The Battle over Mold: Report from the Front

Over the last 2 years, there has been an explosion in lawsuits by owners of residential and commercial properties seeking compensation for the cost of remediating mold-related damage. Mold has become the new 'tort du jour' in the construction industry. With the rise in mold claims, homeowners and owners of commercial property have scurried to review their first-party property insurance policies to determine whether they are insured for such damage.

In anticipation of the expected flurry of first-party insurance claims and lawsuits regarding coverage for mold damage, there have been numerous articles written about whether such claims are covered. These articles have attempted to predict how the courts will rule on such claims, much like handicapping an election or a sporting event. But of course ' as in an election or a sporting event ' the real question is not who should win but who actually is winning.

A pitched battle is currently being waged in the courts between first-party property insurers and policyholders over whether the cost of remediating mold damage is covered by first-party insurance policies. This article is a report from the front lines of the battle. A baker's dozen first-party mold cases have been decided to date by the courts. Both insurers and policyholders can claim significant victories in these early decisions. Neither side, however, has been able to find a legal doctrine or policy provision that has enabled it to deliver a knockout blow. The battle rages on.

The 13 cases that have been decided to date are summarized below. Although the cases often turn on their particular facts and the precise terms of the policy at issue, a few general observations about these early decisions can be made. Please note that all cases mentioned in the text are summarized at the end of this article.

Causation

In first-party property insurance litigation, the name of the game is causation. First-party property insurance policies cover some causes of loss, but not others. Successful policyholders have argued that their mold-related damage was caused by a covered cause of loss rather than an excluded cause. See McClain, Maples, Bowers, Churchill, and Liristis (below). In some of these cases, the policyholders have prevailed despite specific exclusions in the policy for damage caused by mold. See McClain, Maples, Bowers, and Liristis. Insurers have prevailed in other cases by persuading the court that the mold-related damage was in fact caused by mold, rather than by an antecedent cause (eg, water leakage) or by a subsequent cause (eg, the mycotoxins emitted by mold), and hence that the damage was subject to a mold exclusion. See Cooper and Myers (below). Even in cases in which the policy did not contain a mold exclusion, the insurer has prevailed by persuading the court that the mold-related damage was caused by an excluded cause, such as faulty workmanship (Lillard-Roberts), or by a cause not covered by a designated perils policy. See Herzog (mold damage not a named peril). With respect to causation, the policyholder is significantly hindered, and the insurer is significantly helped, by the presence in the policy of an applicable 'anti-concurrent cause' clause. Such clauses provide that losses are not covered if they were caused either concurrently or in any sequence by an excluded cause. Compare Cooper (policyholder's argument that the efficient proximate cause of mold damage was water, a covered cause, rather than mold, an excluded cause, was rejected because mold exclusion was covered by an anti-concurrent cause provision) with Maples (summary judgment for insurer reversed because anti-concurrent cause clause in policy did not apply to mold exclusion; hence, fact finder was required to determine whether 'dominant and efficient' cause of mold damage was mold or rather the burst pipe that led to the mold).

Causation As a Fact Issue

Policyholders in several cases have successfully argued that the issue of whether a covered event is the efficient proximate cause of mold damage is one that should be decided by the fact finder at trial. See Lillard-Roberts, Churchill, Liristis, Maples and Anderson. Judging by the outcome of the several mold-related coverage or bad faith cases that have gone to trial, juries are very sympathetic to the policyholder in mold cases.

See Anderson, Allison (formerly 'Ballard'), and Hatley. Hence, getting to the jury on the causation issue can itself be a significant victory for the policyholder.

Pollution Exclusion

In only one of the 13 mold-related first-party insurance cases decided to date did the court address the applicability of the exclusion for loss caused by the dispersal of contaminants (including 'fungi') or pollutants. In Unity/Waterford-Fair Oaks, the court granted summary judgment to the insurer based on this exclusion, ruling that the mold resulting from roof leaks was a contaminant or pollutant that was 'dispersed' within the covered properties. Look for this exclusion to receive more attention in future cases.

