RENDERED' JUNE 15, 2017

§upreme Tnuri of BMHTNM

2015- SC- 000158- DG
DATE’?/ new mm

WANDA J~EAN THIELE, ET AL _ APPELLANTS

ON REVIEW FROM COURT OF APPEALS
V. CASE NO. 2013FCA-OO2165-MR
ROCKCASTLE CIRCUIT COURT NO., 1 l-CI-QOSQQ

'KENTUCKY GROWERS INSURANCE APPELLEE
coMPANY .

OPINION` OF TH_E COURT BY JI_J`STICE CUNNINGHAM

- AFFIRMING

In 2004, Hiram Campbell purchased a homeowner’s insurance policy_
from the Appellee, Kentucl<y Growe'rs Insurance Co_mpany (“Insurer”). The
1 policy provided coverage for Hiram’s horne located in Brodhead, Kentucky. 'l`he
policy was self-renewing-and continued in effect after Hiram died in late 2605.
Following Hiram-’s death, his daughter, A_ppellant Wanda Thiele (“Thiele_”),
moved into Hiram’s residence. She was also the executrix of Hirarn’s estate.

In January 201 1,` Thiele moved the-refrigerator and discovered termite
infestation. Additional termite damage Was discovered throughout the home, ‘

including damage to wall paneling and ilooring. Upon discovering the damage§

Thiele contacted Insurer to make a claim under the homeowner’s policy
provision covering collapse. That provision provides:

8. Collapse - “We” pay for direct physical loss . . .'involving the

collapse of a building or part of a building caused by only the

following: , '

(b) hidden insect or vermin decay;

Collapse does not mean settling, cracking, bulging, or expanding .
Because no collapse had occurred, Insurer denied Thiele’s claim. As a result,
Thiele filed a declaration of rights claim in Rockcastle Circuit Court. Insurer
answered and filed a motion for a declaratory judgment in its favor. The trial
court conducted a hearing and subsequently issued a judgment in Thiele’s
favor. On appeal, a unanimous Court of Appeals’ panel reversed the trial
court.- Having reviewed the record and the law, we affirm the Court of Appeals’
decision and remand this case to the trial court for further proceedings

Analysis

“It is well settled that the proper interpretation of insurance contracts

generally is a matter of law to be decided by a court; and, thus, an appellate

”

court uses a de novo, not a deferential,‘ standard of review. Cincinnati Ins. Co.

' v. Motorists Mut.'Ins., 306 S.W.Sd 69, 73 (Ky. 2010]. The controlling case here
is Niagara Fire rns.` co. v. curtsinger, 361 s.W.Qd 762, 763 (Ky. 1962).
Cui'tsinger defined collapse as follows:

The word ‘collapse’ in connection with a building or other structure
has a well~understood common meaning Webster's Collegiate

dictionary defines the word as, ‘(l) To break down or go to pieces
- suddenly, especially by falling in of sides; to cave in.’

It seems to us that the mere subsidence of the floor of the porch,

which pulled it and the roof away from the building a few inches,

cannot be regarded as the collapse of any part of the building, and

that the trial court should have so ruled as a matter of law.

Id. at 764-65.

The damage to Thiele’s residence may have been more extensive than that
discussed in Curtsinger. However, it is undisputed that Thiele’s residence has
not “collapsed” under Curtsinger’s definition Therefore, applying Curtsinger
would foreclose recovery under the insurance policy at issue here.

1Thiele requests that we abrogate Curtsinger, and instead adopt the more
lenient majority rule. Under the majority rule,-“[t]he structure need not be in
imminent danger of collapse, but the damage to it must substantially impair
the structural integrity of the building That is, the damage must alter the
basic stability or.structure of the building in order to constitute a ‘collapse.’”
11 Couch on lnsurance, § 153:81 (3d ed., June 2016 Update) (tluoting
Sandalwood Condominium Ass’n at Ul;'ildwood, Inc. 1). Allstate Ins. Co., 294
F.Supp.Zd 1315, 1318 (M.D. Fla. 2003)). See also 71 A.L.R.3d 1072. We
decline Appellant’s invitation to adopt the majority rule.

We have consistently held that “[t]he words employed in insurance
polici'es, if clear and unambiguous, should be given their plain and ordinary
meaning.” Nationwide Mut. Ins. Co. v. Nolan, 10 S.W.Sd 129, 131 (Ky. 1999)
(citations omitted). The meaning of “collapse” is Clear. Moreov_er, a Significant

number of states still adhere to a plain language interpretation of “collapse.”

