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By: Edward Eshoo, Jr., Childress & Zdeb, Ltd.
Over the past four years, there has been an explosion of first-party property insurance claims regarding coverage for mold damage. How have insurers been responding to these claims? Although some insurers have challenged whether mold damage is covered, most insurers have been covering mold damage ensuing from a covered peril. However, the surge in mold-related claims within the past four years, as well as the verdicts in Ballard v. Fire Insurance Exchange and Anderson v. Allstate Insurance Co., have caused insurers to eliminate coverage or to limit coverage for any type of fungus, including mold.
This paper will begin by discussing the analysis traditionally taken by the insurance industry in evaluating coverage for mold damage under a typical homeowners insurance policy. It will then summarize reported first-party mold cases in which an insurer challenged coverage for mold-related damage. It will discuss the Ballard and Anderson decisions and the lessons learned from these “bad faith” verdicts. Lastly, it will address the recent changes made by homeowners insurers which impact future first-party coverage for mold damage.
I. MOLD DAMAGE TRADITIONALLY HAS BEEN COVERED UNDER A HOMEOWNERS POLICY IF IT IS THE CONSEQUENCE OF A COVERED PERIL.
Mold claims arise out of the presence of water inside the insured dwelling. Mold can grow almost anywhere there is moisture, water damage, high humidity, or dampness. Traditionally, the insurance industry has taken the position that mold damage is covered if it results from a covered peril. As such, coverage for mold damage depends on the source of the water or moisture causing the mold.
Most homeowners’ insurance policies provide dwelling coverage on an all-risk basis. Direct physical loss to the dwelling is covered unless excluded. Most homeowners’ insurance policies exclude loss caused by or resulting from continuous or repeated seepage or leakage of water which occurs over a period of time. Most homeowners’ insurance policies also contain a “water damage” exclusion, which excludes loss caused by floodwater, surface water, waves, tidal water, overflow of a body of water, water which backs up through sewers or drains, water which overflows from a sump, and water below the surface of the ground. Mold damage to the dwelling is therefore covered unless it results from one of these sources of water.
Most homeowners’ insurance policies provide personal property coverage on a specified peril basis, such as direct physical loss to personal property caused by: (1) weight of ice, snow or sleet which causes damage to property contained in a dwelling; (2) rain, snow, or sleet which enters the interior of the dwelling through an opening in a roof or wall caused by the direct force of wind or hail; (3) sudden and accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system, or from within a household appliance (but not loss caused by or resulting from continuous or repeated seepage or leakage of water which occurs over a period of time); (4) sudden and accidental tearing apart, cracking, burning or bulging of a steam or hot water heating system, an air conditioning or automatic fire protective sprinkler system, or an appliance for heating water; and (5) freezing of a plumbing, heating, air conditioning or automatic fire protective sprinkler system, or of a household appliance. Specified peril coverage is also subject to exclusions. Mold damage to personal property is thus covered if it results from any of the specified water perils and if it is not excluded.
If there is mold damage to personal property, and the water that caused the mold damage is from a covered specified peril (for example, wind creates an opening in the roof allowing water to intrude into the dwelling), but there is no direct water damage to the personal property, is there coverage for the mold damage to the personal property? This is a question for which, at present, there is no clear precedent to provide guidance. However, most homeowners insurers adhere to the following procedure: if the investigation establishes a causal link between a covered specified peril and the mold damage to the personal property, then they will pay to clean, repair, or replace the personal property, even where the personal property has not been directly damaged by the specified peril itself. Thus, in the example above, the mold damage to the personal property is covered, even though it sustained no direct damage from water.
Most homeowners’ insurance policies contain two exclusions which, on their face, would appear to bar coverage for mold damage. The exclusions are: (1) loss caused by rust, corrosion, mold, wet or dry rot and (2) loss caused by the discharge, dispersal, seepage, migration, release, or escape of pollutants, which term is usually defined to include any solid, liquid, gaseous or thermal irritant or contaminant.
The “pollution” exclusion has not been and should not be a bar to coverage for mold damage. Most courts, including the Illinois Supreme Court, have concluded that the “pollution” exclusion applies only to injury or damage caused by traditional environmental pollution i.e., industrial discharge of toxic waste into the environment. Accordingly, even if it is considered a “pollutant,” neither mold growth nor the discharge, dispersal, migration, release, or escape of mold spores in a contained or indoor environment constitutes the type of traditional environmental pollution contemplated by the exclusion.
Likewise, the “mold” exclusion has not been and should not be a bar to coverage for mold damage. Under the rule of insurance contract construction known as “noscitur a sociis,” language should be construed in accordance with the words which are associated with it. The term “mold” is surrounded by types of loss (rust, corrosion, wet or dry rot) that occur naturally over a period of time. As such, the intent of the mold exclusion is to bar coverage for mold which occurs gradually, and which is not associated with a fortuitous event.
According to William P. Wilson, Jr., Director of the Virtual University for the Independent Insurance Agents of America, Inc.:
“It is the consensus opinion of many industry experts that the purpose of Exclusion 2.e(3) [smog, rust or other corrosion, mold, wet or dry rot] is to preclude coverage for mold that arises naturally due to high relative humidity or an otherwise excluded loss (e.g., flooding, defective construction, etc.), and not due to an otherwise covered loss such as a burst water pipe. So, in some situations, mold damage would most likely be covered, while it wouldn’t in others. This position is bolstered by the other excluded causes that appear in Item (3) of the exclusion . . . smog, rust, corrosion, rot. These are all naturally occurring phenomena that usually take place over a period of time as a result of atmospheric conditions.
A premise for supporting the position that the exclusions above do not apply to mold resulting from an otherwise covered peril is the fact that these exclusions do not exist in the named perils homeowners forms such as the HO-2. So, if a covered peril is the efficient proximate cause of the mold, such damage is covered. This argument is also supported by the Filing Memorandum which accompanied the ISO 1991 Homeowners filing. According to that memorandum, referring to a change in the deterioration exclusion wording, ‘This change is being made to avoid having the Special Coverage forms provide lesser coverage than what is provided under a Named Perils form. . . .’ In other words, according to ISO, a ‘special’ (a.k.a. ‘all risks’) form should not provide lesser coverage than a named perils form.”
This is the interpretation advanced by the Fire, Casualty and Surety (“FC&S”) Bulletins, a National Underwriter Company publication which is a recognized resource in the insurance industry for insureds and insurers in interpreting policy provisions:
“There is an exclusion for mold in the homeowner’s forms. The reason is that the exclusion lies within the group of things that will happen over time, such as rust, corrosion, and wear-and-tear, and thus are uninsurable. When a homeowner allows a leaky pipe to keep on dripping, or allows mold to grow within a steamy bathroom, then there is no coverage. But, the FC&S position is that mold originating from a covered event, such as a major storm or a burst pipe, is covered. And in fact, under certain conditions, the 2000 ISO homeowners’ forms specifically cover mold, fungus, or wet rot damage; coverage exists when the damage results from accidental discharge if such damage is hidden.”
This is the interpretation advanced by Ken Brownlee, a recognized author and editor of insurance claims adjusting textbooks:
“In first party claims, the [mold] exclusion only applies if the mold or other excluded perils such as deterioration or the dispersal of pollutants is the initiating cause of loss, not the consequence of a covered peril, such as a broken water pipe, a fire, wind-storm, or weight of ice, sleet, or snow. For the exclusion to apply, the mold has to occur naturally over time as a result of climactic conditions or an otherwise excluded moisture problem.”
This also is the interpretation advanced by the Illinois Department of Insurance on its website as well as in response to inquiries made by insureds.
Interpreting the mold exclusion in the manner above is not only consistent with but required by the well-established rule of insurance contract construction that “[p]rovisions in insurance policies that limit or exclude coverage are to be construed liberally in favor of the insured.” Under this canon of insurance contract construction, even if a particular limiting or exclusionary phrase or term is capable of being interpreted in the manner sought by the insurer, where another interpretation favorable to the insured reasonably can be made that construction must be applied. Interpreting the mold exclusion liberally in favor of insureds thus results in the conclusion that mold damage which originates from a covered peril is not excluded.
In addition to the “mold” and “pollution” exclusions, insurers may assert the exclusions contained in most homeowners’ insurance policies for loss to the dwelling (1) caused by wear and tear and deterioration and (2) caused by faulty, inadequate, or defective: (a) workmanship, repair, construction, renovation, or remodeling; (b) materials used in repair, construction, renovation, or remodeling; or (c) maintenance. However, both the “wear and tear” exclusion and the “faulty, inadequate or defective” exclusion cover any “ensuing loss” to the dwelling not excluded or excepted.
As an example, a roof leaks, with resultant interior water and mold damage. The roof was in a worn and torn condition and had been faultily maintained. The leaking roof itself is not covered because of the “wear and tear” and “faulty maintenance” exclusions. The “water damage” exclusion does not preclude coverage for the interior water and mold damage. Therefore, the interior water and mold damage is not “excluded or excepted,” and is a covered “ensuing loss.”