Read the Policy, Sift the Facts

The last general observation is that it is very difficult to make general observations about first-party mold-related coverage cases, as the disparate results of the cases summarized below attest. More so than general liability insurance policies, first-party property policies contain provisions that differ from policy to policy. In addition, the mold-related cases decided to date suggest that courts are willing to draw relatively fine distinctions based on the particular facts of the case. As a result, the mold-related first-party insurance decisions being handed down today may have limited precedential value, because either policyholders or insurers may be able to distinguish those cases on their facts or on the specific terms of the policy at issue.

First-Party Mold-Related Decisions Favoring Policyholders

The Home Insurance Company v. McClain, 2000 WL 144115 (Tex. App. Dallas Feb. 20, 2000), no pet.

• Roof leaks caused water damage to wood and sheetrock, resulting in mold growth that rendered home uninhabitable.
• Partial summary judgment to policyholder.
• Policy excluded losses caused by wear and tear, deterioration, any quality in property that causes it to damage itself, rot, mold, or other 'fungi.'
• 'Ensuing losses' not excluded if  loss would otherwise be covered.
• Policyholder prevails on ensuing loss argument. Court holds that damage was caused by water leaking from roof. Fact that fungi and mold were an intermediate cause was irrelevant. Hence, exclusion for loss caused by mold and fungi did not apply.

Churchill v. Factory Mutual Ins. Co., 2002 WL 31680804 (W.D. Wash. Oct. 23, 2002)

• All risk policy.
• Water intrusion in walls of shopping center led to development of mold over time.
• Mold-related damage not specifically excluded, although mold-related damage was specifically excluded in other policies issued by the insurer.
• Insurer's motion for summary judgment was denied.
• If the 'efficient proximate cause' of the loss is covered, the loss is covered, even if other events in the chain of causation are not covered.
• Determination of the 'efficient proximate cause' of the loss is an issue of fact for the jury.
• Whether mold growth was 'fortuitous' is also a question of fact.
• General exclusions for deterioration, depletion, wear and tear, inherent vice or latent defect, faulty workmanship, or construction or design defects, did not apply to mold damage.

Anderson v. Allstate Ins. Co., 45 Fed. Appx. 754, 2002 WL 2021617 (9th Cir. 2002) (California law)

• Policy covered water damage from freezing.
• Insurer did not challenge jury finding that insurer breached homeowner's policy by not covering mold damage resulting from burst pipe.
• Ninth Circuit affirmed award of approximately $500,000 in compensatory damages for insurer's bad faith in failing to conduct an adequate investigation before denying claim.
• Ninth Circuit reversed award of punitive damages.

Allison v. Fire Ins. Exchange (the 'Ballard' case), 2002 WL 31833440 (Tex. App. ' Austin Dec. 19, 2002)

• Mold damage was caused by various leaks from plumbing system. A few years earlier, damage was caused by a leak from frozen pipes.
• Terms of homeowner's policy not described in opinion.
• Insurer paid approximately $1.5 million to repair damage caused by leaks, including mold damage.
• Hence, coverage for mold damage was never at issue in suit.
• Plaintiffs Mary Ballard and husband Ronald Allison sued insurer for bad faith and violation of Texas Deceptive Trade Practices Act for delaying payment of claims.
• Jury found in favor of plaintiffs and awarded compensatory damages, damages for mental anguish, punitive damages, and attorneys' fees.
• On appeal, court affirmed finding of violation of DTPA and affirmed approximately $4 million in compensatory damages.
• Court of appeals reversed damages for mental anguish and punitive damages and remanded for recalculation of award of attorneys' fees.

