WESTERN MASS. – More than two dozen people told the Joint Committee on Environment, Natural Resources and Agriculture stories of losing their life savings, safety and homes to the wide-spread problem of crumbling foundations. Some residents teared up during the Jan. 4 virtual hearing while testifying to the committee that the equity in their homes evaporated overnight, and with it, plans to retire, fund their children’s college education and more.

The people affected by the crumbling foundations live in a wide swath of western and central Massachusetts, where homes were built beginning in the 1980s with concrete aggregate that unknowingly contained the naturally occurring mineral pyrrhotite. This mineral reacts with air and water, which damages the structure integrity of the concrete with which it was mixed. The only solution is replacement of the concrete foundation.

To address the issue, Senate bill S548, “An Act relative to crumbling concrete foundations” was written. The bill would require testing of quarries and concrete aggregate for the presence of pyrrhotite, tax abatements for affected homes within 50 miles of Stafford Springs, CT, where the first known affected quarry is located and waives building permit fees for work related to replacement of the foundation. The bill also creates a “captive insurance company,” which would help cover the cost of replacing the contaminated foundation and requires homeowners to disclose the presence of or suspected presence of pyrrhotite when selling the property.

A total of 26 legislators have signed onto the bill, including state Sens. Eric Lesser and Joanne Comerford and state Reps. Brian Ashe, Angelo Puppolo, Lindsay Sabadosa and Jacob Oliveira.

Lawmakers Weigh In

Congressman Richard Neal spoke during the hearing and told state lawmakers that he had spoken with Gov. Charlie Baker on the issue and has been in touch with the White House.

Neal pointed to two amendments to the federal legislation known as Build Back Better that were added by the House Ways and Means Committee, which he chairs. The first was a repeal of the limit placed on personal casualty loss deductions that were put in place under the Trump-era JOBS Act. The removal of the deduction limit will allow homeowners to deduct losses back to 2018.

The second amendment establishes a neighborhood homes investment tax credit to help homeowners rebuild.

The Build Back Better legislation must go through the Senate and the reconciliation process before it can become law. “Be assured, as chairman of the committee, those items will stay in,” the bill, Neal said.

Neal thanked Ashe and bill S548 author state Sen. Anne Gobi. He said they have “been out in front” in working on the problem that has affected residents “through no fault of their own.”

Gobi agreed with Neal’s sentiments. “It isn’t anybody’s fault,” she said of the vein of pyrrhotite that is now thought to run from Canada through Connecticut. She said the proposed legislation does not “go after” any person or industry for redress. Instead, Gobi compared it to the way a state “steps up” in the wake of a hurricane or other natural disaster.

Ashe spoke about the financial impact of the crumbling foundations, which can run up to $250,000. “Some of these people, it will bankrupt them,” he said.

Ashe also noted that public buildings can also be affected. Both he and Gobi pointed to a school in Connecticut that was razed and rebuilt after the foundation was found to be crumbling. The “tricky part,” Ashe said, is that it may take up to 20 years for the cracks to show.

Holland Board of Selectmen member James Whalen pointed out that small towns rely on property taxes and the devaluation of homes damages the revenue needed to supply services.

Connecticut state Rep. Tom Delnicki said the provisions laid out in bill S548 are a “must.” Connecticut has already passed many of the same requirements. He said an estimated 5,000 to 8,000 homes in Connecticut are affected. So far, more than 250 people have filed claims from the captive insurance company and Deborah MacCoy, a member of the Connecticut Working Quarry Group, said as many as 2,000 people are in various stages of filing claims.

“It gives the folks a light at the end of the tunnel,” Delnicki said of the captive insurance company.

For many homeowners, the journey through that tunnel has already been long and filled with obstacles.

Insurance Coverage

Michelle Loglisci of Monson told lawmakers that homeowners go through stages similar to those of grief, including devastation, anger and denial. “It’s hard to admit your home is worthless,” she said.

As Loglisci explained and other echoed, her insurance company told her that only “abrupt” collapses were covered. This coverage change was added to many policies shortly after people became aware of the crumbling foundation problem.

With homeowners left to shoulder the cost of foundation replacement, the house that would normally serve as the collateral for a bank loan has been devalued by the presence of pyrrhotite, leaving people in a no-win situation.

One homeowner in his 50s said he had to take out a second mortgage and drain his savings to pay the $170,000 for a new foundation.

