Termite Damage Isn’t Building Collapse for Purposes of First Party Property Coverage

The Kentucky Supreme Court recently found that an insurance company’s homeowners’ policy did not cover termite damage that did not result in the home’s collapse. The insured presented a claim for termite infestation that was discovered throughout the insured home which had damaged both wall paneling and flooring. In Thiel v. Kentucky Growers Insurance Co., 522 S.W.3d 198 (2017) the court concluded that the insured house had not collapsed under the policy definition.

Under the homeowners’ policy, the policy covered direct physical loss “involving the collapse of a building or part of a building caused by only the following: “. . . hidden insect or vermin decay.” The policy indicated that collapse did not mean settling, cracking, bulging, or expanding. The court applied a standard dictionary definition of “collapse” to mean “to break down or go to pieces suddenly, especially by falling in of sides; to cave in.” See, Niagara Fire Insurance Co. v. Curtsinger, 361 S.W.3d 762, 763 (Ky. 1962).

Nevertheless, the Kentucky Supreme Court found that the home had not collapsed within the meaning of the insurance policy. The court adhered to the clear and ambiguous wording of the policy and gave a plain and ordinary meaning to the term “collapse” in finding no coverage. In doing so, the court refused to adopt the more lenient majority rule in the country under which the structure may not be in imminent danger of collapse, provided that the damage would substantially impair the structural integrity of the building.