Shelter Mut. Ins. Co. v. Tommy Maples, 309 F.3d 1068 (8th Cir. 2002) (Arkansas law)

• Summary judgment for residential property insurer reversed.
• Frozen pipes burst, which caused mold, which caused damage to the home.
• Anti-concurrent causation clause in the policy provided that losses were not covered if they were caused concurrently or in any sequence by an excluded cause of loss. But this provision did not apply to the exclusion for mold damage.
• Hence, court reversed for factual determination of whether it was the mold (a non-covered peril) or rather the burst pipes (a covered peril) that was the 'dominant and efficient' cause of the loss.

Bowers v. Farmers Ins. Exchange, 991 P.2d 734 (Wash. App. 2000)

• Tenant's marijuana growing caused mold to grow throughout the house as the result of extensive heat, humidity, and water condensation.
• Landlord's first-party property policy excluded direct or indirect loss caused by mold.
• Court held that the 'efficient proximate cause' of the mold damage was tenant's vandalism, a covered cause of loss, rather than the resulting mold growth.
• Court ordered entry of summary judgment to policyholder on remand, since there was no genuine issue of material fact on causation issue.

Hatley v. Century National Ins. Co., No. CV 2000-006713 (Ariz. Super. Marcipa Cty. Nov. 2001), reprinted in Mealey's Litigation Report: Mold, Vol. 1, # 12, at p. 3 (Dec. 2001)

• After the Hatleys' son was diagnosed with mold spores in his lungs, the Hatleys asked their homeowner's insurer to pay for removal of mold in the home.
• The insurer initially denied coverage, citing the policy's mold exclusion.
• The Hatleys argued that the mold was caused by water damage, which was a covered cause of loss.
• After the Hatleys sued, the insurer paid the amount of their claim.
• The jury awarded the Hatleys $244,000 in compensatory damages and $4 million in punitive damages based on the Hatleys' claim of bad faith.

Liristis v. American Family Mut. Ins. Co., 2002 WL 31760243 (Ariz. App. Dec. 26, 2002)

• Mold resulted from water damage after a fire in the policyholder's home, and from roof leaks following the fire.
• Insurer denied coverage based on mold exclusion.
• Summary judgment for insurer reversed because there were issues of fact regarding causation.
• On remand, fact finder will have to determine whether the mold itself constituted the loss and whether the mold was caused by the covered fire event, in which case the cost of remediating the mold would be covered, or rather whether the mold was the cause of the loss, or was caused not by the fire but by an excluded cause, in which case there would be no coverage.

First-Party Mold-Related Decisions Favoring Insurers

Herzog v. State Farm & Cas. Co., C.A. No. 02-4 (E.D. La. Sept. 30, 2002), reprinted in Mealey's Litigation Report: Mold, Vol. 2, # 11, at p. 10 (Nov. 2002), appeal pending.

• Policyholder sued insurer for coverage of loss to personal property in home caused by airborne mold.
• Named-perils policy covered loss to property from inter alia sudden and accidental water leakage.
• Court grants summary judgment to insurer because policyholder's complaint did not allege that mold resulted from covered water leakage.

Myers v. State Farm Fire and Cas. Co., 2002 WL 1547673 (Minn. App. July 16, 2002), cert. denied (Minn. October 15, 2002)

• Mold problem in home was caused by water dripping from a plumbing system that had been installed improperly.
• Policy excluded loss consisting of, or directly and immediately caused by, leakage of water from a plumbing system; by mold; or by inadequacy in materials, workmanship, or construction.
• Summary judgment to insurer
• Loss covered by all three exclusions.
• Loss did not constitute a 'resulting loss' within meaning of the policy because there was no separate, covered cause of loss.

Lexington Ins. Co. v. Unity/Waterford-Fair Oaks, Ltd., 2002 WL 356756 (N.D. Tex. March 5, 2002)

• Mold damage to apartment units caused by roof leaks resulting from severe rainstorm and flooding.
• First-party property policy excluded loss or damage caused by dispersal of contaminants or pollutants. 'Contaminant' was defined to include 'fungi.'
• Court granted summary judgment to insurer, holding that the exclusion applied because the mold at issue was 'dispersed' within the covered properties.

