Conn. Supreme Court Finds Insurers Not Liable for Crumbling Foundations

Insurers are not liable for crumbling foundations caused by defective concrete unless the home is on the verge of collapse, the Connecticut Supreme Court ruled. The decision will likely amplify public pressure for a government solution.

Thousands of homes in northeastern Connecticut and western Massachusetts were built on foundations containing pyrrhotite, a mineral that causes concrete to slowly deteriorate as it is exposed to oxygen and water. Insurers have denied homeowners’ claims, arguing that policy language that covers the collapse of a structure does not include defective construction unless the building is literally falling down.

The Connecticut Supreme Court sided with insurers in three unanimous decisions released Tuesday. The court ruled that Liberty Insurance, Liberty Mutual and The Hartford are not liable because the insured homes were not in imminent danger of collapse.

In two of the cases, the Supreme Court answered certified questions from the U.S. District Court in disputes involving policies that did not exclude foundations, but did not define the term “collapse.” The high court answered by expanding on its 1987 ruling in Beach v. Middlesex Assurance Co. to find that “collapse” means that a building is in imminent danger of falling down and therefore unsafe for its intended purpose.

The policies also excluded coverage for defective foundations. The court ruled that the exclusions encompassed deteriorating basement walls, not just the footings under them.

“We, of course, recognize the seriousness of the crumbling foundations problem that confronts the plaintiffs in the present case, and we also acknowledge the gravity of the problem for so many other homeowners statewide,” the court said in Karas et al v. Liberty Insurance Corp. “Our sole task, however, is to construe the plaintiffs’ homeowners insurance policy as we would any other such contract, that is, in accordance with its terms as applied to the facts of the case.”

Connecticut lawmakers have been grappling with the crumbling foundations problem for years. State officials discovered that concrete produced from a quarry in Willington, Connecticut by J.J. Mottes Concrete in Stafford Springs contained pyrrhotite and the foundations were slowly deteriorating.

State officials believe 35,000 Connecticut homes were built with the suspect material from 1983 to 2015, when J.J. Mottes signed a consent agreement with the state and stopped using the quarry. The company is now defunct.

Deteriorating foundations have also been found in western Massachusetts and in the Canadian province of Quebec.

In 2017, the Connecticut state legislature set aside $133 million to create a captive insurance carrier — Connecticut Foundation Solutions Indemnity Co. — that pays up to $175,000 for repairs. The carrier does not pay to replace driveways and porches and homeowners must file a claim that was denied by their insurer in order to receive funding. State lawmakers also funded a low-interest loan program for repairs that aren’t covered by the captive insurer.

Michael Magaris, superintendent of the Foundation Solutions, said the carrier has received 1,198 claims, including 71 that were suspended because the homeowners had pending litigation against their insurers. He said he expects that those claimants will now contact his office to move their claims to active status.

Margaris said the captive replaced the foundations for 55 homes and expects to have replaced 90 by Christmas and more than 250 by the end of next year. But Foundation Solutions is not accepting any more applications from homeowners because it doesn’t have adequate funding.

Sens. Richard Blumenthal and Chris Murphy, both Connecticut Democrats, have introduced legislation to provide up to $20 million in funding to reimburse homeowners for money spent to prevent, repair and mitigate damage caused by concrete foundations containing pyrrhotite.

Margaris said the Foundation Solutions captive was designed to accept claims from Massachusetts if a funding source is established for those claims. He said an estimated 1,200 homes in Massachusetts have foundation problems because of pyrrhotite.

In the meantime, affected homeowners, as they wait for relief from the federal government, have found a reason to gripe about greedy insurance companies. The Connecticut Coalition Against Crumbling Foundations set up a Facebook page where the public an air its views on the subject.

“Perhaps insurance companies should be forced to refund all the premiums paid for their rewording fraudulent policies,” a user identified as Russell Newman wrote in reaction to news about the state Supreme Court’s ruling. “If your dwelling burns down , are they going to rebuild on a defective foundation? Why pay insurance?”

About the story: This April 11, 2017 file photo shows nuggets of the rust-colored mineral pyrrhotite, right, and a chunk of concrete containing the mineral that’s been removed from a crumbling basement, left, in Willington, Conn. (AP Photo/Susan Haigh, File)