E.g., Heintz v. U.S. Fidelit`y & Guar. Co., 730 S.W.Qd 268, 269 (Mo. App. 1987]

_(“There must have been a falling down or collapsing of a part of a building. A
condition of impending collapse is insufficient.”). Therefore, we believe that
Curtsinger was rightly decided and see no reason to depart from its holding.

As a practical matter, any long range effect of our decision could easily
be minimized by the insurance.companies in simply re-defining the “collapse”
exemption to meet our judicial definition. We refuse to contort the common
sense meaning of that word to the breaking point for such an ephemeral
consequence

Conclusion

For the foregoing reasons, We hereby affirm the Court Of Appeals’
decision reversing the trial court’s judgment and remanding. '

Minton, C.J.; Cunningham, l-lughes, Keller, Venters and Wright, JJ.,
sitting. Minton, C.J.; I-Iughes, Keller, and Venters, JJ., concur. Wright, J.,
dissents by Separate opinion. VanMeter, J., not sitting.

WRIGHT, J., DISSENTING: l respectfully dissent from the majority’s
affirming the Court of Appeals’ decision reversing the trial court’s judgment I
agree with the majority’s holding that Niagara Fire Ins. Co. v. Curtsinger, 361
S.W.Qd 762 (Ky. 1962), is the law in Kentucky. Where l must respectfully
dissent from the majority is Witl'i its conclusion that “it is undisputed that
Thiele’s residence has not ‘collapsed’ under Currsinger’s definition.” That is a
factual determination for the trial court, and there-is substantial evidence to

support its finding that a part of the building has collapsed.

In Curtsinger, our predecessor court adopted Webster’s Collegiate
Dictionary’s definition of collapse: “(1) To break down or go to pieces suddenly .
. . .” 361 S.W.Qd at 762. There are two parts to this definition. The first is “to
break down”; the second, “to go to pieces suddenly.” Each describes a separate-
condition of collapse. Ke-ntucky Growers’s analysis of whether collapse has
occurred is focused totally on the second, “to go to pieces suddenly.” l agree
that the facts in this case fail to meet that condition. But there was substantial
evidence that parts of the residence had broken down, meeting the first part of
the definition of collapse.

The engineering iirm’s pictures make it clear that it would be impossible
for some parts of the residence to collapse due to hidden insect damage
because four of the walls are made of concrete block. Photograph 351 shows
the concrete block walls of the garage and photograph 1 shows that the garage
is attached to the house and under the single continuous roof. Photographs 1
and 3 show two chimneys penetrating the roof. Photographs 13 and 19 shown
that the chimneys are masonry block and would be impervious to termite
damage. Photograph l also shows that the masonry chimneys, Which are
attached to and support the single continuous roof, are spaced equally across
the'side of the building unsupported by masonry walls. The masonry walls
and supports would make it impossible, or at least highly unlikely, for this

residence to go to pieces suddenly and fall to the ground.'l If only the second

 

1 Unless indicated otliemrise, all referenced photographs are from Kentucky
Growers’s Exhi'bit 3.

clause of the definition of collapse counts,.then Kentucky Growers would seem
to have sold an insurance policy that provides only illusory coverage for insect-
damage collapse given the residence’s masonry supports.

A closer examination of the evidence makes it clear that there is
substantial evidence that parts of this residence had broken down due' to
hidden insect decay. Kentucky Growers policy provides coverage for:

8. Collapse - “We” pay for direct physical loss . . . involving the

collapse of a building or part of the building-caused by only the
following:~ ‘ `

fb) hidden insect or vermin decay . . . .
lt i_s undisputed that there is extensive termite damage to the residence. The
question now becomes is there sufficient evidence to show collapse or break
down of part of the residence?

Hidden insect decay has caused the floor to drop throughout the
residence. Photographs 5, 6, and 13 show that support of the floor has broken
down so that the floor has dropped even where it was attached to masonry l
walls and chimneys. lt is impossible to tell from these photographs how much
the floor has dropped.

0 The best evidence of how much parts of this building have broken down
and fallen is Photograph 24. -It shows that the wallis attached to the roof and
adjoining walls and has a steel pipe projecting from the masonry chimney
through the wall. The wall has broken down to such degree that the steel pipe
has ripped through the wall instead of supporting it. This photograph also

shows that the wall and floor have fallen at least 4 inches in spite of being

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attached to the supporting sidewalls, roof and having the metal pipe sticking
through it.

