Court Upholds Insurer’s Refusal to Cover Carport Collapse From Weight of 2010 Blizzard
The winter of 2010 was memorable for the record amount of snow that it dumped on Maryland. For several days, Charm City businesses, courts and public transportation remained closed because of blizzard conditions. Many Maryland homeowners also remember the damage caused by the snow and ice – many roofs needed repair and some failed under the weight of the wintry weather.
An Anne Arundel couple’s attempt to have their insurer reimburse them under their homeowners’ insurance policy for the damage caused by the February 2010 collapse of their carport was stymied by Maryland’s Court of Special Appeals when it upheld their insurer’s refusal to pay their claim. State Farm Fire and Casualty Insurance (State Farm) denied the claim on the ground that the carport was not a building and that the policy only covered losses due to collapse of buildings.
Under more than a foot of snow and ice, Moira and Gregory Taylor’s carport collapsed. The Taylors had built the detached carport in 2007. Before construction, Mrs. Taylor had called her State Farm insurance agent to ask whether the carport would be covered under the policy. Taylor recollected that the agent said the carport would be covered. The 20×20 structure was built on an existing asphalt pad next to the house. It was not attached to the Taylor’s house. When the carport fell, it landed on the Taylors’ two cars, a snow blower and a power washer.
The Taylors’ insurance agent issued a check for $1250 to cover the cost of removing the carport. The check was issued from the agent’s discretionary funds and did not include a reservation of rights. The agent later said that the issuance of the check did not reflect a determination that the claim for the loss of the carport was covered. The agent also later said that she had no recollection of having a conversation with Ms. Taylor about the carport.
Because of the high number of claims, State Farm sent out a catastrophe team. Field representatives were instructed that losses due to collapse were covered only for buildings and that a building is a structure with a roof and at least three walls. As a result, State Farm denied the claim.
Mrs. Taylor asked the Maryland Insurance Administration (MIA) to investigate under the Maryland law that forbids insurers from engaging in unfair claim settlement practices. Insurers can not refuse to pay a claim for an arbitrary or capricious reason. An insurer acts arbitrarily or capriciously when it refuses to pay a claim “based on an unpredictable whim.” Insurers must also act in good faith in settling a first-party claim under a property and casualty insurance policy.
The People’s Insurance Counsel Division (PICD) decided to intervene on behalf of the Taylors. PICD is a unit within the Office of the Attorney General. It evaluates each complaint filed with the MIA by a consumer arising under a homeowners insurance policy. If it determines that the interests of insurance consumers may be affected by the resolution of the complaint, it intervenes and appears on behalf of insurance consumers before the MIA and the courts.
PICD’s expert witness said that, based on his experience handling thousands of homeowners insurance claims that the terms “structure” and “building” are synonymous. He said that, because of this, the Taylors’ claim should have been covered as a loss due to the collapse of a building. He also said that, in a review of homeowners insurance policies of about 10 insurers doing business in Maryland, one policy defined the term “building structure” to mean a “building with a roof and four walls.” The other nine policies did not define the term “building.”
However, one of State Farm’s expert witnesses concurred with the insurer’s decision to deny the claim for the loss of the carport, but countermanded the decision to deny the claim for the loss to the property located inside the carport. He concluded that the policy did not cover the loss of the carport because the carport was not a building.
MIA determined that State Farm’s decision had not “been shown to be arbitrary, capricious or lacking in good faith.”
PICD then filed a petition for judicial review of the decision in the Circuit Court for Baltimore City. The circuit court affirmed MIA. And, Maryland’s intermediate appellate court agreed, affirming the trial court’s decision.
PICD told the Court of Special Appeals that State Farm did not have a legal basis to deny the Taylors’ claim because their definition of the word “building” was not supported by case law or dictionary definitions or State Farm’s own past practices. PICD argued that the word “building” is plain and unambiguous and that it is synonymous with the word “structure.” It relied on a dictionary definition and also pointed out that the Anne Arundel County Code requires that carports have at least two open sides, which means that all carports in that county will be excluded from coverage under State Farm’s definition of the word “building.”
PICD also argued that the word “building” as used in the policy was susceptible of more than one meaning and, therefore, the policy should be construed in favor of consumers and against State Farm, as the drafter of the contract.
On the other hand, State Farm contended – among other things – that the policy language was plain and unambiguous and was properly read by State Farm as not covering the loss of the carport. State Farm argued that the word “building” under the policy is plain and unambiguous and means a structure with a roof and at least three walls. It relied on case law and dictionary definitions. As a result, State Farm said it was not acting in a capricious or arbitrary way or in a manner lacking good faith.
Agreeing with State Farm, the appellate court noted that there was substantial evidence to support the MIA’s decision.The court also said it agreed with State Farm’s interpretation of the language of its policy and would affirm on that basis. “The broad definition of the word ‘building’ urged by PICD plainly is at odds with how that word is used in the Policy,” the court responded, noting that the words “structure” and “building” were not used interchangeably in the policy.
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