eNotes: Liability – May 2022 – Maryland

SIGNIFICANT CASE SUMMARY

MD CASE SUMMARY

Denc v. Phila. Indem. Ins. Co.
United States Court of Appeals for the Fourth Circuit
2022 U.S. App. LEXIS 10443

Decided: April 18, 2022

The Fourth Circuit finds insurance coverage applies where policy fails to specifically preclude coverage.

Background

In a case grappling with a breach of contract allegation, the Fourth Circuit interpreted an insurance policy provision in accordance with the plain language of the provision and found in favor of the Plaintiff. Plaintiff, the owner of an apartment complex, sued his insurance provider, claiming Defendant breached the insurance policy by failing to cover a loss at the apartment complex. On the date of loss, there was a party held at the apartment complex. Party goers were jumping on the second-floor breezeway, which caused the breezeway to abruptly collapse. Defendant’s structural engineer concluded that long-term water intrusion into the apartment building caused the breezeway’s structural support to weaken such that it was unable to support the party goers. On this basis, Defendant denied coverage.

In the District Court, summary judgment on the breach of contract count was granted in favor of Plaintiff. Defendant appealed, arguing the Lower Court erred in finding that the loss resulted in an “abrupt collapse,” as defined by the insurance policy, and that the breezeway remained standing, making the policy unenforceable.

Holding

The Fourth Circuit held: (1) when a policy does not define a term such as “abrupt collapse,” the term will be construed against the insurance company; and (2) when a term such as “standing” is not defined, it will be given the plain meaning of the word. Defendant argued that because of the long-term water intrusion into the apartment building, the collapse was not abrupt and was caused by water damage. The Court was not persuaded and held the policy did not specifically exclude coverage in this circumstance, so the loss was covered. Defendant’s next argued that because the breezeway did not completely collapse, the policy could not be enforced. Again, the Court declined. The Court refused to interpret the word so narrowly where the insurance agreement did not define “standing.”

Questions about this case can be directed to Brandon James at (443) 641-0567 or bjames@tthlaw.com.