The insurance policy provides coverage if a part of the building collapses
due to hidden insect decay. The floors are part of the building. The wall
depicted in Photograph 24 is part of the residence These parts of the
residence have broken down as described in the insurance policy.

Termites access their food sources by hidden tunnels and in such
manner as to keep them concealed from potential predators. They also eat the
wood in such a manner as to keep themselves concealed and the wood
standing for as long as possible. This enables the termites to consume as
much of the wood as possible before it breaks down and they are exposed to
potential predators. The hidden pathways and consumption of the wood that
supports this residence is shown by Photographs 7 and 8. The result of this is
that by the time the floors and Walls have fallen, as happened in Thiele’s
residence, the termites have destroyed any structural support and it cannot be
restabilized.

How does this differ from what occurred in Cur'tsinger? Our predecessor
court in Curtsi'nger was faced With a situation where Water washed the support
out from under a post and so allowed it to drop a short distance before landing
on a solid surface and restabilizing; Since the post became supported 'by
another solid surface', it regained its structural integrity and would not fall
further. Although the corner of the porch had suffered some damage, it still '

had structural integrity and was unlikely to fall or break down further. But in

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our case, parts Of the residence have broken down and cannot regain
structural support. The parts of the residence that have broken down are
being Supported by other parts of the building that are impervious to termite
damage, but even though they are being supported,lthey have lost their
Structural integrity and broken down,

This is best illustrated by the following analogy: if a man Were walking
down the street, had a heart attack, and fell to the ground, we would consider
him to have collapsed; if a man were Walking down the Street, had a heart
attack, and a friend caught him before he hit the ground, we would still
consider him to have collapsed In both examples, the man lost the structural
integrity to support himself; but in the second example, the man became
supported by a secondary source. ln the case before us, the floor and wall in
the house have lost their structural integrity and ability to support themselves,
but are supported by their attachment to other walls; ceilings, roof, masonry
chimneys and metal pipes. The policy covers collapse of a part of the building,
and some parts have collapsed even if they have been prevented from reaching
the ground by masonry walls, chimneys and metal pipes.

lt is important, too, that the insurance policy failed to define collapse. A
reasonable person should be able to understand policy provisions and to t
ascertain what his policy covers without having a legal team research
interpretations of its words. Kentucky Growers claims that their position is the
normal everyday definition of the word collapse. _The simple response to this is

' that the trial judge and other jurisdictions have come to a different

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_ interpretation than that advanced by Kentucky Growers. Our predecessor
court in Curtsi'nger adopted the definition of collapse, but again, that case only
utilized the second clause of that definition As the discussion above shows,
the definition’s first clause is also very important to the interpretation of this
_contract. Obviously, it is more complex than the definition advocated by
Kentucky Growers, and_if there is any ambiguity, it must be interpreted against
the drafter of the contract, Kentucky Growers, and in favor of coverage.

Society benefits from contracts_from people fulfilling their _promises.
First, it forces insurance companies to clearly and unmistakably state What a
plan covers and what it does not. Second, it helps to level the playing field so
that a reasonably prudent purchaser of insurance will be just as capable of
understanding the terms and provisions of a policy. Third, it enables a
purchaser of insurance to go to a different company or buy a different policy if
they understand that the coverage will not protect them. All this goes a long
way in ensuring that consumers get what they bargain for. 1

Nearly seventy years of precedent of this Court’s construction of
insurance policies has held that any ambiguity or failure to define terms must
be resolved against the drafter of the policy. ln 1950,- our predecessor Court
stated, “[a] policy or contract of insurance ordinarily is to be construed liberally
in favor ofl the insured and strictly as against the insurer.” Koch v. Ocean Acc.
& Guar. Corp., 230 S.W.2d 893, 895 (Ky. 1950). Likewise, for nearly a half
century, this Court has held that “exceptio_ns and exclusions [of insurance

policies] should be strictly construed so as to make insurance effective.i’ State