Cooper v. American Family Mut. Ins. Co., 184 F. Supp. 2d 960 (D. Ariz. 2002)

• Plumbing leak resulted in damage caused by mold. Insurer denied coverage.
• Policy covered 'risks of accidental physical loss,' unless excluded.
• Policy excluded losses caused by mold.
• Policy had anti-concurrent causation clause: 'such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.' Court held that under Arizona law, policy's anti-concurrent causation clause would be enforced. Hence, no coverage for loss caused by mold, even though a covered event (plumbing leak) may have contributed to the loss. As a result, court did not need to determine whether the covered plumbing leak was the 'efficient proximate cause of the loss,' because it wouldn't matter if it were.
• Court also held that 'resulting loss clause' did not restore coverage.
• Clause merely reaffirmed coverage for secondary losses ultimately caused by excluded perils. Mycotoxins released by mold spores are not a separate and independent cause of loss resulting from mold. Removal of the mold would presumably also remove the mycotoxins.

First-Party Mold-Related Mixed Decisions

Prudential Prop. & Cas. Ins. Co. v. Lillard-Roberts, No. CV-01-1362-ST (D. Ore. June 18, 2002)

• Visible mold in home, which may not be removable, is distinct and demonstrable damage that is sufficient to constitute a 'direct' and  'physical' loss within meaning of homeowner's policy.
• Mold resulting from leaks due to faulty workmanship would not constitute an 'ensuing loss,' and hence the faulty workmanship exclusion would apply to such loss.
• Summary judgment to insurer denied because fact issues remained regarding the cause of the mold in the home.

Stephen R. Mysliwiec is a partner in the commercial litigation practice group at Piper Rudnick LLP in Washington, DC. Mysliwiec has extensive experience in insurance coverage, surety, and construction defect litigation. He may be contacted at 202-861-3930.

Over the last 2 years, there has been an explosion in lawsuits by owners of residential and commercial properties seeking compensation for the cost of remediating mold-related damage. Mold has become the new 'tort du jour' in the construction industry. With the rise in mold claims, homeowners and owners of commercial property have scurried to review their first-party property insurance policies to determine whether they are insured for such damage.

In anticipation of the expected flurry of first-party insurance claims and lawsuits regarding coverage for mold damage, there have been numerous articles written about whether such claims are covered. These articles have attempted to predict how the courts will rule on such claims, much like handicapping an election or a sporting event. But of course ' as in an election or a sporting event ' the real question is not who should win but who actually is winning.

A pitched battle is currently being waged in the courts between first-party property insurers and policyholders over whether the cost of remediating mold damage is covered by first-party insurance policies. This article is a report from the front lines of the battle. A baker's dozen first-party mold cases have been decided to date by the courts. Both insurers and policyholders can claim significant victories in these early decisions. Neither side, however, has been able to find a legal doctrine or policy provision that has enabled it to deliver a knockout blow. The battle rages on.

The 13 cases that have been decided to date are summarized below. Although the cases often turn on their particular facts and the precise terms of the policy at issue, a few general observations about these early decisions can be made. Please note that all cases mentioned in the text are summarized at the end of this article.

