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By Seth V. Jackson
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For most of the Northeast, this winter was off to a slow start in terms of snowfall. That was, however, until winter storm Juno paralyzed much of the Eastern Corridor and resulted in eye-popping, 3-foot-plus snow totals in some heavily populated areas. With more precipitation in the forecast, the threat of snow load roof collapse claims has suddenly become very real. This article identifies a list of considerations for adjusting such claims that may arise from this historic snowstorm or other storms that may hit before the winter is done.

1. Has a Covered Collapse Occurred?

As in any adjustment, the threshold question is whether there has been a covered loss. Typically, when a roof collapses under the weight of snow, the cost of repairing the roof and any related damage is covered under the terms and conditions of a property policy. However, there may be instances where an insured seeks coverage for repair costs for roofs that have not collapsed or costs to prevent “imminent” collapse related to the accumulation of heavy snow.

Historically, collapse was not a defined term in policies, leading to disputes between insurers and insureds regarding the scope of collapse coverage. See e.g., Dreiblatt v. St. Paul Fire & Marine Insurance Co., 264 F.3d 126 (1st Cir. 2001) (where the insured suffered roof damage following a heavy snowstorm and “collapse” was not defined in the subject policy, holding that no “collapse” had occurred because there was not a “noticeably altered physical appearance” (i.e., sagging or support structure damage)).

Today, “collapse” is typically defined in property policies, eliminating some of the uncertainty regarding coverage. In many policies, “collapse” means “an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose.” Such policies do not provide coverage if the “collapse” was caused by the “specified causes of loss,” including weight of snow, ice or sleet or “decay that is hidden from view, unless the presence of such decay is known to an insured prior to collapse.”

Since there is no coverage where the insured had knowledge of “decay,” it is important to investigate whether other contributing factors may have played a role in the collapse and whether those contributing factors were known to the insured before the collapse. See e.g., Fetzer v. Safeco Ins. Co., No. CV040092567 (Conn. Super. Ct. Dec. 6, 2007) (granting summary judgment for an insurer because, even though the weight of snow was the immediate cause of a roof collapse, the roof was found to be severely decayed prior to the collapse). Even where there has not been a collapse, adjusters should keep in mind that reasonable snow removal costs incurred to prevent collapse may be recoverable under the policy’s sue and labor clause or as reasonable costs incurred to prevent additional damage which are discussed below.

2. Number of Occurrences

Questions regarding the number of covered occurrences may arise under a number of different scenarios; for instance, where there is more than one alleged collapse at an insured premises. This issue can affect both the limits available for a particular loss and the deductible(s) which an insured must absorb. For example, in Newmont Mines Ltd. v. Hanover Ins. Co., 784 F.2d 127 (2d Cir. 1986), insurers unsuccessfully argued that since two collapses separated by a number of days were caused by the same condition (excessive snow accumulation) both collapses should constitute one occurrence. The Second Circuit disagreed with the insurers, affirming a jury’s two-occurrence finding because, in part, the definition of “collapse” in the policies was “strong evidence that the parties considered each collapse to be an independent event or occurrence.” Thus, the specific wording of the policy at issue, particularly the definitions of “occurrence” and “collapse,” is likely to play an important role in such cases.

Given the result in Newmont Mines, multiple-occurrence outcomes are a possibility in cases involving both multiple collapses at the same property and/or multiple collapses at different covered properties. A finding of multiple occurrences may also result in cases where there are multiple snowstorms that cause damage. It is important to remember, however, that cases addressing the number of occurrences are extremely fact-sensitive, and it is difficult to articulate a hard-and-fast rule of general application.

3. Time Element Coverages

A roof collapse at an insured location or at the location of a supplier or buyer can have a debilitating impact on a business’ ability to continue operations. Time element coverages, including business interruption, contingent business interruption and ingress/egress coverages, may therefore be called upon to respond to such a loss.

Business Interruption Coverage

The debilitating effect of the recent winter storm raises the possibility that insured businesses have experienced a dip in revenues due to a direct result of property damage at an insured location or because of the snow’s general, adverse impact on travel, foot traffic, etc. In past snowstorms, some businesses resorted to “snow day” special discounts to get customers in the door.

Complex quantitative issues may arise from the business interruption claims of insureds following a roof collapse due to heavy snow. One of the most significant issues in these cases is determining what factors may be taken into account in measuring a loss of income. Business interruption clauses often include “experience of the business” provisions, which typically provide that “due consideration shall be given to experience of the business before the loss and the probable experience thereafter had no loss occurred.”

Under these clauses, the question arises, then, whether the appropriate base period for the business interruption calculation is the company’s historical earnings or whether the calculation should consider the depressed business conditions due to the season-long inclement weather. While it is more likely the case that an insured would want to minimize or avoid the consideration of a depressed post-loss market, it is also possible to imagine a fact pattern where taking post-loss economic conditions into account could actually increase the business interruption recovery. For example, consider a hypothetical where one of four ski lodges at a particular mountain suffers a roof collapse. The favorable skiing conditions cause skiers to flock to the mountain anyway, increasing revenues at the three undamaged ski lodges. Would the lost earnings claimed by the damaged ski lodge be based on the uptick in revenue the other ski lodges enjoyed for the remainder of the season?

No court in New England or the Mid-Atlantic has directly addressed this issue. Courts in other jurisdictions have indicated it is appropriate to consider both past earnings and potential future earnings in light of the business circumstances during the period of interruption. To the extent that the successive heavy snows this winter would have impacted the business during the period of restoration even if it had not been damaged, the impact of the bad weather on the business should be taken into account as it reflects the “probable business thereafter had no loss occurred.”