Eric Gagnon of East Longmeadow called crumbling foundations, “unforeseen, natural catastrophic losses,” and compared it to a fire or flood. The $250,000 to replace the foundation means he can no longer retire at 65 or help pay for his daughter’s wedding this year.

Some municipalities offer tax abatement, but the process can be frustrating. Gagnon said, “It’s tough enough to deal with this monstrous process,” without fighting through tax paperwork.

Gagnon’s wife, Sharon Gagnon teared up as she described the creaking and cracking noises that can be heard from a crumbling basement. She said homeowners are left feeling as though they had done something wrong.

Another East Longmeadow homeowner, Karyn Rosenkranz, emphasized that the people affected by crumbling foundations, “have their life savings wrapped up in their house or are trying to save for retirement and their children’s college.” Her husband, Brad Rosenkranz, noted there are lemon laws to protect people who buy faulty cars but there is no recourse for people who are sold a house with a damaged foundation.

Other people described being afraid their homes would collapse with their families inside, doors that no longer close because of the slow cave-in of their foundation.

Steven Loglisci, Michelle Loglisci’s son, told lawmakers that his dream had always been to buy his parents’ home and raise his family there. The financial devastation of crumbling foundations affects more than just the homeowners, he said. It “nullifies” people’s “investment in their home, investment in their family.”

A Monson resident named Michael Milanese turned his camera so lawmakers could see his basement walls, which were spider-webbed with thick cracks and holes where the concrete had disintegrated. He held a level against the wall, which was bowing inward. Two tree trunks braced had been braced between the walls to keep them from falling in.

When Milanese said he did not think taxpayers should pay to help people with crumbling foundations, State Rep. Cindy Domb asked him where the money should come from. “I’m going to leave that to you because that’s your job,” Milanese said.

State Rep. Carolyn Dykema said, “Hearing these stories first-hand certainly adds another level of understanding about the impacts here.”

Industry Explanation

Christopher Stark, executive director of the Massachusetts Insurance Federation, spoke on behalf of his industry. He urged lawmakers to find out how “broad” the problem is before creating a captive insurance company, but assured the committee, “We are here to help craft a solution.”

Dykema asked what criteria are used to determine what is covered and what should be excluded. She called the foundation a “basic” part of a house that people would assume was covered.

Stark said the issues with foundations are usually the result of “structural defect” or wear and tear rather than natural disasters such as fire or flood.

As to the change in policies to exempt all but abrupt collapses, Stark told her that homeowners are given a list of changes to their policy when they first open it and when it is renewed. He said with so many notices required by law, consumers are less likely to read them all and may miss some policy changes.

Dykema told Stark that homeowners thought they were “mitigating the risk” to their homes through insurance policies and called it “incredibly frustrating and painful” that homeowners were not “properly advised” about the coverage and exemptions.

State Rep. Mindy Domb asked Stark if policies are canceled because of pyrrhotite. He said a 2021 change prohibits companies from canceling or not renewing policies solely due to the presence of the mineral. When asked if it had been happening prior to the change, he said there were “concerns,” but no members of the Massachusetts Insurance Federation had been engaging in that practice.

“I’m confused about how [pyrrhotite] can be a significant issue that would warrant exclusion, but at the same time, you’re not viewing it as a known peril.” She continued, “What defines a peril? What could be more perilous than your foundation cracking?”

Stark said foundations bulging and cracking have never been covered by homeowners’ insurance. He stated that foundation exclusions are traditional “when it comes to roots, settlement flooding drainage, drought and construction defects.” Stark said. He described the crumbling foundations as a “construction defect,” and went on to say, “Some companies, not all but some, chose to strengthen that language,” to include only “imminent” collapse.

“What you’re saying is your company will continue to collect premiums from those customers yet not address the most fundamental protective aspect of their home, which allows them to continue living in it.” She added, “That’s not a good look.”

State Sen. Becca Rausch, the chair of the committee, asked Stark about the profit margin for the industry. When he did not have that data available, she asked him to “ballpark” the figure, then pushed, “Would you guess that it’s in the millions?” He acknowledged it could be for some companies.

Rausch said she is a lawyer with “extensive” knowledge of contract law and, “Frankly, what you’re testifying to today does not reconcile with my understanding of the insurance provisions set forth in contractual law.” She said his testimony was “extremely concerning to hear.” Rausch asked for contact information for the federation’s lawyer.

The committee will next vote on whether to advance the bill to the full Senate.