Wall & Associates LLC (Wall) built two buildings in 1989 and 1990, respectively. Both buildings’ exteriors consisted of a polystyrene foam wall system called "External Insulation Finishing System" (EIFS). EIFS was a relatively new construction method at the time the buildings were erected.

Shortly after their construction, the buildings had problems with leaking water. Numerous attempts, including re-caulking and special paint, were made to correct the problems over a number of years. Wall retained experts to investigate the problems. Extensive testing revealed that the buildings had decayed and deteriorated from water intrusion and that the EIFS was in imminent danger of falling off the building and posed a public threat. It recommended removing and replacing the EIFS on two sides of the buildings. The experts also reported that there was no way of telling when, if ever, the EIFS would fail. However, after repairs began, some of the brick facades fell off with as little as a touch of a finger.

The insurance policy covering these buildings was written by Assurance Company of America (Assurance), effective March 25, 1999. Wall submitted a notice of loss in June, 1999. Several months after the repairs were finished, Wall submitted a proof of loss seeking recovery of around $530,000. The forms stated that the damage was discovered on April 22, 1999 and coverage was sought for a collapse loss. The cause of damage was described as "deterioration of gypsum wallboard forming substrate of exterior wall system, creating high risk of failure of structural support for brick facing."

Assurance's policy covered against "risks of direct physical loss or damage," but it also had an exclusion for loss caused by collapse. The exclusion made an exception, covering ensuing loss when that loss was caused by certain specified perils as well as by hidden decay.

Assurance denied Wall's claim, stating that there had been no collapse. After the denial, Assurance filed a declaratory judgment action, seeking clarification on a number of issues. Both parties filed motions for summary judgment and the trial court granted Assurance's motion, holding that no "collapse" occurred. Further, it held that, absent any collapse, the other issues were moot. Wall appealed.

The appellate court explored a number of related cases. The court stated that collapse was not defined in the policy and was to be interpreted to include imminent collapse, suggesting that requiring an actual collapse to trigger coverage when one is imminent was against public policy. It stated that an exception to the collapse exclusion should include "imminent" collapse and interpreted "collapse" to include "substantial impairment of structural integrity" and "risk" of loss to include "threat" of loss. It concluded that the trial court erred in interpreting the term "collapse" in isolation and for failing to consider other terms of the provision. It sent the case back to the trial court to reassess the facts using such an interpretation.

Assurance Company Of America, A Maryland Corporation, Plaintiff-Appellee V. Wall & Associates LLC Of Olympia, a Washington corporation, Defendant-Appellant. U.S. Court of Appeals, Ninth Circuit. No. 02-35992. August 5, 2004. Reversed and remanded. 2004 CCH Personal and Commercial Liability Cases. Paragraph 48,015.