II. LEGAL CHALLENGES INVOLVING FIRST-PARTY MOLD-RELATED CLAIMS: A MIXED BAG OF APPLES.
Prior to 1999, there had been a relative paucity of published cases concerning first-party insurance coverage for mold damage, largely due to the fact that insurers had been covering mold damage if it was the result of a covered loss. However, since 1999, there have been a number of legal challenges involving mold-related claims. The following cases illustrate how courts have addressed the issue of first-party coverage for mold damage.
In ColumbiaKnit, Inc. v. Affiliated FM Insurance Co., rainwater entered the insured premises and saturated some of a clothing manufacturer’s garments and fabrics stored therein. The policy insured against “all risks of direct physical loss of or damage to the property insured except as hereinafter excluded.” The insured contended that all of the property stored in the warehouse had suffered direct physical loss or damage due to direct contact with water or prolonged exposure to high humidity, and mold and mildew from the air and wet garments. In so far as all the property in the building had suffered direct, physical loss or damage, the insured maintained that the issue in this case was not coverage of property, but the extent of damages to the property covered. The insurer took the position that, as a matter of law, the insured’s claims for damages to property stored in the warehouse and not subjected to direct water intrusion were not covered under the policy, and that only a small portion of the property (that which had sustained damage by water intrusion) had sustained a direct physical loss. In denying the insurer’s motion for partial summary judgment, the district court reasoned as follows: goods need not have been water-soaked from the water intrusion to be covered; fabric and garments in the building that are moldy as a result of the water leak are covered property under the policy; fabrics and garments with a pervasive, persistent or noxious odor may also be physically damaged property; and if the insured established at trial a class of garments which had increased microbial counts that would, as a result, develop either an odor or mold or mildew, those items would be covered as well.
In Bowers v. Farmers Insurance Exchange, mold damage to the floors, carpets, walls, paneling, doors, window coverings, insulation, rafters, joints, and other surface areas of the insured’s rental house occurred when her tenants, without her knowledge, converted a basement portion of the house into a hot house for growing marijuana. Farmers denied the claim for mold-related damage, referencing the “mold” exclusion. The insured filed suit and, upon cross-motions for summary judgment, the trial court found in favor of Farmers. The Washington Court of Appeals reversed, reasoning that the tenants’ conduct in creating a sauna-like environment in the basement was an act of “vandalism”, which was a covered peril, and that the tenants’ vandalism was the “efficient proximate cause” of the mold damage. Under the efficient proximate cause doctrine, if the insured successfully demonstrates that the proximate cause of the loss is covered, the entire loss is covered notwithstanding the fact that an event in the chain of causation was specifically excluded from coverage.
In Home Insurance Co. v. McClain, rainwater leaked into the insureds’ house as the result of roof construction defects. The leaking water had collected and soaked the stud areas behind interior walls, damaging the walls, ceilings, and sub-floors. The rainwater provided an environment for mold and bacteria to grow in the dwelling, thus rendering it uninhabitable. The insureds submitted a claim for the mold and bacteria damages, which was denied on the basis of the policy exclusion for “mold.” The insureds filed suit and, after the submission of cross-motions for summary judgment, the trial court found in favor of the insureds. The Texas Court of Appeals affirmed, reasoning that the mold damage was the consequence of the water damage and, therefore, within an “ensuing loss” exception to the “mold” exclusion.
In Trappers Lodge Condominium Association, et al. v. Travelers Insurance Co., numerous condominium units began experiencing water leakage and staining around sliding glass doorwells. Although some units had not yet exhibited any damage or loss, the insureds, three condominium associations, repaired the doorwell area in every unit, which repairs included re-caulking and the installation of flashing as a preventive measure. The insureds sought to recover the repair costs from Travelers, their property insurer. Travelers declined reimbursement and the insureds subsequently filed suit. In granting Travelers’ motion for summary judgment, the district court concluded that the loss fell within the exclusions for loss or damage caused by or resulting from “fungus,” “decay,” “deterioration,” “continuous or repeated seepage or leakage of water,” and “faulty, inadequate or defective” design, workmanship, or construction. The district court also concluded that two of the condominium associations failed to provide timely notice of the loss and that such failure to timely notify it of the damage materially prejudiced Travelers’ ability to adjust and to investigate the claims.
In Lexington Insurance Co. v. Unity/Waterford-Fair Oaks, Ltd., mold damage to first and second floor apartment units and other damage to second floor units were caused by a severe rainstorm and flooding at the insured’s apartment complex. Lexington, the insurer for the apartment complex, sought a declaratory judgment that it was not liable either for the cost to abate and repair the mold damage or for the cost to repair the other damage. The district court granted Lexington’s summary judgment motion. The district court concluded that coverage was excluded by the “Pollution, Contamination Debris Removal Exclusion Endorsement.” The district court found that the mold spores which caused the damage were “contaminants” or “pollutants,” inasmuch as both terms were defined by the insurance policy to include “fungi,” and that the process of mold proliferation involves existing mold bodies giving off reproductive spores that are released, discharged, or dispersed via the air into the surrounding environment. The district court also concluded that the roof leaks were caused in part by inadequate maintenance of the roof and that Lexington was therefore shielded from liability for damages resulting from the roof leaks pursuant to the Anti-Concurrent Cause Clause, which provided, in relevant part: “[t]his Agreement does not insure against loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.”
In Sather v. State Farm Fire & Casualty Insurance Co., storms damaged the insureds’ home in June of 1998. The insureds discovered a significant mold problem in their home in early 2000. In June of 2000, State Farm agreed to pay $37,917.31 to help reduce the mold. In December of 2000, the insureds left their home due to the mold. State Farm denied all of the insureds’ claims for mold-related damage on the basis that the plain language of the policy excluded coverage for mold damage. The district court agreed and entered summary judgment in favor of State Farm. The Minnesota Court of Appeals affirmed, in the process rejecting the insureds’ claim that the district court erred in not giving them more time for discovery before responding to the summary judgment motion. If proper discovery had been conducted, including obtaining State Farm’s Operation Guide 75-110 entitled “Mold, Mildew, and Other Fungi”, the result may have been different. That Operation Guide, which provides general guidelines for claims representatives handling claims involving mold, mildew, or other type of fungi, demonstrates that mold damage resulting from a covered peril is a coverage intended by State Farm’s homeowners insurance policy. Additionally, State Farm recently amended its homeowners insurance policy (FP-7955) by adding a “Fungus” exclusion. The notice which accompanied the exclusion endorsement stated that it “eliminates coverage for any type of fungus including mold.” The obvious question is “why would State Farm need to amend its homeowners insurance policy to exclude fungus, including mold, if, as State Farm argued in Sather, it was excluded to begin with”?
In Myers v. State Farm Fire and Casualty Co., the insureds filed a claim with State Farm after their home was rendered uninhabitable due to mold. One expert opined that the mold problem was caused by moisture in the crawl space resulting from defective plumbing. Another expert observed excessive moisture and active fungal growth in the crawl space and opined that the moisture in the crawl space did not result solely from the defective plumbing system but also from defective construction of the crawl space. A third expert who inspected the home concluded that the fungal growth in the home was not directly related to the fungal growth in the crawl space, but rather was the type of growth to be expected in a 100-year-old home. In affirming the district court’s grant of summary judgment in favor of State Farm, the Minnesota Court of Appeals found that all of the damage that occurred to the insured dwelling resulted from the continuous or repeated seepage or leakage of water from a plumbing system or plumbing fixture, from improper construction and grading, or from mold or fungal contamination, and that the policy’s plain language excluded coverage for those damages.
In Cooper v. American Family Mutual Insurance Co., a plumbing leak damaged drywall and flooring in the insured’s master bedroom and hall closet. American Family paid for repairs to the drywall and flooring, but denied coverage for the ensuing mold damage on the basis that the policy excluded coverage for “mold” regardless of the cause. The district court agreed with American Family. The district court declined to apply the “efficient proximate cause” rule as urged by the insured because Arizona had not adopted such rule. The district court also rejected the insured’s argument that because she filed a claim for loss resulting from a covered accidental event, all ensuing loss, including mold, should be covered under the “resulting loss” exception to the “mold” exclusion.
In Liristis v. American Family Mutual Insurance Co., there was a fire in the insured dwelling resulting in fire damage and also water damage because of the water used to suppress the fire. Within a month or two after the fire, the insureds noticed mold growth. Following the repairs after the fire, the roof leaked each time it rained, resulting in water soaking the walls, ceiling, carpeting and property inside the home. The insureds made a claim for contamination caused by the mold. American Family denied the claim based on a policy exclusion for “mold.” The insureds filed suit. Both parties moved for summary judgment on the issue of coverage. The trial court concluded that there was no coverage for the mold damage, and entered judgment in favor of American Family. The Arizona Court of Appeals reversed. Agreeing that mold may be either damage or a cause of a loss, depending on the circumstances, the appeals court concluded that mold damage caused by a covered event is covered, but that losses caused by mold may be excluded. Thus, the insureds were entitled to coverage for the mold damage caused by the fire and the water used to extinguish the fire, including the cost of removal or repair of the damage. However, the appeals court remanded the case back to the trial court because a question of fact was presented as to whether some or all of the mold damage was caused by the fire.
