal issues in the abstract but instead consider them based on the certified record that the federal court provides ” Id. (citing RCW 2.60.030(2); St. Paul Fire & Marine Ins. Co. v. Onvia, Inc., 165 Wn.2d 122, 126, 196 P.3d 664 (2008)). “Construction of an insurance policy is a question of law for the courts, the policy is construed as a whole, and the policy ‘should be given a fair, reasonable, and sensible construction as would be given to the contract by the average person purchasing insurance.’ ” Queen City Farms, Inc. v. Cent. Nat'l Ins. Co. of Omaha, 126 Wn.2d 50, 65, 882 P.2d 703 (1994) (internal quotation marks omitted) (quoting Grange Ins. Co. v. Brosseau, 113 Wn.2d 91, 95, 776 P.2d 123 (1989)).

¶7 “ ‘[Contractual terms are ambiguous if they are subject to more than one reasonable interpretation when applied to a particular set of facts.’ ” Quadrant Corp. v. Am. States Ins. Co., 154 Wn.2d 165, 181, 110 P.3d 733 (2005) (quoting Madison Constr. Co. v. Harleysville Mut. Ins. Co., 557 Pa. 595, 606, 735 A.2d 100 (1999)). We find that the term “collapse” in the Policy is ambiguous because it is susceptible to more than one reasonable interpretation.

¶8 Illustrative of this is our opinion in Sprague v. Safeco Insurance Co. of America, 174 Wn.2d 524, 276 P.3d 1270 (2012), where we were asked to define the term “collapse” in Washington insurance policies. While the court decided the case on different grounds, both the dissent and the concurrence proposed different definitions of “collapse.” Id. This alone demonstrates that “collapse” is an ambiguous term. The division of our court is reflected in courts across the country that have adopted different but reasonable definitions of “collapse” in insurance policies. See, e.g., Olmstead v. Lumbermens Mut. Ins. Co., 22 Ohio St. 2d 212, 259 N.E.2d 123, 126 (1970) (defining “collapse” as “a falling *490down, falling together, or caving into an unorganized mass”); Am. Concept Ins. Co. v. Jones, 935 F. Supp. 1220, 1227 (D. Utah 1996) (defining “collapse” as substantial impairment of structural integrity); Buczek v. Cont'l Cas. Ins. Co., 378 F.3d 284, 290 (3d Cir. 2004) (defining “collapse” as substantial impairment of structural integrity that “ ‘connotes imminent collapse threatening the preservation of the building as a structure or . . . health and safety5 ” (quoting Fantis Foods, Inc. v. N. River Ins. Co., 332 N.J. Super. 250, 260, 753 A.2d 176 (App. Div. 2000))). An undefined term “collapse” in an insurance policy is an ambiguous term because it is susceptible to more than one reasonable interpretation, demonstrated by the range of reasonable definitions of “collapse” adopted by various courts.1

¶9 Undefined terms in an insurance policy “are to be interpreted in accord with the understanding of the average purchaser of insurance, and the terms are to be *491given their plain, ordinary and popular meaning.” Queen City Farms, Inc., 126 Wn.2d at 77. Importantly,

[i]t is Hornbook law that where a clause in an insurance policy is ambiguous, the meaning and construction most favorable to the insured must be applied, even though the insurer may have intended another meaning. Jeffries v. General Cas. Co. of America, 46 Wn.2d 543, 283 P.2d 128 (1955); Kane v. Order of United Commercial Travelers of America, 3 Wn.2d 355, 100 P.2d 1036 (1940). Ambiguous exclusionary clauses, particularly, should be construed in the manner most favorable to the insured. Brown v. Underwriters at Lloyd’s, 53 Wn.2d 142, 332 P.2d 228 (1958); Murray v. Western Pac. Ins. Co., 2 Wn. App. 985, 472 P.2d 611 (1970).