Causation

In first-party property insurance litigation, the name of the game is causation. First-party property insurance policies cover some causes of loss, but not others. Successful policyholders have argued that their mold-related damage was caused by a covered cause of loss rather than an excluded cause. See McClain, Maples, Bowers, Churchill, and Liristis (below). In some of these cases, the policyholders have prevailed despite specific exclusions in the policy for damage caused by mold. See McClain, Maples, Bowers, and Liristis. Insurers have prevailed in other cases by persuading the court that the mold-related damage was in fact caused by mold, rather than by an antecedent cause (eg, water leakage) or by a subsequent cause (eg, the mycotoxins emitted by mold), and hence that the damage was subject to a mold exclusion. See Cooper and Myers (below). Even in cases in which the policy did not contain a mold exclusion, the insurer has prevailed by persuading the court that the mold-related damage was caused by an excluded cause, such as faulty workmanship (Lillard-Roberts), or by a cause not covered by a designated perils policy. See Herzog (mold damage not a named peril). With respect to causation, the policyholder is significantly hindered, and the insurer is significantly helped, by the presence in the policy of an applicable 'anti-concurrent cause' clause. Such clauses provide that losses are not covered if they were caused either concurrently or in any sequence by an excluded cause. Compare Cooper (policyholder's argument that the efficient proximate cause of mold damage was water, a covered cause, rather than mold, an excluded cause, was rejected because mold exclusion was covered by an anti-concurrent cause provision) with Maples (summary judgment for insurer reversed because anti-concurrent cause clause in policy did not apply to mold exclusion; hence, fact finder was required to determine whether 'dominant and efficient' cause of mold damage was mold or rather the burst pipe that led to the mold).

Causation As a Fact Issue

Policyholders in several cases have successfully argued that the issue of whether a covered event is the efficient proximate cause of mold damage is one that should be decided by the fact finder at trial. See Lillard-Roberts, Churchill, Liristis, Maples and Anderson. Judging by the outcome of the several mold-related coverage or bad faith cases that have gone to trial, juries are very sympathetic to the policyholder in mold cases.

See Anderson, Allison (formerly 'Ballard'), and Hatley. Hence, getting to the jury on the causation issue can itself be a significant victory for the policyholder.

Pollution Exclusion

In only one of the 13 mold-related first-party insurance cases decided to date did the court address the applicability of the exclusion for loss caused by the dispersal of contaminants (including 'fungi') or pollutants. In Unity/Waterford-Fair Oaks, the court granted summary judgment to the insurer based on this exclusion, ruling that the mold resulting from roof leaks was a contaminant or pollutant that was 'dispersed' within the covered properties. Look for this exclusion to receive more attention in future cases.

Read the Policy, Sift the Facts

The last general observation is that it is very difficult to make general observations about first-party mold-related coverage cases, as the disparate results of the cases summarized below attest. More so than general liability insurance policies, first-party property policies contain provisions that differ from policy to policy. In addition, the mold-related cases decided to date suggest that courts are willing to draw relatively fine distinctions based on the particular facts of the case. As a result, the mold-related first-party insurance decisions being handed down today may have limited precedential value, because either policyholders or insurers may be able to distinguish those cases on their facts or on the specific terms of the policy at issue.

First-Party Mold-Related Decisions Favoring Policyholders

The Home Insurance Company v. McClain, 2000 WL 144115 (Tex. App. Dallas Feb. 20, 2000), no pet.

• Roof leaks caused water damage to wood and sheetrock, resulting in mold growth that rendered home uninhabitable.
• Partial summary judgment to policyholder.
• Policy excluded losses caused by wear and tear, deterioration, any quality in property that causes it to damage itself, rot, mold, or other 'fungi.'
• 'Ensuing losses' not excluded if  loss would otherwise be covered.
• Policyholder prevails on ensuing loss argument. Court holds that damage was caused by water leaking from roof. Fact that fungi and mold were an intermediate cause was irrelevant. Hence, exclusion for loss caused by mold and fungi did not apply.

Churchill v. Factory Mutual Ins. Co., 2002 WL 31680804 (W.D. Wash. Oct. 23, 2002)

• All risk policy.
• Water intrusion in walls of shopping center led to development of mold over time.
• Mold-related damage not specifically excluded, although mold-related damage was specifically excluded in other policies issued by the insurer.
• Insurer's motion for summary judgment was denied.
• If the 'efficient proximate cause' of the loss is covered, the loss is covered, even if other events in the chain of causation are not covered.
• Determination of the 'efficient proximate cause' of the loss is an issue of fact for the jury.
• Whether mold growth was 'fortuitous' is also a question of fact.
• General exclusions for deterioration, depletion, wear and tear, inherent vice or latent defect, faulty workmanship, or construction or design defects, did not apply to mold damage.