In Prudential Property & Casualty Insurance Co. v. Lillard-Roberts, the insurer sought declaratory relief that its homeowners insurance policy did not cover the insured’s claim for water and mold damage to her personal property. Although the cause of the water leakage and resulting mold damage was unknown, for purposes of summary judgment the district court assumed that the named peril of accidental discharge or overflow of water or steam from within a plumbing system caused the mold damage. The district court stated that the insured had been forced to abandon all of her personal property, assuming that it was contaminated by mold and causing health issues. The district court also stated that mold spores do not attach to non-porous surfaces, namely metal and glass, which can easily be remediated. However, mold spores can attach to any porous surface, including “cloth, carpets, leather, wood, sheet rock, insulation (and on human foods) when moist conditions exists,” which may not be subject to remediation. As a result, when viewing the record in the light most favorable to the insured, her porous personal property was sufficiently contaminated by mold to the point that it had become worthless to her. Therefore, Prudential was not entitled to summary judgment as to the personal property on the ground that no “direct” and “physical” loss had occurred.
In Herzog v. State Farm Fire & Casualty Co., the insured noticed a suspected mold spot on the interior wall of his bedroom. He also discovered leaks in other areas of the house and thought that mold was present in those areas. He later determined the mold had become airborne and contaminated the contents of the building. He submitted a claim with State Farm, who denied it on the basis that there was no coverage because the mold damage did not result from one of the 16 enumerated perils for personal property coverage. The district court agreed, and granted State Farm’s summary judgment motion. The district court reasoned as follows: damage to personal property caused by mold is not listed as one of the insured losses for personal property; in his complaint, the insured only alleged mold damage; and the complaint did not reference water damage at all.
In Churchill v. Factory Mutual Insurance Co., the insured sought to recover for mold and water intrusion damage at its shopping center. The insured moved for partial summary judgment as to Factory Mutual’s affirmative defenses to coverage based on its policy exclusions. Factory Mutual asserted that faulty construction and other factors caused, or contributed to, the damage. The district court denied the motion because the “efficient proximate cause” of the losses had not been determined.
In Shelter Mutual Insurance Co. v. Maples, the insured, while residing in Saudi Arabia, contracted for construction of a single-family home in Arkansas. The insured, who remained in Saudi Arabia, took reasonable precautions to winterize the residence by leaving a key with the contractor and asking him to winterize the residence. At some unknown time, a water pipe froze and burst, and between four to six inches of water stood continuously in the basement until the contractor discovered the problem months later. While the standing water caused only minimal structural damage to the basement, the humidity from the standing water caused mold to form on all of the interior surfaces of the residence. As a result of the mold, the residence became uninhabitable, requiring demolition. The insured reported the loss to Shelter Mutual, and Shelter thereafter instituted an action to determine its duty to pay. The district court concluded that Shelter was entitled to summary judgment, reasoning that the policy language clearly provided that any loss due to mold was not covered regardless of its cause. The Eighth Circuit Court of Appeals reversed, concluding that summary judgment was improper because the determinative question was a factual one: whether the frozen pipe or the mold was the dominant and efficient cause of the loss.
In Salerno v. State Farm Fire and Casualty Co., the insured’s home was damaged by flooding during Hurricane Floyd on September 16, 1999. Her insurer, State Farm, recommended Servpro to clean her home. Servpro removed the rugs and put fans out to dry the water for a few days. When Servpro came to pick up the fans, the insured asked about mold growth because of an odor in the home. Servpro sprayed the floor perimeter in the rooms on the ground floor, but allegedly did not spray the unfinished areas or the closets. State Farm and Servpro allegedly told the insured that there was no further mold problem arising from the flooding. In August of 2001, the insured came into contact with Servpro again for unrelated damage to her son’s home. At that time, she asked Serpro to inspect her home. They did so and found mold in the heater room and in the wallboards in the crawlspace, and also pointed out that the paneling was faded and stained from the water damage. The insured made numerous claims against both Servpro and State Farm for the ongoing mold problem. In her complaint, the insured alleged that she has been out of work since the time the flood damage was allegedly improperly repaired due to her medical condition arising from continuous exposure to the mold. State Farm raised the issue that the insurance policy’s one-year suit limitations clause barred the insured’s claim filed three years after the original damage and claim. The Superior Court of Delaware agreed, reasoning that the insured knew, or reasonably should have known, of the presence of mold and its effects upon her and her property some time within the first year after the alleged negligent work. Since she did not bring suit within one year after the date of damage, instead waiting until three years later to file suit, the insured’s suit was time-barred.
In Fiess v. State Farm Lloyds, the insureds brought suit against State Farm for mold damage to their home arising out of flooding and other damage resulting from Tropical Storm Allison. State Farm moved for summary judgment. The district court granted the motion, agreeing with State Farm that the claim for mold damage was expressly excluded from coverage regardless of the cause. The district court also rejected the insured’s argument that mold damage caused by water damage was covered as an “ensuing loss,” reasoning just the opposite: that “ensuing” water damage must result from an exclusion such as mold.
In Flores v. Allstate Texas Lloyd’s Company, the insureds brought suit alleging breach of contract, bad faith, and insurance code violations against its homeowner’s insurer, Allstate, for failing to properly investigate and to fully pay their claims for mold damage to their home. Allstate moved for summary judgment on the grounds that the insureds’ claims were barred for failure to comply with certain conditions precedent to coverage under the policy; specifically, prompt notice and mitigation of damages. Allstate’s position was that the insureds had a duty under the policy to provide prompt notice of each initial water event that they contend caused ensuing mold damage. All of the leaks identified by the insureds occurred months to years prior to their claim for mold damage. Had the insureds provided such notice, and made necessary repairs, Allstate argued that it would not have been faced with the ensuing mold claim.
As a preliminary matter, the district court concluded that the policy covered mold damage to the dwelling and to the personal property that ensued from an otherwise covered water damage event under the policy. In reaching this conclusion, the district court declined to follow the district court’s reasoning in Fiess; instead, it construed the “mold” exclusion as precluding coverage for mold occurring naturally or resulting from a non-covered event, but not for mold “ensuing” from a covered water damage event. The district court also concluded that a homeowner’s failure to provide initial notice of a water event within the home should not, as a general rule, prevent the homeowner from subsequently providing prompt notice of, and receiving coverage for, ensuing mold damage that becomes manifest or apparent well after the initial water event, where such initial failure to provide notice is reasonable under the circumstances. The district court’s reasoning was as follows: the policy required prompt notice “of facts relating to the claim;” an insured cannot provide notice until he or she is aware of facts relating to a “claim;” a party cannot be said to sustain actual property damage until such damage becomes manifest; insurance coverage is not even triggered until identifiable damage occurs; and, by extension, there can be no duty to notify until damage becomes apparent. Because genuine issues of material fact existed concerning the insureds’ purported failure to comply with the requirements of prompt notice and reasonable repairs under their homeowners insurance policy, summary judgment was inappropriate.
Salinas v. Allstate Texas Lloyd’s Company involved the same issues addressed in Flores. The district court granted Allstate summary judgment on the insureds’ mold claims stemming from HVAC and master bath shower pan leaks on the grounds that they failed to comply with the requirements of prompt notice and reasonable repairs under their policy. The district court denied summary judgment on the insureds’ mold claims resulting from roof damage. The district court also denied the parties’ respective summary judgment motions regarding the interpretation of the insurance policy. The district court rejected Allstate’s argument that the insurance policy precludes all mold claims. The district court also rejected the insureds’ arguments that the mold exclusion is ambiguous and that mold ensuing from water damage that is itself caused by another excluded loss, such as deterioration, is also covered under the insurance policy.
In Schrock v. Feazel Roofing Co., the insureds contracted with a roofing contractor in 1994 to repair the leaking roof of their residence. Between 1994 and 2000, multiple roof repairs were performed in an effort to halt the leaks. After some roofing shingles came loose, the insureds discovered water damage had caused the supporting studs to disintegrate. They hired an architect to determine the extent of the damage. Following an inspection of the property, the architect concluded that the north wall of the residence showed “wood disintegration and a technical wall collapse.” The architect also reported damp, wet and rotten wood; moldy fiberglass insulation; and interior wall stains. The insureds notified their insurer, Indiana Insurance Co., who hired an engineering firm to review the damage. The engineering firm concluded the damage was caused by long-term water infiltration probably caused by installation errors made by the roofing contractor. Indiana denied coverage, citing policy exclusions. The insured filed suit, claiming they were entitled to coverage because the damage to the home was caused by rainwater, which was a covered peril. The trial court granted summary judgment in favor of Indiana, holding that the policy excluded loss caused by “rot” and “deterioration” regardless of its source. The Ohio Court of Appeals agreed with the trial court that, based upon language set forth in the homeowner’s insurance policy, the damage to the residence was excluded. The appeals court also rejected the insureds’ claims that their home was covered by the policy’s clauses concerning ensuing loss and collapse. The dissenting opinion was that because damage caused by rainwater was not an excluded peril, any ensuing loss resulting from rainwater damage was covered.
