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Mold Contamination Covered By Insurance

Mold is a four-letter word in the insurance industry. So much so that the insurers have acted swiftly to put exclusions in practically every policy to eliminate coverage.

Which means, consequently, that policies that don't have such an exclusion actually have the coverage. Read your policy carefully.

That's the case I have to report today. Late last month, a Texas federal district court ruled that an insurer couldn't use the definition of "occurrence" or the expiration of the policy to deny coverage for mold contamination.

The background of the case involves a homeowner who contracted to have a company to design and install a heating ventilation and air conditioning system. Apparently, the company didn't do a good job installing it in 1998 and servicing it in 2000 and 2001.

Mold grew all over the home. The homeowner discovered it while conducting a home inspection, and sued the HVAC company.

The HVAC company tendered the claim to Liberty Mutual Insurance Company, which denied the claim on two grounds. First, LMIC said it wasn't an occurrence (an accident) as defined by the policy. Second, LMIC claimed the policy had expired, and the tender was too late.

The Court ruled ($20 to get the report, $30 for the case if you're not a Lexis subscriber, which is why the details are here) that the HVAC company surely didn't intend for the mold to grow, so it must have been as the result of an accident.

That's the easy way to say it. In the judge's parlance, he said that an accident exists where an action is intentional but is performed negligently and that the effect is not what would have been intended or expected had that action been performed non-negligently.

Right. What ever happened to plain English for lawyers?

Next came the issue of whether the law in Texas required the application of a continuous trigger of coverage. Fortunately for the homeowner, Texas, like California, has applied that doctrine to insurance policies. Since the homeowner alleged that the damage occurred during the time the policy was in effect, the insurance company couldn't deny coverage because the claim was submitted after the policy expired.

Adding icing to the cake, the judge also ruled that since the insurance company failed to defend the HVAC company against the homeowners claims, it looks like the HVAC company may also get its attorneys fees and costs back.

It warms my heart.

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Printer friendly page Permalink Email to a friend Posted by J. Craig Williams on Saturday, November 13, 2004 at 23:25 Comments Closed (1) |
 
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