Anderson v. Allstate Ins. Co., 45 Fed. Appx. 754, 2002 WL 2021617 (9th Cir. 2002) (California law)

• Policy covered water damage from freezing.
• Insurer did not challenge jury finding that insurer breached homeowner's policy by not covering mold damage resulting from burst pipe.
• Ninth Circuit affirmed award of approximately $500,000 in compensatory damages for insurer's bad faith in failing to conduct an adequate investigation before denying claim.
• Ninth Circuit reversed award of punitive damages.

Allison v. Fire Ins. Exchange (the 'Ballard' case), 2002 WL 31833440 (Tex. App. ' Austin Dec. 19, 2002)

• Mold damage was caused by various leaks from plumbing system. A few years earlier, damage was caused by a leak from frozen pipes.
• Terms of homeowner's policy not described in opinion.
• Insurer paid approximately $1.5 million to repair damage caused by leaks, including mold damage.
• Hence, coverage for mold damage was never at issue in suit.
• Plaintiffs Mary Ballard and husband Ronald Allison sued insurer for bad faith and violation of Texas Deceptive Trade Practices Act for delaying payment of claims.
• Jury found in favor of plaintiffs and awarded compensatory damages, damages for mental anguish, punitive damages, and attorneys' fees.
• On appeal, court affirmed finding of violation of DTPA and affirmed approximately $4 million in compensatory damages.
• Court of appeals reversed damages for mental anguish and punitive damages and remanded for recalculation of award of attorneys' fees.

Shelter Mut. Ins. Co. v. Tommy Maples , 309 F.3d 1068 (8th Cir. 2002) (Arkansas law)

• Summary judgment for residential property insurer reversed.
• Frozen pipes burst, which caused mold, which caused damage to the home.
• Anti-concurrent causation clause in the policy provided that losses were not covered if they were caused concurrently or in any sequence by an excluded cause of loss. But this provision did not apply to the exclusion for mold damage.
• Hence, court reversed for factual determination of whether it was the mold (a non-covered peril) or rather the burst pipes (a covered peril) that was the 'dominant and efficient' cause of the loss.

Bowers v. Farmers Ins. Exchange , 991 P.2d 734 (Wash. App. 2000)

• Tenant's marijuana growing caused mold to grow throughout the house as the result of extensive heat, humidity, and water condensation.
• Landlord's first-party property policy excluded direct or indirect loss caused by mold.
• Court held that the 'efficient proximate cause' of the mold damage was tenant's vandalism, a covered cause of loss, rather than the resulting mold growth.
• Court ordered entry of summary judgment to policyholder on remand, since there was no genuine issue of material fact on causation issue.

Hatley v. Century National Ins. Co., No. CV 2000-006713 (Ariz. Super. Marcipa Cty. Nov. 2001), reprinted in Mealey's Litigation Report: Mold, Vol. 1, # 12, at p. 3 (Dec. 2001)

• After the Hatleys' son was diagnosed with mold spores in his lungs, the Hatleys asked their homeowner's insurer to pay for removal of mold in the home.
• The insurer initially denied coverage, citing the policy's mold exclusion.
• The Hatleys argued that the mold was caused by water damage, which was a covered cause of loss.
• After the Hatleys sued, the insurer paid the amount of their claim.
• The jury awarded the Hatleys $244,000 in compensatory damages and $4 million in punitive damages based on the Hatleys' claim of bad faith.