Where a roof collapse is the result of heavy snowstorms affecting the economy regionally, it is possible that issues will arise regarding the appropriate reading of the experience of the business clause. It is important, therefore, to carefully review the applicable policy language to evaluate the impact of any out-of-the-ordinary revenue trends the insured experienced/experiences before and after the collapse.

Requirement of Physical Damage

Given the states of emergency and travel bans implemented by governors in most Northeastern states, including New York, New Hampshire and Massachusetts arising from winter storm Juno, an insured may attempt to make a claim for business income lost during the period of time when access to the insured’s operations was impaired or precluded due to inclement weather conditions or snow accumulation in and around the premises. However, despite these governmental orders, it is generally understood that business interruption coverage is predicated on lost business revenue due to suspension of operations caused by physical loss or damage to insured property.

Ingress/Egress Clauses and Contingent Business Interruption Coverage

Significantly, while a business interruption provision may prevent an insured from recovering lost business income where there is no physical damage to the insured property, other time element provisions, including “ingress/egress” clauses, may provide coverage, even in the absence of such damage arising from snowstorms.

The ingress/egress clause contained in some forms provides coverage for “loss sustained during the period of time when, as a direct result of a peril not excluded, ingress to or egress from real and personal property not excluded hereunder, is thereby prevented.” Courts construing language similar to that contained in the ISO form have concluded that such provisions do not require “physical damage” in order to trigger coverage.

It should be noted, however, that some policies contain an express requirement that the interruption be the result of physical damage to the insured property or other property. Policies of this kind sometimes contain a territorial limitation requiring that physical damage to other property be within a certain distance of the insured premises. For example, a policy may state that the “kind of property” covered by the policy includes real property in which the insured has an interest “or within 1,000 feet of the insured properties.”

The express language of an ingress/egress provision is therefore critical to determining whether physical damage is required to trigger coverage, and if so, what type of physical damage satisfies the requirements for coverage. Even where physical damage is not required, it is critical to determine whether a covered peril is implicated in the first instance, and how a policy defines “real and personal property not excluded hereunder.”

Notably, contingent business interruption coverage may be implicated in the event that a supplier, vendor or purchaser upon whom an insured business relies for its continued operation sustains a loss as a result of a snow-induced roof collapse. Not surprisingly, contingent business interruption claims involve many of the same considerations as standard business interruption claims, including the presence of physical damage. The difference between the two coverages, however, is that in contingent business interruption claims, the physical damage takes place at a location other than the insured premises (e.g., “at contingent business premises”, at “contributing property”). As is the case with ingress/egress provisions, there may be important variations in the language of contingent business interruption clauses.

4. Additional Coverages

In addition to the damage to the property itself, an insured who has been affected by a snow load roof collapse may claim other types of covered losses.

Sue and Labor/Preservation of Property and Mitigation of Loss

The cost of snow removal is likely to be a frequent claim line item. Policies may contain a sue and labor clause, which provides coverage for costs associated with taking steps necessary to protect covered property “in the event of actual or imminent loss or damage.” It is important to note that an insured typically cannot recover more than the amount of loss that was avoided due to the snow removal.

Coverage for snow removal is necessarily going to be fact sensitive. However, to the extent the costs were incurred to prevent imminent damage to the insured premises, the costs are covered under the sue and labor clause. To the extent the snow removal was not necessary to prevent further damage, it is not a covered loss.

Even if the policy does not contain a sue and labor clause, there is a duty under the policy to take all reasonable steps to prevent further “property damage,” with reasonable costs incurred to prevent additional damage covered under the policy. In some forms, this duty is explicitly set forth in the policy. Again, the analysis would be fact-specific, but there is a potential that some snow removal costs would be covered if incurred to prevent additional covered damage.

Additionally, the insured may need to move some of its undamaged property after the roof collapse to protect that property from sustaining damage. As such, the policy may provide coverage for any direct physical loss or damage to property “while it is being moved or while temporarily stored at another location; or only if the loss or damage occurs within 30 days after the property is first moved.”

Debris Removal

Debris removal costs are often included in the limit of liability for damaged property. It should be noted that claims for debris removal expenses may be subject to a hard reporting deadline (i.e., the coverage form explicitly notes that debris removal expenses will only be paid if the insured reports the costs to the insurer in writing within 180 days of the loss).

5. Summary

A roof collapse requires an expeditious adjustment. Additionally, a prompt coverage determination can minimize the insurer’s exposure, particularly if the insured is making a business interruption claim. Below is a suggested checklist for adjusting snow load collapse claims:

• Has a covered collapse occurred?

• Are there other contributing factors (e.g., rot, decay, corrosion, etc.)?

• Has the insured used all reasonable means to save and preserve property at and after the time of a loss, or when property is endangered?

• What is the number of occurrences associated with the collapse?
• What additional coverages may apply (e.g., debris removal, fire department services, protection of property, mitigation of loss, etc.)? Note the particular limitations that may apply to those additional coverages, such as the 180-day reporting deadline often attached to debris removal provisions.
• How does the language of the business interruption clause impact the calculation of the claimed business interruption loss?

—By Seth V. Jackson, Zelle Hofmann Voelbel & Mason LLP

Seth Jackson is a senior associate in Zelle Hofmann Voelbel & Mason's Boston office.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.