Dairyland Ins. Co. v. Ward, 83 Wn.2d 353, 358, 517 P.2d 966 (1974). The definition of “collapse” requested by the insured — substantial impairment of structural integrity — is a reasonable definition because it comports with the commonsense meaning of “collapse,” which is evident from it having been adopted as the definition of “collapse” by many courts across the country and used by State Farm in at least one other case. Mercer Place Condo. Ass’n v. State Farm Fire & Cas. Co., 104 Wn. App. 597, 600, 17 P.3d 626 (2000) (State Farm agreed with the insured that the word “collapse” in the policy in that case meant “ ‘substantial impairment of structural integrity.’ ”); see, e.g., Am. Concept Ins. Co., 935 F. Supp. at 1227-28; Beach v. Middlesex Mut. Assurance Co., 205 Conn. 246, 252-53, 532 A.2d 1297 (1987).

¶10 Here the insured requests that “collapse” be interpreted to mean “substantial impairment of structural integrity.” We largely agree. Of the definitions offered to us, substantial impairment of structural integrity is both reasonable and the most favorable to the insured. Based on the language of the Policy, however, we caution that “collapse” must mean something more than mere “settling, cracking, shrinking, bulging or expansion.” ER at 142. Also, we note that “structural integrity” of a building means a building’s ability to remain upright and “substantial impairment” *492means a severe impairment. Taken together, “substantial impairment” of “structural integrity” means an impairment so severe as to materially impair a building’s ability to remain upright.2 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.

Conclusion

¶11 “Collapse” in the Policy means the substantial impairment of structural integrity of a building or part of a building that renders such building or part of a building unfit for its function or unsafe in a manner that is more than mere settling, cracking, shrinkage, bulging, or expansion.

Johnson, Owens, Stephens, Wiggins, and Yu, JJ., concur.

According to the dissent, “ ‘[clollapse’ is not a vague term and is not ambiguous.” Dissent at 493. The term “collapse” is ambiguous because it is “ ‘subject to more than one reasonable interpretation when applied to a particular set of facts.’ ” Quadrant Corp., 154 Wn.2d at 181 (quoting Madison Constr. Co., 557 Pa. at 606). For example, while State Farm argues that the term “collapse” is “clear and unambiguous” and “the average purchaser would not think that the State Farm policy is ambiguous,” State Farm itself does not offer an exact definition of “collapse,” which supports the conclusion that the term is ambiguous. Br. of Appellee at 16, 36. State Farm argues that “the average purchaser of insurance would define ‘collapse’ to include something less than total destruction: a structure’s significant falling or caving, albeit not to the ground, or perhaps imminent falling or caving or similar damage,” id. at 6-7, but also offers a definition without imminency, id. at 18 (“[T]he average purchaser of insurance would understand — not only rubble-on-the ground, but also a significant falling or caving in that does not reach the ground.”). Also, as the dissent recognizes, circuits and courts do not agree on a single definition of “collapse,” instead defining “ ‘collapse’ in three major ways — actual collapse, imminent collapse, and substantial impairment of structural integrity.” Dissent at 494 (footnote omitted). Furthermore, not only does the dissent disagree with this opinion, the dissent and concurrence in Sprague provided two different, reasonable interpretations of “collapse” both supported by definitions of “collapse” in Webster’s Third New International Dictionary. Sprague, 174 Wn.2d at 532-38. Finally, we note that the Ninth Circuit asked us to define “collapse.” Queen Anne Park Homeowners Ass'n, 763 F.3d at 1235. If “collapse” was unambiguous, the Ninth Circuit would not have needed to certify that question to us. The dissent fails to show that the term “collapse” is not ambiguous.

We disagree that “substantial impairment of structural integrity” may be interpreted so loosely as to convert an insurance policy “into a maintenance agreement by allowing recovery for damage which, while substantial, does not threaten collapse.” Ocean Winds Council of Co-Owners, Inc. v. Auto-Owner Ins. Co., 350 S.C. 268, 271, 565 S.E.2d 306 (2002).