In Kelly v. Farmers Insurance Co., Inc., ruptured pipes caused water and mold damage in the insureds’ home in the summer of 2001. Farmers authorized coverage for the repairs, which included several remediation-related tasks, the completion of which was deemed necessary to adequately repair the property damage and to prevent the spread of the mold. The tasks included: restoration of the interior plumbing, replacement of Sheetrock, and application of a sealant under and steam cleaning of affected carpeting. The insureds hired contractors to perform the repairs and clean-up tasks identified by Farmers, which work was completed in the fall of 2001. In December of 2001, the insureds contacted Farmers because of suspicions that the mold problem had not been eliminated. Following testing which revealed that the home was infected with mold, Farmers denied the insureds’ claim for mold-remediation coverage pursuant to the mold-exclusion provision in the Farmers homeowners policy. Suit followed, and Farmers moved for summary judgment, arguing that the unambiguous policy language excluded coverage for mold.
In denying the motion, the district court initially determined that Oklahoma follows the efficient proximate cause doctrine. The district court next determined that the mold-exclusion provision in the policy did not circumvent the efficient proximate cause doctrine. The district court reasoned that that language in the policy simply excludes losses “consisting of, or caused directly or indirectly by: . . . mold. . . .” While this language generally excludes insurance coverage for mold, it does not expressly and specifically disclaim coverage when one or more covered causes contributes to the mold-related loss. Thus, the language in the policy was inconsistent with the policy language most frequently determined by courts to effect a circumvention of the efficient proximate cause doctrine. The district court found, as have the majority of the courts that have addressed the issue, that in order to contract around the doctrine, the policy provision intended to effect the circumvention must explicitly and specifically disclaim coverage for the losses that arise from a combination of excluded and covered causes, regardless of the sequence in which the various causes occurred. Lastly, the district court determined that whether the water damage from the ruptured pipes constituted the proximate cause of the insureds’ loss was a question of fact properly reserved for a jury.
In Tatalovich v. Pennsylvania National Mutual Insurance Co., the insureds sought to recover for mold damage allegedly caused by water leaking from the roof of their home into the bathroom area where the mold was discovered. The insurance policy excluded coverage for damages caused by mold, but covered water damage. The insurance policy also covered any ensuing loss “not excluded or excepted.” Both parties moved for summary judgment. The court first rejected the insurer’s argument that mold cannot be covered by the ensuing loss clause because it is specifically “excluded or excepted” in the policy, reasoning that such argument would completely emasculate the ensuing loss clause. At best, the court noted, the language in the ensuing loss clause is susceptible to more than one meaning and reasonably intelligent persons could differ as to whether mold can be an ensuing loss, meaning that the clause is ambiguous and must be construed against the insurer and in favor of the insureds. The court then accepted the insureds’ argument that Pennsylvania courts have recognized the “efficient proximate cause” rule i.e., if risk insured against was the proximate cause of a loss, the insured may recover even though a peril excluded from coverage may have contributed thereto. Thus, if the water damage (a covered claim) caused the mold (a non-covered claim) to develop, according to the court the insurer would be required to pay under the terms of the policy through the ensuing loss provision. However, the court declined to enter summary judgment in favor of the insureds because a factual dispute existed as to whether the mold was caused by a covered peril.
In Factory Mutual Insurance Co. v. Estate of Campbell, the Estate owned a commercial property in Southern California, the Market on the Lake (“the Market”). The Estate was aware in the mid-1980s that water leaks could be expected throughout the complex because of construction defects. The Market suffered yearly bouts of water damage attributable to rain water leaking into the complex from the time the Estate purchased the property until Factory Mutual’s policy covering the Market went into effect in 1995. Rain water damage continued to arise episodically during the period Factory Mutual’s policy was in effect. Hazardous mold began growing in the Market following heavy rains during the winter of 1997/1998. The Ninth Circuit, Court of Appeals affirmed the district court’s grant of summary judgment in favor of Factory Mutual. The Ninth circuit reasoned that the proximate cause of the hazardous mold was the long-standing construction defects throughout the Market. The Ninth Court also reasoned that because the Market’s construction defects were the proximate cause of the pre-1995 water intrusion damage and the water intrusion damage that caused the hazardous mold growth, the hazardous mold growth represented a “loss-in-progress” at the time Factory Mutual’s policy covering the Market went into effect.
In Miller v. Farmers Insurance Group, the insureds moved for partial summary judgment to the effect that their Texas Standard Homeowners Policy covered certain losses caused by ensuing water damage, whether or not such loss included mold, Farmers filed a counter motion for summary judgment in connection with the same provisions of the policy, arguing that mold caused by ensuing water damage is always excluded. The policy was an “all-risk policy”. All perils are covered unless excluded. Exclusion “f” excluded loss caused by, among other things, wear and tear, deterioration, rust, rot, and mold or other fungi. However, exclusion “f” contained an exception that reinstated coverage for ensuing loss caused by water damage “if the loss would otherwise be covered under this policy.” The district court granted the insureds’ motion. The district court found that the insureds’ construction of the policy was not unreasonable, and therefore adopted the same i.e., that dwelling losses (including mold losses) caused by water damage ensuing from any of the perils listed in exclusion “f” are covered so long as such damage is not excluded by some other provision of the policy besides exclusion “f”.
In Dahlke v. Home Owners Insurance Co., melting ice and snow on the insureds’ roof leaked into their house causing the ceiling to collapse, and causing damage to the walls. Various contractors and adjusters examined the house and determined that, in addition to the ceiling and wall damage, the leaking water fostered mold growth which caused the house to be a total loss. Before discovering the extent of the damages to the house caused by mold, Home Owners agreed to pay for repairs, provide temporary housing, and event pay for some remediation of the mold problem. But after further investigation revealed the full extent of the mold damage, Home Owners denied the claim for mold damage, relying on an exclusionary provision of the parties’ insurance policy that expressly excluded coverage for loss caused directly or indirectly by mold. Additionally, the policy expressly excluded coverage for such losses “whether or not any other cause or event that contributes concurrently or in any sequence to the loss.” The insureds filed suit, alleging breach of contract and violation of various Michigan statutes. Home Owners moved for summary disposition, arguing that no genuine issue of material fact existed that losses caused by mold damage were excluded under the terms of the policy regardless of how or when they were caused. In reversing the trial court’s denial of the motion, the Court of Appeals of Michigan declined to adopt the insureds’ interpretation that, even if damage is of a kind that is named in the exclusion, such as the mold in this case, if the damage results from an otherwise covered event the exclusion does not apply. The appeals courts reasoned that loss caused by mold was expressly excluded regardless of the water damage that contributed concurrently or in any sequence to the loss. Because there was no genuine issue of material fact as to whether the claimed losses caused by mold were excluded under the terms of the insurance policy, the appeals court concluded that the trial court erred in denying the motion for summary disposition.
In Kemmerer v. State Farm Insurance Co., the insured returned home from a two-month trip to Arizona to find her home and belongings significantly damaged from mold infestation. The State Farm policy provided coverage for physical loss to personal property by certain specified perils, including sudden and accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system, or from within a household appliance. State Farm moved for summary judgment, contending that the insured failed to adduce evidence sufficient to create a genuine issue of fact, “that a peril specified by the policy caused the bloom of mold in her home.” The district court agreed with the insured that if a leak from her powder room toilet caused the mold infestation, that leak would fall within a peril outlined in the insurance policy. However, the district court concluded that the insured failed to present admissible expert testimony as to the cause of the mold infestation. Although the report provided by the insured’s environmental consultant contained conclusions as to the presence, levels, and likely health hazards of mold cultures in the house, it did not speak as to the cause of the mold infestation.
In Tellez v. Encompass Insurance Co., an ice storm hit the Texarkana area in December, 2000. The insureds notified Encompass in June, 2002 that their home was suffering damage from the presence of mold caused by the ice storm. Encompass denied the claim based on late notice and the “mold” exclusion contained in the insurance policy. The insured filed suit, and Encompass moved for summary judgment, arguing that the insured did not give “prompt” notice of the loss as required by the policy. The insureds, in response, claimed that notice was timely because the mold damage did not manifest until June, 2002 and it would therefore have been impossible to report this damage before this point in time. The district court granted the motion, reasoning as follows: “property damage” must occur during the policy period; the timing of injury to property is the point at which the damage manifested itself; the manifestation date of June, 2002 was outside of the policy period; because the policy defined “property damage” to include incidents within the policy period, there was no property damage; and since there was no property damage, there was no occurrence.
As the results of the cases summarized above attest, few general observations about first-party mold-related insurance coverage cases can be made. The cases often turned on their particular facts and the specific terms of the policy at issue. However, in many of the cases, causation was the name of the game. Was the most important, proximate cause of the loss covered? If so, then there was coverage for the mold damage that was the result of the covered event. As explained earlier, this is the analysis most insurers have taken in evaluating first-party property coverage for mold-related damage.
