In Tustin Field Gas & Food v. Mid-Century Ins. Co. (No. B268850, filed 7/3/17), a California appeals court ruled that a split in an underground storage tank, caused by the tank sitting on a rock for years, was not a covered “collapse” as a matter of law.
Tustin Field owned a gas station in Palm Springs. The installer of the underground storage tanks did not follow the manufacturer’s instructions to bury them in pea gravel or crushed rock. Instead, the installer just dug a hole, placed the tanks into that hole, and then covered them with “native soil” containing rocks, boulders and other debris.
The tanks were double-walled, steel with a fiberglass sheath. Sixteen years after installation, testing revealed that the fiberglass sheath on one tank was no longer intact. The tank was excavated and the fiberglass sheath was found to be cracked from the tank sitting on a nine-inch boulder. The insured paid to have the crack repaired and made a claim for the cost of excavating and repairing the tank.
The Mid-Century policy generally excluded collapse, but provided “Additional Coverage for Collapse” as follows:
“[Mid-Century] will pay for direct physical loss or damage to Covered Property, caused by a collapse of a building or any part of a building insured under this policy, if the collapse is caused by one or more of the following:… (b) Hidden decay;…(d) Weight of people or personal property;… (f) Use of defective material or methods in construction, remodeling or renovation if the collapse occurs during the course of the construction, remodeling or renovation. However, if the collapse occurs after construction, remodeling or renovation is complete and is caused in part by [an enumerated] cause of loss…, [Mid-Century] will pay for the loss or damage even if use of defective material or methods in construction, remodeling or renovation, contributes to the collapse.”
The subsection also specified that “Collapse does not include settling, cracking, shrinkage, bulging or expansion.”
Mid-Century denied coverage and in the following bad faith lawsuit, the trial court granted summary judgment to the insurer while denying the insured’s cross-motion for summary judgment.
The trial court concluded that there was no covered cause of loss because there had been no “collapse.” The court ruled that the insured had to show an “actual” collapse, but had failed to submit evidence that the tank “suffered a complete change in structure and lost its distinctive character as an underground storage tank.” The insured had shown, at most, that the tank was no longer usable under storage tank law because its outer sheath had been breached, but “a mere impairment of [the tank’s] structural integrity did not constitute an actual collapse.”
The appeals court affirmed. First, the court rejected the argument that if a structure is not usable it has necessarily collapsed. (Citing Sabella v. Wisler (1963) 59 Cal.2d 21 and Doheny West Homeowners’ Assn. v. American Guarantee & Liability Ins. Co. (1997) 60 Cal.App.4th 400.)
The Tustin Field court also rejected the argument that “substantial impairment of structural integrity” of a building constitutes collapse: “This is incorrect…. California law specifically holds to the contrary, at least where, as here, a policy excludes from collapse ‘settling’ and the like.” (Citing Doheny West, supra, and Stamm Theatres, Inc. v. Hartford Casualty Ins. Co. (2001) 93 Cal.App.4th 531.)
The Tustin Field court went on to reject a claim that ambiguity from the lack of a specific definition for collapse in the policy mandated interpretation in the policyholder’s favor, as well as rejecting the insured’s appeal to public policy.
The Tustin Field court distinguished Doheny West, supra, Stamm Theatres, supra, and Panico v. Truck Ins. Exchange (2001) 90 Cal.App.4th 1294, as all involving a broader meaning of collapse:
“[B]ecause the [Mid-Century] Policy excludes collapse from its definition of Covered Causes of Loss, and then creates a more limited ‘exception to the exception’ that re-extends coverage for collapse-related damage, but only ‘for direct physical loss or damage to Covered Property, caused by a collapse of a building or any part of a building insured under this policy, if the collapse is caused by one or more’ enumerated reasons. Because this revival of coverage for collapse does not include ‘risks of’ collapse (just collapse itself) and because the Policy nowhere covers damage ‘involving collapse,’ the broader definition of collapse discussed in Doheny West, Panico, and Stamm Theatres is inapplicable.”
The Tustin Field court also dismissed the insured’s use of expert testimony as inadmissible for the purpose of contract interpretation, and ruled that even if causation posed a factual dispute, it was not material to the result.
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