Indiana Insurance had issued an HO policy to Janet Liaskos and denied her claim for damages after a slab in the basement floor cracked and pushed up, allowing water to gush in and fill the basement almost to the floor joists. Cracks appeared on the first-floor interior walls and on the exterior masonry, and a crater formed on the outside of the house.

A videotape of the house and photographs were introduced into evidence, in addition to reports from two engineers--one for each party--but no testimony was presented. Experts agreed that pressure exerted by water below the surface of the ground caused the damage. They disagreed as to whether the support structure of the house had moved. The company's engineer stated that "the structural foundation walls and footings were sound and did not move when the floor heaved up."

The opinion of the insured's engineer was that the increased water pressure in the city's sewer system overstressed the plumbing and caused the damage. He said a crack was evident in the northwest corner foundation wall, and that cracks existed in most of the doorways and passageways on the first-floor interior and in the exterior masonry adjacent to the front door.

Indiana relied upon two exclusions in its policy, the first of which stated it did not cover loss caused by "b. . . . pressure or weight to a foundation, retaining wall or bulkhead . . . f. (1) wear and tear, marring, deterioration . . . (6) settling, cracking, shrinking, bulging or expansion of pavements, patios, foundations, walls, floors, roofs or ceilings."

The second provision excluded water damage, including flood, surface water, and " . . . water below the surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool or other structure. If such water causes the collapse of a building or any part of a building, we cover loss caused by the collapse. Collapse does not include settling, cracking, shrinking, bulging or expansion."

The policy also provided, by endorsement, coverage up to $1,000 for loss exceeding $25 caused by "back-up of sewers or drains."

The trial court found that the loss did not fall within the meaning of "collapse" and ruled that Indiana was liable only for the $1,000 under the "back-up of sewers and drains" coverage. The insured appealed.

The higher court noted that the policy exclusion did not define "collapse" but defined what it was not, and said that the definition was an issue of law. It found that most authorities have held that the term "collapse" includes coverage for any substantial impairment of the structure. It concluded that "collapse" does not require complete destruction of the building or a part thereof.

In this case, however, the court ruled that the exclusion precluded coverage since the cracking was not shown to affect the structural integrity of the house. While the house was uninhabitable for a short period, that was due to the presence of water and lack of electricity. The company was liable only for the coverage of $1,000 under the loss caused by the "back-up of sewers and drains."

The judgment entered in the trial court against Indiana Insurance for $1,000 was affirmed.

Indiana Insurance Company v. Janet F. Liaskos, Appellant--No. 1-97-2527--Appellate Court of Illinois, First District, Third Division--June 24, 1998--Rehearing denied August 4, 1998-697 North Eastern Reporter 2d 398.