III. WATER DAMAGE AND MOLD CLAIMS ARE RIPE FOR EXTRACONTRACTUAL RELIEF.
Section 155 of the Illinois Insurance Code “provides an extracontractual remedy to policyholders whose insurer’s refusal to recognize liability and pay a claim under a policy is vexatious and unreasonable.” Section 155 allows as part of the taxable costs in an action reasonable attorney fees and an amount not to exceed $60,000.
Examples of vexatious and unreasonable conduct on the part of the insurer include: (a) refusing to pay despite knowledge that it was liable and knowledge that refusal would result in serious damage to the insured; (b) failing to adequately investigate a claim; (c) denial of the claim without adequate supporting evidence; (d) failing to evaluate a claim objectively; and (e) interpreting policy provisions in an unreasonable manner.
The question of vexatious and unreasonable conduct within the meaning of section 155 is a factual one, which must be based upon an assessment of the totality of the circumstances, including: the insurer’s attitude; whether an insured was forced to file suit to recover; and if an insured was deprived of the use of its property.
Vexatious and unreasonable conduct on the part of an insurer in a mold claim which, if proven, should constitute a violation of section 155 includes:
(a) failing to promptly contact the insured once the loss is reported;
(b) failing to pay the insured amounts due under the insurance policy within 40 days of the loss, which constitutes an unreasonable delay in paying the insured’s claim as a matter of law;
(c) failing to provide the insured with a reasonable written explanation for the delay in resolving his or her claim, in violation of the regulations promulgated by the Illinois Director of Insurance;
(d) adjusting the claim contrary to and in violation of its own water and mold adjusting guidelines;
(e) adjusting the claim contrary to and in violation of its own property claims handling procedures;
(f) assigning claim representatives to adjust the claim who are untrained and inexperienced in mold, and who make numerous misrepresentations to the insured;
(g) not attempting in good faith to effectuate a prompt, fair, and equitable settlement of the claim, a claim in which liability is reasonably clear;
(h) without proper cause, wrongfully and knowingly refusing to reimburse the insured for certain losses, and delaying payment on other losses which it acknowledges are covered under the insurance policy, such losses including additional living expenses and dwelling and other structural repairs and replacements;
(i) forcing the insured to retain legal counsel to investigate his or her claim and to file a lawsuit to recover the benefits that should have been immediately forthcoming under the insurance policy;
(j) failing to acknowledge with reasonable promptness pertinent communications with respect to the claim;
(k) failing to provide the insured with reports prepared by experts, despite repeated requests for the same;
(l) willfully refusing to undertake its coverage obligations to protect the insured, instead undertaking a continuous effort to conceal material information from the insured, to procrastinate and to delay at every turn, and acting to maximize its own financial interest at the expense and to the financial demise of the insured;
(m) unreasonably delaying investigation or payment of the claim by requiring both a formal proof of loss form and subsequent verification that would result in duplication of information and verification appearing in the formal proof of loss form;
(n) refusing to pay the claim without conducting a reasonable investigation; and
(o) failing to affirm or deny coverage of the claim within a reasonable time after having completed its investigation related to such claim.
Although “bad faith” claims are preempted by section 155 , juries in Texas and California have awarded significant damages for the bad faith exhibited by two insurance companies in their handling of water and mold damage claims arising out of plumbing leaks. In Ballard, a Texas jury awarded a Farmers insured $32 million, while in Anderson, a California jury awarded an Allstate insured $18 million.
What began as a single claim for water damage to hardwood floor evolved to include mold contamination of the entire house and outbuildings. The jury awarded $2,547,350 to replace the home; $1,154.175 to remediate the home, $2,000,000 to replace the contents of the home; $350,000 for past and future additional living expenses; $176,000 for Ballard’s cost of the appraisal process; $5,000,000 for Ballard’s mental anguish; $12,000.000 in punitive damages; and $8,891,000 for attorneys’ fees. The district court rendered a final judgment for over $33 million, reducing actual damages by $2,045,204.28 (the total amount that Fire Insurance Exchange (FIE), a member of the Farmers Insurance Group, had already paid to Ballard on her claims) and including prejudgment interest and a statutory penalty under article 21.55 of the Texas Insurance Code on portions of the award.
The Texas Court of Appeals concluded that there was some evidence to support the jury’s finding that FIE breached its duty of good faith and fair dealing and that the breach caused damages to Ballard. Some evidence showed that an FIE adjuster’s lack of authority or experience in handling claims of the Ballard magnitude caused delays in processing the claims. Other evidence called into question FIE’s good faith handling of the claims. Ballard also presented some evidence of a pattern of failure to promptly pay that caused further damage to the house. The Texas Court of Appeals thus affirmed the actual damages award of $4,006,320.72, in addition to prejudgment and postjudgment interest. However, it reversed the jury’s award of punitive damages and mental anguish damages, concluding that there was no evidence in the record that FIE was actually aware that its actions toward Ballard were false, deceptive, or unfairthat is, that FIE was more than consciously indifferent to Ballard’s rights and welfare.
The insured, Thomas Anderson, purchased an Allstate Deluxe Homeowners Policy in June 1996. The policy covered water damage from freezing, with an exclusion of coverage for freezing damage if the house was unoccupied and the owner failed to take reasonable care to maintain heat. Sometime in January 1997, a pipe in Anderson’s attic broke and sprayed water into the house. On January 17, 1997, one of Anderson’s neighbors saw water running down the outside of the house and called to the local water district to have the water turned off. Anderson and his son discovered the damage on February 1, 1997 and reported the loss to Allstate. The process of adjustment then became contentious, resulting in Anderson, who could not inhabit his residence because of mold, filing suit against Allstate in June 1999. The jury found that Allstate breached the insurance contract. The jury also found that Allstate breached its implied duty of good faith and fair dealing in discharging its contractual responsibilities under its policy by acting maliciously and oppressively in not fully compensating for repairs, particularly including elimination of mold. The jury awarded Anderson compensatory damages of $484,853.96 and punitive damages of $18 million. The district court reduced the punitive damage award to five times the compensatory damages. Allstate appealed both awards, and Anderson cross-appealed the district court’s reduction of punitive damages. The Ninth Circuit Court of Appeals affirmed the compensatory award and reversed the punitive damages award.
With respect to the implied duty of good faith and fair dealing, the Ninth Circuit concluded that the jury could properly find that Allstate breached such duty by acting unreasonably when handling Anderson’s claim. Allstate’s actions of refusing to resolve the issue of coverage, refusing to consider evidence of additional loss, offering settlement while withholding a final determination of coverage, pressuring Anderson to pay for an appraisal while still withholding a final determination of coverage, and failing to communicate concerning exposure to asbestos and mold all supported a finding of bad faith liability.
With respect to the punitive damage award, the Ninth Circuit concluded that Allstate’s conduct did not reach the level required for such an award. There was no substantial evidence that Allstate acted with malice, oppression, or fraud in handling Anderson’s claim. The health hazards of mold were less clear at the time of Allstate’s actions than they later became. Some of Allstate’s actions were inconsistent with a finding of malice or extreme indifference to Anderson’s rights, including its payment of $28 per hour to Anderson’s son for cleanup work when he had put in a claim at a lower rate, and its advice to Anderson’s contractor to raise his original estimate to meet that of Allstate’s. Anderson presented sufficient evidence for a jury to find that Allstate later breached its duty of good faith and fair dealing, but even with regard to Allstate’s later dealings, there was not enough evidence for a jury to find that Allstate engaged in such despicable conduct that it should be punished with punitive damages.
As the Ballard and Anderson verdicts demonstrate, water-damage and mold claims are ripe for extra-contractual relief. The attention generated by these two verdicts has thus caused insurers to review their claim-handling processes for both water-damage claims and mold claims to help mitigate their losses and to prevent potential bad faith claims. Lessons learned by insurers from these verdicts have included: increased knowledge of the issues relating to mold; prompt investigation and handling of water and mold damage claims; increased training for adjusters and remediation contractors; and reserving rights and filing declaratory judgment actions if coverage is in doubt.
IV. CHALLENGING MOLD-RELATED EXCLUSIONS AND LIMITATIONS IN HOMEOWNERS INSURANCE POLICIES.
Future coverage under homeowners insurance policies for mold-related damage will be impacted by two recent changes made by homeowners insurers to their policies.
First, some homeowners insurers are re-writing their homeowners insurance policies in such a fashion so as to clearly express their intent not to cover mold damage, even if the mold is precipitated by an otherwise covered peril.
One insurer amended its “water damage” exclusion and developed the following “mold” exclusion:
“Under Section 1 Losses Not Insured, item 2. Water damage is deleted in its entirety and replaced by the following:
2. Water damage.
Acts or omissions of persons can cause, contribute to or aggravate water damage. Also water damage can occur naturally to cause loss or combine with acts or omissions of persons to cause loss. Whenever water damage occurs, the resulting loss is always excluded under this policy, however caused; except we do cover:
1. Direct physical loss to the dwelling or separate structures caused by water damage resulting from build-up of ice on portions of the roof or roof gutters.