Liristis v. American Family Mut. Ins. Co., 2002 WL 31760243 (Ariz. App. Dec. 26, 2002)

• Mold resulted from water damage after a fire in the policyholder's home, and from roof leaks following the fire.
• Insurer denied coverage based on mold exclusion.
• Summary judgment for insurer reversed because there were issues of fact regarding causation.
• On remand, fact finder will have to determine whether the mold itself constituted the loss and whether the mold was caused by the covered fire event, in which case the cost of remediating the mold would be covered, or rather whether the mold was the cause of the loss, or was caused not by the fire but by an excluded cause, in which case there would be no coverage.

First-Party Mold-Related Decisions Favoring Insurers

Herzog v. State Farm & Cas. Co., C.A. No. 02-4 (E.D. La. Sept. 30, 2002), reprinted in Mealey's Litigation Report: Mold, Vol. 2, # 11, at p. 10 (Nov. 2002), appeal pending.

• Policyholder sued insurer for coverage of loss to personal property in home caused by airborne mold.
• Named-perils policy covered loss to property from inter alia sudden and accidental water leakage.
• Court grants summary judgment to insurer because policyholder's complaint did not allege that mold resulted from covered water leakage.

Myers v. State Farm Fire and Cas. Co., 2002 WL 1547673 (Minn. App. July 16, 2002), cert. denied (Minn. October 15, 2002)

• Mold problem in home was caused by water dripping from a plumbing system that had been installed improperly.
• Policy excluded loss consisting of, or directly and immediately caused by, leakage of water from a plumbing system; by mold; or by inadequacy in materials, workmanship, or construction.
• Summary judgment to insurer
• Loss covered by all three exclusions.
• Loss did not constitute a 'resulting loss' within meaning of the policy because there was no separate, covered cause of loss.

Lexington Ins. Co. v. Unity/Waterford-Fair Oaks, Ltd., 2002 WL 356756 (N.D. Tex. March 5, 2002)

• Mold damage to apartment units caused by roof leaks resulting from severe rainstorm and flooding.
• First-party property policy excluded loss or damage caused by dispersal of contaminants or pollutants. 'Contaminant' was defined to include 'fungi.'
• Court granted summary judgment to insurer, holding that the exclusion applied because the mold at issue was 'dispersed' within the covered properties.

Cooper v. American Family Mut. Ins. Co., 184 F. Supp. 2d 960 (D. Ariz. 2002)

• Plumbing leak resulted in damage caused by mold. Insurer denied coverage.
• Policy covered 'risks of accidental physical loss,' unless excluded.
• Policy excluded losses caused by mold.
• Policy had anti-concurrent causation clause: 'such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.' Court held that under Arizona law, policy's anti-concurrent causation clause would be enforced. Hence, no coverage for loss caused by mold, even though a covered event (plumbing leak) may have contributed to the loss. As a result, court did not need to determine whether the covered plumbing leak was the 'efficient proximate cause of the loss,' because it wouldn't matter if it were.
• Court also held that 'resulting loss clause' did not restore coverage.
• Clause merely reaffirmed coverage for secondary losses ultimately caused by excluded perils. Mycotoxins released by mold spores are not a separate and independent cause of loss resulting from mold. Removal of the mold would presumably also remove the mycotoxins.

First-Party Mold-Related Mixed Decisions

Prudential Prop. & Cas. Ins. Co. v. Lillard-Roberts, No. CV-01-1362-ST (D. Ore. June 18, 2002)

• Visible mold in home, which may not be removable, is distinct and demonstrable damage that is sufficient to constitute a 'direct' and  'physical' loss within meaning of homeowner's policy.
• Mold resulting from leaks due to faulty workmanship would not constitute an 'ensuing loss,' and hence the faulty workmanship exclusion would apply to such loss.
• Summary judgment to insurer denied because fact issues remained regarding the cause of the mold in the home.

Stephen R. Mysliwiec is a partner in the commercial litigation practice group at Piper Rudnick LLP in Washington, DC. Mysliwiec has extensive experience in insurance coverage, surety, and construction defect litigation. He may be contacted at 202-861-3930.