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Auto. 'Mut. Ins. Co. v.¢Trai,-ztwein, 414 S.W.2d 587, 589 (Ky. 1967). ln fact, we
have said, “as to the manner of construction of insurance policies, Kentucky
law is crystal clear that exclusions are to be narrowly interpreted and all
questions resolved in favor of the insured.” Eyler v. Nationwide Mut. Fi're Ins.
Co.,' 824 S.W.2d 855, 859 (Ky. 1992); see also Webb v. Ky. Farm Bureau Ins.
Co., 577 S.W.2d'.17 (Ky. App. 1978)]. While these long-held tenets of our law
are firmly established, I also agree that “[t]he rule of strict construction against
an insurance company certainly does not mean that every doubt must be
resolved against it . . . [because] the policy must receive a reasonable
interpretation consistent . . . [with] the plain meaning and /or language of the
contract.” St. Paul Fc`re & Marine Ins. Co. v. Powell-Walton-Milward, Inc., 870
s.w.2d 223, 226 (Ky. 1994).

ln Bz'clwell v. Shelter Mut. Ins. Co., 367 S.W.3d 585, 588 (Ky. 2012), this
Court unanimously held:

To be enforceable, Kentucky law requires a limitation of insurance

coverage, such .as a permissive user step-down provision, to be

‘clearly stated in order to apprise the insured of such limitations.’

St. Paul Fire &.'Marine Ins. Co. v. Powell-Walton-Milward, Inc., 870

S.W.2d 223, 227-(Ky.1994). [N]ot only is the exclusion to be _
p;refully, expressed, but . . . the operative terms clearly defined
(Emphasis added.) lnsurance policies are enforceable as long as they

“expressly apprise insureds of the exclusion,” with the operative terms being

clearly defined. Kentucky Growers failed to define collapse in their insurance

policy.

10

Just like the exclusion provision in Bc`dwell, Kentucky Growers’s policy
“leaves the policyholder guessing as to this provision’s. meaning.” 367 S.W.3d
at 590-91. “And since the policy is drafted in all details by the insurance
company, it must be held strictly accountable for the language used.” Eyler,
824 S.W.2d at 859-60. Thus, ,“when ambiguities exist, we resolve them against
the drafter ‘in order to circumvent the technical, legalistic and complex
contractual terms which limit benefits to the insured.”’ Bidwell, 367 S.W.3d at
588-89 (quoting Sir_non v. Cont'l Ins. Co., 724 S.W.2d 210, 213 (Ky.1986)).

Under the doctrine of reasonable expectations, the policy must be
interpreted in favor of the insured if the policy created a reasonable expectation
of coverage. The position advocated by Kentucky Growers would create a
Situation in Which it Would almost be impossible for Thiele to have a successful
claim. The policy states that it will provide coverage for collapse of a part of the
building as a result of hidden termite damage. The way termites work
combined with the portions of the building that are impervious to termites
would make it impossible for the purchaser to have a successful claim for their
damages As this Court unanimously said: d

An essential tool in deciding whether an insurance policy is

ambiguous, and consequently should be interpreted in favor of the

insured, is the so-called “doctrine of reasonable expectations.” . . .

The gist of the doctrine is that the insured is entitled to all the

coverage he may reasonably expect to be provided under the policy.

Only an unequivocally conspicuous, plain and clear manifestation

of the company’s intent to exclude coverage will defeat that
expectation

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Bidwell, 367 S.W.3d at 589 (Ky. 2012) (citations and internal quotation marks
omitted).

d The majority states that “[a]s a practical matter, any long range effect of
our decision could easily be minimized by the insurance companies in simply
re-defin_ing the ‘collapse’ exemption to meet our judicial detinition.” Given the
resources and teams of attorneys that are available to the insurance company,-
this statement is undoubtedly true. ln fact, Kentucky Growers changed this
policy to specifically exclude this coverage days after receiving the claim. The
essential issue is that the purchaser of the insurance should have had the
-' benefit of their bargain. lf Thiele was misled by an ambiguity in the policy,
then she was denied the ability to shop elsewhere for the coverage. lt-is also
puzzling to understand Why Kentucky Growers thought it was necessary to
change the policy to clearly exclude coverage for this damage if the policy
already unambiguously excluded coverage for this situation.

lt is for these reasons that l dissent and would reverse the Court of

Appeals.

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COUNSEL .FOR APPELLANTS:
Robert R. Baker

RANKIN 85 BAKER, PLLC
COUNSEL FOR APPELLEE:
Don Arlie Pisacano

Elizabeth C. Woodford
MILLER, GRIFFIN 85 MARKS, P.S.C.

COUNSEL FOR AMICUS CURIAE AMERICAN INSURANCE ASSOCIATION and
INSURANCE INSTITUTE OF KENTUCKY:
Michael Shea Maloney

Stephen Conner Keller _
SCl-IILLER BARNES MALONEY PLLC

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