2. Loss or damage to the interior of any dwelling or separate structures, or to personal property inside the dwelling or separate structures caused by water damage if the dwelling or separate structures first sustain loss or damage caused by a peril described under Section 1 Losses Insured Coverage C Personal Property.
3. Direct loss to the dwelling or separate structures or personal property if caused by fire or explosion resulting from water damage.
We never, under any circumstances, cover rust, mold, fungus, or wet or dry rot, even if resulting from exceptions 1, 2 or 3 above.”
* * * *
“Under Section I-Losses Not Insured, the following item, item 14. Rust, mold, fungus, or wet or dry rot, is added:
14. Rust, mold, fungus, or wet or dry rot.
Acts or omissions of persons can cause, contribute to or aggravate rust, mold, fungus, or wet or dry rot. Also, rust, mold, fungus, or wet or dry rot can occur naturally to cause a loss or combine with acts or omissions of persons to cause loss. Whenever rust, mold, fungus, or wet or dry rot occurs, the rust, mold, fungus, or wet or dry rot and any resulting loss is always excluded under this policy, however caused.”
Another insurer developed the following “fungus” exclusion:
“g. Fungus. We also do not cover:
(1) any loss of use or delay in rebuilding, repairing or replacing covered property, including any associated cost or expense, due to interference at the residence premises or location of the rebuilding, repair or replacement, by fungus.
(2) any remediation of fungus, including the cost to:
(a) remove the fungus from covered property or to repair, restore or replace that property; or
(b) tear out and replace any part of the building or other property as needed to gain access to the fungus; or
(3) the cost of any testing or monitoring of air or property to confirm the type, absence, presence or level of fungus, whether performed prior to, during or after removal, repair, restoration or replacement of covered property.
Fungus means any type or form of fungus, including mold, mildew, mycotoxins, spores, scents or byproducts produced or released by fungi.”
Second, other homeowners insurers are amending or changing their homeowners insurance policies to provide for limited coverage for loss to property caused by or consisting of mold or fungus.
One insurer’s amendatory endorsement reads as follows:
“In the event of a covered water loss under Coverage A Dwelling Protection, Coverage B Other Structures Protection or Coverage C Personal Property Protection, we will pay up to $5,000 for mold, fungus, wet rot or dry rot remediation.
Remediation means the reasonable and necessary treatment, removal or disposal of mold, fungus, wet rot or dry rot as required to complete repair or replacement of property we cover under Coverage A Dwelling Protection, Coverage B Other Structures Protection or Coverage C Personal Property Protection damaged by covered water loss, including payment for any reasonable increase in living expenses necessary to maintain your normal standard of living if mold, fungus, wet rot or dry rot makes your residence premises uninhabitable. Remediation also includes any investigation or testing to detect, measure or evaluate mold fungus, wet rot or dry rot.”
Another insurer’s change endorsement reads, in part, as follows:
“Fungi, Wet or Dry Rot, or Bacteria. We will pay up to $10,000 for:
a. the direct physical loss to covered property caused by fungi, wet or dry rot, or bacteria;
b. the cost to remove fungi, wet or dry rot, or bacteria from covered property;
c. the cost to tear out and replace any part of the building or other covered property as needed to gain access to the fungi, wet or dry rot, or bacteria;
d. the cost of any testing of air or property to confirm the absence, presence or level of fungi, wet or dry rot, or bacteria, whether performed prior to, during or after removal, repair, restoration or replacement. The cost of such testing will be provided only to the extent that there is a reason to believe there is the presence of fungi, wet or dry rot, or bacteria;
‘Fungi’ means any type or form of fungus, including yeast, mold or mildew, blight or mushroom and any mycotoxins, spore, scents or other substances, products or byproducts produced, released by or arising out of fungi, including growth, proliferation or spread of fungi or the current or past presence of fungi. However, this definition does not include any fungi intended by the insured for consumption.”
The Insurance Services Office, Inc. (ISO), an advisory organization serving insurers, also recently introduced Optional Limited Fungi, Wet or Dry Rot, or Bacteria Coverage Endorsements. These endorsements provide limited first party coverage for loss due to fungi, wet or dry rot, or bacteria when such loss occurs during the policy period. Up to $10,000, $25,000 and $50,000, on an aggregate basis, is provided for loss to property caused by fungi, wet or dry rot, or bacteria. Coverage includes the cost to remove such fungi, wet or dry rot, or bacteria from covered property, the cost to tear out any part of covered property to gain access to the fungi, wet or dry rot, or bacteria, and the cost to test for the presence of such fungi, wet or dry rot, or bacteria. Coverage is available only if loss or costs result from a peril insured against that occurs during the policy period.
The American Association of Insurance Services (AAIS), another advisory organization serving insurers, recently developed advisory endorsements addressing the mold exposure under its homeowners program. Three options are available: (1) a complete exclusion of coverage for losses arising from “wet rot, dry rot, bacteria, fungi, or protists,” categories that encompass mold and other living organisms; (2) an endorsement granting limited coverage for losses related to wet rot/dry rot/bacteria/fungi/protists that arise from any peril covered by the underlying policy; and (3) an endorsement granting limited coverage for losses related to wet rot/dry rot/bacteria/fungi/protists that arise only from the accidental discharge of liquids or steam from certain systems. In terms of coverage mechanics, the endorsements exclude building and personal property coverage for losses arising from “wet rot, dry rot, bacteria, fungi, or protists” and amend the “Wear and Tear” exclusion to remove the underlying form’s reference to mold, wet rot, and dry rot. For the limited coverage endorsement, a property coverage extension for “Wet Rot, Dry Rot, Bacteria, Fungi, and Protists” is added back in with an aggregate sublimit.
Insureds’ counsel confronted with these “new” policy provisions should not automatically accept them. Insureds’ counsel should consider the following three approaches in an effort to avoid their application.
First, insureds’ counsel handling mold claims involving these new forms and endorsements should check insurance department websites and inquire whether the insurer has met state requirements for filing and using mold-related exclusions and limitations. A number of Departments of Insurance have issued regulations or bulletins concerning insurer filings of new forms and endorsements regarding exclusions and limitations for mold, fungi, wet rot, dry rot, bacteria and related causes of loss.
For example, the Arkansas Insurance Department and the Louisiana Department of Insurance have issued bulletins which allow a homeowners insurer to use endorsements that exclude coverage for mold if the exclusion is directed at precluding coverage for: (1) remedial costs, such as the cost of testing the insured premises for mold, or the costs of containment or fumigation of the insured premises, whether the mold is the result of a covered cause of loss or otherwise; or (2) mold that is not the result of a covered cause of loss.
Another example is the Nebraska Department of Insurance, which issued a newsletter explaining that on property losses by mold (and other related terms) the exclusion applies only if the mold is not a result of a covered cause of loss. If a result of a covered cause of loss coverage limits that are in place for the property portion of the insurance contract will apply without any other limitations, restrictions or deductibles than are already on the policy.
Second, insureds’ counsel handling mold claims involving renewal policies with new provisions that materially diminish coverage for mold damage should ascertain whether the insurer complied with applicable state law. Many states require written notice to the insured prior to renewal if the insurer intends to renew with material modifications i.e., elimination of coverages, material restrictions or reductions in coverage, or other changes that materially alter the coverage provided in the expiring policy. The notice itself must inform the insured of the modifications. The purpose of the notice requirement is to protect the insured from having significant changes made to their insurance coverage without their knowledge. The length of the notice and the particular form of proof required to prove that notice was provided to the insured vary from state to state.
The remedy for an insurer’s failure to comply with the notice requirements regarding a material modification is that the modification does not take effect. Guillen v. Potomac Insurance Co. of Illinois is a case which illustrates the consequences of an insurer’s failure to comply with the notice requirement for a material policy modification.
That case involved whether the insurer had adhered to the notice requirements of section 143.17a(b) of the Illinois Insurance Code with respect to the addition of a lead exclusion to a commercial general liability renewal insurance policy. The Illinois Supreme Court turned to subsection (a) of the statute, which governs an insurer’s notice obligations when it chooses not to renew an insurance policy. Subsection (a) states that “proof of mailing” the notice of non-renewal shall be maintained on “a recognized U.S. Post Office form or a form acceptable to the U.S. Post Office or other commercial mail delivery service.” Subsection (b), which deals with notice of a material policy change, also states that the insurer must maintain “proof of mailing,” but does not repeat the definition of that term which is set forth in subsection (a).
The insurer argued that it had notified the insureds in writing about the lead exclusion 75 days prior to renewal and that it had maintained sufficient proof of mailing. In support of this contention, the insurer provided an unsigned copy of a letter which was purportedly sent to the insureds, and an affidavit from an employee that described its custom and practice with respect to mailing notices of materials changes in insurance policies to its insureds. Concluding that the words “proof of mailing” should be given the same meaning throughout the statute, the Illinois Supreme Court held that an insurer who attempts to prove that it mailed notice of a material policy change under subsection (b) must show that it maintained proof of mailing on a form acceptable to the Postal Service or other commercial mail delivery service. Since the insurer failed to show proof of mailing on such a form with respect to the lead exclusion, the Court concluded that the exclusion never became part of the insurance policy.
