The floor collapsed in the halls of Versailles – what did the court decide?
Nov 21, 2021
From: Attorney Shlomi Hadar - John Geva, Hadar & Co. - Lawyers and Mediators
introduction
In what cases is damage caused by an inherent defect in the property considered an "accident" in the insurance policy? Will the collapse of a building entitle an insured to insurance coverage, even when the policy does not explicitly refer to this type of accident?
In light of various recent events, we have deemed it appropriate to expand on the subject in light of a ruling issued on May 10, 2015, which concerned the collapse of the floor of the "Versailles" wedding hall in Jerusalem (hereinafter:
From: Attorney Shlomi Hadar - John Geva, Hadar & Co. - Lawyers and Mediators
introduction
In what cases is damage caused by an inherent defect in the property considered an "accident" in the insurance policy? Will the collapse of a building entitle an insured to insurance coverage, even when the policy does not explicitly refer to this type of accident?
In light of various recent events, we have deemed it appropriate to expand on the subject in light of a ruling issued on May 10, 2015, which concerned the collapse of the floor of the "Versailles" wedding hall in Jerusalem (hereinafter: " the hall ") in the midst of a large-scale wedding celebration that took place in the hall. 23 people were killed and hundreds were injured as a result of that event.
Factual background
The plaintiffs purchased the policy from the defendant near the beginning of the hall's operation in 1990, and renewed it over the years, except for certain periods when they took out insurance with another insurance company. In that case, the plaintiffs argued in court that the policy they purchased from the defendant covered the damages they suffered as a result of the incident. The defendant, for its part, sent third-party notices to 20 individuals and entities, who it claimed were negligently responsible for the incident by virtue of their involvement in the design and construction of the building, the building's event hall owners, and statutory authorities who failed to supervise the construction and safety.
In the insurance policy, the term "insurance event" was defined as follows: " Damage to the insured's property caused by an accidental and unexpected event due to one of the risks covered in Chapter 1A, all in accordance with the terms and conditions of this chapter and the general terms and conditions of the policy ."
The plaintiffs' basic claim was that the incident in question was an "accidental and unforeseen event" that occurred due to an "explosion," which is one of the risks covered by the policy. "Explosion" was defined in the policy as follows: " Explosion, including explosion from overheating of boilers, tanks and vessels under pressure or underpressure, excluding explosion of explosives - unless it is expressly stated in the list that the explosives are part of the contents of the business ."
Factual Background
The plaintiffs purchased the policy from the defendant near the start of the hall’s operation in 1990 and renewed it over the years, except for certain periods during which they insured with another company. In this case, the plaintiffs argued in court that the policy they purchased from the defendant covered the damages they suffered as a result of the incident. The defendant, on the other hand, sent third-party notices to 20 individuals and entities whom it held responsible for the incident due to their alleged negligence, including those involved in the planning and construction of the building, owners of event halls, and statutory authorities that failed to supervise construction and safety.
In the insurance policy, the term “insured event” was defined as:
“Damage to the insured property caused by an accidental and unforeseen event resulting from one of the risks covered in Chapter 1A, all subject to the conditions and exclusions of that chapter and the general conditions and exclusions of the policy.”
The plaintiffs’ basic claim was that the incident in question was an “accidental and unforeseen event” caused by an “explosion”, which is listed among the risks covered by the policy. “Explosion” was defined in the policy as:
“An explosion, including explosions caused by overheating of boilers, containers, and vessels under pressure or vacuum, except for the explosion of explosives—unless explicitly stated in the schedule that explosives form part of the business contents.”
The parties' claims
The plaintiffs claimed that although the collapse of the hall floor resulted, as agreed, from a defect or defects that were inherent in the structure before, the collapse event still constitutes an accidental event, because it occurred at a specific point in time, during dancing on the dance floor. Furthermore, in the rejection letter, the defendant's attorney raised two reasons for rejecting the claim: one reason - "the policy does not cover collapse damage"; the second reason - "this is an event that is not an accidental event, and as such, is not covered by the policy." The plaintiffs claimed that since the defendant did not state in the rejection letter that the reason for rejecting the claim was that the collapse was due to an inherent defect in the property, it is prevented from using this reason as a defense in court, in accordance with the Insurance Commissioner's guidelines, which prohibit an insurance company from asserting claims that were not included in the rejection letter, unless the reason for rejection was not known at the time the insured's claim was rejected.
The defendant, on the other hand, claimed that the collapse of the hall floor was not an "accidental and unexpected event," but rather an event that developed gradually and continuously, as a result of the construction of the structure using the "lightweight" method, which turned out to be a faulty construction method and was the decisive factor in the damage. The defendant further claimed that the gradual nature of the event, in addition to ruling out the existence of an accident, falls within the scope of an express exclusion in the policy, according to which "insurance under this chapter does not cover an insured event caused directly or indirectly by and/or as a result of a gradual process of any kind ."