Lastly, insureds’ counsel handling claims involving water and mold damage following a covered fire or lightning loss should determine whether that state employs the 165-line,1943 New York Standard Fire Policy (“SFP”). Illinois, for example, has adopted the SFP by statute. All fire insurance policies written in the State of Illinois must conform to the requirements of the SFP. As such, the SFP sets forth minimum fire insurance coverage upon which an insured can rely under any fire insurance policy issued in the State of Illinois. The SFP guarantees a minimum level of coverage that supersedes any attempt to limit coverage to less than the statutory minimum. A fire insurance policy may not provide less coverage than that set forth in the SFP. Stated differently, a fire insurance policy must provide coverage in conformity with or in excess of the SFP. The SFP thus prohibits the use in fire insurance policies of limitations, conditions, or exclusions not expressly authorized.
The SFP provides coverage for all direct loss by fire and lightning. The perils not covered include such things as loss caused by enemy attack, invasion, insurrection, rebellion, revolution, and civil war. Nowhere does the SFP limit or excluded coverage for mold damage. Thus, under the SFP, water and mold damage resulting from a covered fire or lightning loss is covered.
* Portions of this paper were presented at the October 30, 2003 Lorman Education Services Seminar entitled “Advances in Environmental Mold Issues in Illinois”.
“First-Party Insurance” means any individual, corporation, association, partnership, or other legal entity asserting a contractual right to payment under an insurance policy or insurance contract arising out of the contingency or loss covered by such policy or contract.
Policyholders of America, a non-profit association of policyholders founded by Melinda Ballard, has been charting and documenting first party mold-related claims where the insured retained legal counsel. 2,567 claims were filed in 1999, 5,821 in 2000, and 7,143 in 2001.
2 According to the National Association of Mutual Insurance Companies, “[w]hen it comes to the insurance industry, mold is not part of the standard insurance policy and is covered only if it’s a direct result of a covered peril” (www.moldupdate.com). MoldUpdate.com, which is owned and operated by the National Association of Mutual Insurance Companies, is a site where those interested in the issue of mold can come for current news, education, scientific links, litigation updates, state legislation, and matters of mold as it relates to the insurance industry.
3 Ballard v. Fire Insurance Exchange, No. 99-05252, Tex. Dist., Travis County. The jury awarded a verdict of over 32 million dollars, which the Texas Court of Appeals affirmed in part and reversed in part. 98 S.W.3d 227 (Tex. App.-Austin 2003).
4 Anderson v. Allstate Insurance Co., No. 00-907 (E.D. Cal.). The 18 million in punitive damages awarded by the jury was reversed by the Ninth Circuit Court of Appeals. See 45 Fed. Appx. 754 (9th Cir. 2002).
5 Everett L. Herndon, Jr., “Are Mold Claims Covered Under A Homeowner’s Policy?”, Mealey’s Mold Litigation Conference Materials, June, 2001; William Fred Hagans and Paula Janecek, “Mold - It Generally Is Covered By The Homeowner’s Policy”, Mealey’s Litigation Report: Mold, March, 2001(www.mealey’s.com/mold.pdf); Alexander Robertson IV, “Toxic Mold Litigation: The Asbestos of the New Millenium”, Mealey’s Litigation Report: Mold, August, 2001.
6 In Wallis v. Country Mutual Insurance Co., 309 Ill.App.3d 566, 570 (2nd Dist. 2000), the Second District articulated the respective burdens of proof in a lawsuit for an insurer’s failure to pay a claim under an all-risk homeowners insurance policy. The insured’s burden is to establish (1) that a loss occurred, (2) that the loss resulted from a fortuitous event, and (3) that an all-risk policy covering the insured property was in effect at the time of loss. Once an insured establishes a prima facie case, the burden then shifts to the insurer to show that the loss resulted from a peril expressly excluded from coverage.
7 Most insurers will allow homeowners for an additional premium to buy back coverage for sewer or drain back up or sump pump overflow.
8 American States Insurance Co. v. Koloms, 177 Ill. 2d 473 (1997); see also Kim v. State Farm Fire and Casualty Co., 312 Ill.App.3d 770 (1st Dist. 2000). Suggested reading regarding the “pollution” exclusion includes Joseph W. Hovermill and Douglas D. Guidorizzi, “Are Mold Claims Excluded From Your CGL Policy?”, Mealey’s Litigation Report: Mold, March, 2001 and Patrick J. Wielinski, “Third-Party Insurance Coverage For Mold Claims”, Coverage, Vol. 11, Number 6, November/December 2001.
9 Black’s Law Dictionary 1660 (6th ed. 1990); see also Hardware Wholesalers, Inc. v. Heath, 10 Ill. App. 3d 337, 343 (5th Dist. 1973).
10 William C. Wilson, Jr. “The Insurance Implications of Toxic Mold Claims”, July, 2001 (available at www.iiaa.org/-select “Education” from the menu).
11 The Fire, Casualty & Surety Bulletins, The National Underwriter Company, P.O. Box 14367, Cincinnati, OH 45250-0367 (www.nuco.com). See also Diane W. Richardson, “Homeowners Coverage Guide: Interpretation and Analysis,” at p. 63 (1999).
12 Ken Brownlee, “Is Your Bread Growing Mold?”, Claims Magazine, June 2002.
13 “Illinois Insurance Facts Mold Facts and Homeowners Insurance,” dated December, 2002 (www.ins.il.us/HomeInsurance/mold.htm).
14 Allstate Insurance Co. v. Davenport, 309 Ill. App. 3d 750, 754 (1st Dist. 1999) (construing the term “continuously” under an “any occupation” disability provision of an automobile insurance policy liberally in favor of the insured).
15 This is the interpretation advanced by the Property Loss Research Bureau (“PLRB”), which is a recognized resource in the insurance industry for insurers in interpreting policy provisions. See PLRB Question & Answer Reference Service 146.1, “Interior Water Damage” (July, 1996).
16 1999 WL 619100 (D. Or.).
17 991 P.2d 734 (Wash. App. 2000).
18 2000 WL 144115 (Tex.App.- Dallas).
19 2000 U.S. Dist Lexis 5382 (W.D. Mich.).
20 2001 WL 356756 (N.D. Tex.).
21 2002 WL 378111 (Minn.App.).
22 In analyzing whether coverage applies for damage caused by, resulting in, or consisting of mold, mildew, or various other fungi, State Farm Operation Guide 75-110 states as follows:
“a. Is there an accidental, direct physical loss? Mold is present everywhere indoor and outdoors. To constitute an accidental, direct physical loss, there must be an identifiable, unexpected event that creates the mold condition.
b. Was the mold caused by a covered loss? If mold is the result of a loss, rather than the cause of it, coverage must be analyzed for the event that caused the mold. If the most important, proximate cause of the loss is covered, there is coverage for the mold that was the result of the covered event.
c. Does the loss merely ‘consist of’ mold? If there was not accidental, direct physical loss to cause the mold, and instead the loss itself is mold, then Losses Not Insured, mold, applies. Similarly, if the mold is caused by another excluded event, or if there is no named peril for the cause of loss, there is no coverage for the resulting mold.
d. Do the Section I contamination and pollution Losses Not Insured apply to these losses? Analysis of the Section I (first party) contamination and pollution Losses Not Insured is the same as for mold. That is, if the most important proximate cause of loss is covered, the resulting contamination or pollution is covered as well.” (Emphasis added.)
As State Farm Operation Guide 75-110 reflects, coverage must be analyzed for the peril that caused the mold. If the peril causing the mold is covered, then there is coverage for the mold damage that was the result of the covered peril.
23 2002 WL 1547673 (Minn. App.).
24 184 F.Supp.2d 960 (D. Ariz. 2002).
25 61 P.3d 22 (Ariz. App. 2002).
26 Other jurisdictions also have made the distinction between a cause of loss and an effect of a loss. See, e.g., Associated Aviation Underwriters v. George Koch Sons, Inc., 712 N.E.2d 1071 (Ind. Ct. App. 1999); Bettigole v. American Employers Insurance Co., 567 N.E.2d 1259 (Mass.App. Ct. 1991).
27 2002 WL 31495830 (D. Or.).
28 No. 02-4 (E.D. La), Reported in 2-11 Mealey’s Litig. Rep. Mold 6 (2002).
29 234 F.Supp.2d 1182 (W.D. Wash. 2002).
30 309 F.3d 1068 (8th Cir. 2002).
31 2003 WL 31350541 (Del. Super.).