The court ruled that the plaintiffs had proven that the collapse of the hall floor was an unexpected, accidental event.
The requirement that the damage covered by the policy be caused by an unforeseen accidental event expresses a fundamental principle in insurance law according to which there is no insurance for damage that is certain. Risk is one of the four elements of the insured event (along with the element of damage, the element of causation, and the element of time). The court further determined that if the collapse of the hall floor had been caused solely by the use of the "light-weight" method during the construction of the building, then the collapse could not be considered an accidental event. In such a situation, even though the collapse occurred at a specific and focused point in time, since its origin was a defective construction method that had been inherent in the property since its construction, there was no external and random event that caused the damage, but rather the sole cause of the damage was a defect arising from the nature of the building's creation, which had always been inherent in it.
According to the parties' agreement to the proceedings, the collapse of the floor resulted from a "combination" of two factors. The first factor - the inherent defect in the structure (the "light-weight" method); the second factor - the weight loading of dance activities performed by hundreds of people in a demarcated section (the dance floor) of the floor with the inherent defect. The court ruled that since the collapse of the floor was not expected at all times and in all circumstances, but rather occurred only at a specific point in time when between 300 and 400 people were dancing on the dance floor, which is concentrated in the middle of the hall and its area (approximately 100 square meters) is less than a tenth of the entire hall's area, it cannot be said that the collapse was definitely caused by the defective construction using the "Fel-Kel" method, even if it were not for the weight load created by the hundreds of dancers on a narrow and focused section of the hall. The weight load on the dance floor was a cause - without any - for the collapse of the floor, in the sense that if it were not for the weight load, the collapse would not have occurred, despite the construction of the floor using the "Fel-Kel" method (as thousands of buildings in Israel built using the same method remain standing to this day).
The court further determined that not only did the sinking of the tiles occur suddenly, but the collapse of the floor was also sudden. The degree of suddenness, both of the changes in the flooring on the dance floor shortly before the incident and of the collapse of the floor at the time of the incident, precludes the existence of foreseeable and certain damage.
Even if the event were to be caused by a gradual process, this would not in itself deny the event its character as an unexpected accident. Where the element of suddenness also exists in the event, then this would strengthen and establish the conclusion that it was an unexpected accident.
The court's decision regarding the existence of the insurer's liability
The court ruled that a number of risks can be found in the policy that may, if they materialize, result in an accidental event and damage from a collapse. Since the event that caused the damage is the collapse of the hall floor, and since the definition of the "insured event" grants an independent and separate existence to both the "risk" and the "event", there is no reason to limit the risk specifically to the collapse of a building. The chance may arise from several sources, or from several separate scenarios, which are, among other things, "outside" the event, and are not necessarily the event itself. The absence of an independent covered risk of a building collapse does not entail the conclusion that a building collapse will not be considered an insured accidental event in the appropriate circumstances. A building collapse will be covered by insurance in those situations in which the collapse was caused by one of the risks covered by the policy. Among those covered risks may also be the risk of an explosion, an explosion that may cause a building to collapse.
Applying an active disclosure obligation to the insurer
The court ruled that the policy sold by the defendant to the plaintiffs covered a wide range of risks, including rare, and sometimes even impossible, risks for a banquet hall (such as flood damage due to rising seas or a river overflowing its banks; and underground fire). At the same time, the common risks of engineering failure and defective construction were not included in the policy, even though one of its sections was titled "Structure Insurance." In such a situation, the defendant owed the plaintiffs a duty of active, explicit, detailed, and clear disclosure regarding the scope of the insured risks. This duty stems from the special status that large financial institutions, such as banks or insurance companies, have when they conduct transactions of a consumer nature with their customers.
The court ruled that in the present case, the defendant's described conduct justifies giving a flexible and expansive interpretation to the risk of "explosion" - which is covered by the policy - especially after this risk was vaguely defined in the policy .
Summary
In light of all of the above, the court ruled that the policy provides insurance coverage for damages caused by the incident to the structure and its contents, as well as for loss of profits.
Without a doubt, in this case, as well as in other matters, the results of the event had great weight in the legal analysis and conclusions reached by the court. Were it not for the insurance policies to which the plaintiffs held, it is assumed that those injured by the event would have had no way to obtain reimbursement.
Therefore, one must prepare in advance to examine the many risks in buildings, especially risks to the body and valuable property.
Summary
In light of all of the above, the court ruled that the policy provides insurance coverage for damages caused by the incident to the structure and its contents, as well as for loss of profits.
Without a doubt, in this case, as well as in other matters, the results of the event had great weight in the legal analysis and conclusions reached by the court. Were it not for the insurance policies to which the plaintiffs held, it is assumed that those injured by the event would have had no way to obtain reimbursement.
Therefore, one must prepare in advance to examine the many risks in buildings, especially risks to the body and valuable property.
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