32 Most homeowners’ insurance policies require the insured to file suit against the insurer within one or two years after the date of loss. In Illinois, the suit limitation provision is “tolled from the date proof of loss is filed, in whatever form is required by the policy, until the date the claim is denied in whole or in part.” (215 ILCS 5/143.1.) The “date utilized for determining the date of loss is the date on which the actual physical loss of property occurred.” (Harvey Fruit Market, Inc. v. Hartford Insurance Co. of Illinois, 294 Ill.App.3d 668, 669 (1st Dist. 1998).) Thus, in a mold claim, applying the district court’s reasoning in Flores, the date of loss is the date the mold damage became manifest. However, the insurer may be held to have waived its right to assert or may be estopped from asserting a suit limitation defense. Examples of waiver/estoppel include: (a) where an insurer’s adjuster or expert provide incomplete or inaccurate information to the insured as a result of an inadequate investigation concerning the extent of mold growth and, after the suit limitation period has expired, later investigation discloses greater mold damage than represented to the insured or (b) where the insurer’s post-remediation investigation reveals that all of the mold was removed and, after the suit limitation period has expired, later investigation reveals that it, in fact, was not See Vu v. Prudential Property & Casualty Insurance Co., 26 Cal.4th 1142, 33 P.2d 487 (2001).
33 2003 WL 21659408 (S.D. Tex.).
34 203 WL 21713773 (S.D. Tex.).
35 Most homeowners’ insurance policies require the insured to give the insurer notice of the loss, either “promptly”, “immediately”, or “as soon as practicable.” The purpose of the notice requirement is to enable the insurer to make a timely and thorough investigation of the claim and to protect itself against unjustifiable claims. (United States Fidelity & Guranty Co. v. Maren Engineering Corp., 82 Ill.App.3d 894 (1st Dist. 1989).) The phrases “prompt”, “immediately”, and “as soon as possible” mean the insured must provide notice to the insurer within a reasonable time. Reasonableness generally depends on all the facts and circumstances of the case. (Downing v. Rockford District Mutual Tornado Insurance Co., 112 Ill.App.340 (2nd Dist. 1969).) In that regard, lack of prejudice to the insurer is a factor to be considered in determining whether reasonable notice has been given only if the insured had a good excuse for the late notice or if the delay was relatively brief. (Casualty Indemnity Exchange v. Village of Crete, 731 F.2d 457 (7th Cir. 1984).) Late notice is typically raised as a defense in a mold case if the insured observes mold but delays in reporting it to the insurer.
36 Most homeowners’ insurance policies require the insured to protect the property from further damage and, if repairs to the property are required, the insured must make reasonable and necessary repairs to protect the property. Most homeowners’ insurance policies also exclude coverage for any loss caused by the neglect of the insured to use all reasonable means to save and to preserve property at and after the time of a loss. Insurers typically raise these defenses in a mold case if the insured is aware of water incursion, water damage, high humidity, or moisture or dampness, but fails to take remedial steps to prevent further damage, such as mold growth. (See, e.g., Rossmanith v. Union Insurance Co. 2001 WL1451050 (Iowa App.).) Insurers also raise these defenses in a mold case as a means of limiting the amount of its liability under the policy if the insured unreasonably delays the remediation and the mold problem worsens.
37 Most homeowners’ insurance policies contain a provision limiting property coverage to loss or damage which occurs during the policy period. This becomes an issue when mold has grown slowly over multiple policy periods before it is discovered. The proper focus of analysis in such a circumstance is the “trigger period”, not the policy period. In Flores, the district court concluded that coverage is not triggered until identifiable damage occurs. However, an argument can be made for an earlier trigger period in the context of coverage for mold damage. In Board of Education of Township High School District No. 211 v. International Insurance Co., 308 Ill.App.3d 597 (1st Dist. 1999), the appellate court addressed the trigger period for coverage for property damage caused by asbestos fiber release. The appellate court applied the “equitable continuous trigger”. Under that trigger, asbestos property damage is deemed an ongoing, continuous process triggering every policy in effect during the period beginning with the installation of the friable, fiber-releasing asbestos materials and ending when those materials are removed or contained. In deciding to apply an equitable continuous trigger, the appellate court was persuaded by the analysis in United States Gypsum Co. v. Admiral Insurance Co., 268 Ill.App.3d 598 (1st Dist. 1994) i.e., that property damage, whether from the presence of airborne asbestos fibers or settled fibers subject to reentrainment, occurs over a span of time and cannot be linked to or confined to different policy periods and that the difficulty in determining precisely when the damage occurred or in following its progress or proliferation is exacerbated by the interchangeable nature of the fibers and that their release occurs on a continuing basis. Determining when property damage from airborne mold spores occurs is equally difficult for the same reasons: the interchangeable nature of the spores and that their release occurs on a continuing basis. The Board of Education case thus supports adoption of the equitable continuous trigger to determine the timing of mold damage for coverage purpose, beginning with the initial water event that caused the ensuing mold damage and ending when the moldy building materials are removed
38 2003 WL 22006303 (S.D. Tex.).
39 2003 WL 21652162 (Ohio App. 5th Dist.).
40 The dissenting opinion properly applied the defective workmanship exclusion and the ensuing damage exception thereto. An ensuing loss is covered even if defective workmanship is a “but for” cause of the loss. In that regard, the intent of the exclusion and exception is to exclude only that portion of the loss attributable to the defective workmanship. The exclusion and exception, read together, operate to eliminate the conduct or defect from consideration in analyzing the cause of ensuing damage; unless, of course, there is no ensuing damage and the loss consists solely of the conduct or defect itself, in which case coverage does not apply. Put another way, only the actual physical peril causing the ensuing damage is subject to the coverage analysis. As an example, if a claim was being made to replace exterior insulation and finish system (EIFS) cladding that was defectively designed and/or defectively installed, then there would be no coverage because there would be no ensuing damage and the claim would consist solely of defective design and/or defective workmanship. However, what if claim was being made to repair ensuing water damage and mold damage in the interior of the insured dwelling? The defectively designed and/or defectively installed EIFS is the cause of the loss. Because this portion of the loss is attributable to conduct or defect, it is eliminated from consideration in analyzing causation. Thus, to determine if coverage applies, the actual physical peril causing the ensuing damage, water, must be analyzed. If the source of this water is not excluded or excepted, then there is coverage for the ensuing damage which occurs. See Tento International, Inc. v. State Farm Fire and Casualty Co., 222 F.2d 660 (9th Cir. 2000); Blaine Construction Corp. v. Insurance Co. of North America, 171 F.3d 343 (6th Cir. 1999).
41 281 F.Supp.2d 1290 (W.D.Okla 2003).
42 No. 10724, Pa. Common Pleas, Beaver County (October 10, 2003).
43 2003 WL 22805163 (9th Cir.)
44 No. 01-4238-E, Tex. Dist., Nueces County (December 12, 2003)
45 2003 WL 23018291 (Mich.App.)
46 No. 01-5445, U.S. Dist Count, Pa. Eastern (January, 2004).
47 2004 WL 87017 (E.D. Pa.).
48 Cramer v. Insurance Exchange Agency, 174 Ill.2d 513, 516; see also Richardson v. Illinois Power Co., 217 Ill.App.3d 708, 711 (5th Dist. 1991) (“The legislature intended to provide a remedy to an insured who encounters unnecessary difficulties when an insurer withholds policy benefits.”); Myrda v. Coronet Insurance Co., 221 Ill.App.3d 482, 491 (2nd Dist. 1991) (“[S]ection 155 of the Code is intended to aid the insured and to discourage insurers from profiting by their superior financial positions while delaying in the payment of contractual obligations.”); McGee v. State Farm Fire and Casualty Co., 315 Ill.App.3d 673, 681 (2nd Dist. 2000) (“The attorney fees, costs, and limited penalty provisions of section 155 are intended to make suits by policyholders economically feasible and punish insurance companies for misconduct.”).
49 215 ILCS 5/155; Nelles v. State Farm Fire & Casualty Co., 318 Ill.App.3d 399 (1st Dist. 2000).
50 Emerson v. American Bankers Insurance Co., 223 Ill.App.3d 918, 936 (5th Dist. 1992).
51 Mohr v. Dix Mutual Country Fire Insurance Co., 143 Ill.App.3d 989, 998-99 (4th Dist. 1986).
52 Part 919 of Chapter 1 of Title 50 of the Illinois Administrative Code was promulgated by the Director
of Insurance pursuant to sections 154.5, 154.6 and 401 of the Illinois Insurance Code. The purpose of this Part is to set forth minimum standards for the investigation and disposition of claims arising under insurance contracts issued to Illinois residents.
53 Cramer, 174 Ill.2d 513. Suggested reading on the subject of bad faith in mold claims includes Michael Childress and George K. Lang, “Bad Faith in Mold Claims”, Mealey’s National Mold Litigation Conference Materials, October 2001 and Robert D. Chesler and Carmela Cannistraci, “One Family’s Experience: Why Punitive Damages are Appropriate in Mold Insurance Cases”, Mealey’s Litigation Report: Mold, November, 2001.
54 Insurers interested in improving their processing and handling of water damage claims with ensuing mold losses should consider the suggested practices for insurers developed by the Texas Department of Insurance. They are contained in the document entitled “Effectively Handling Water Damage and Mold Claims” (www.tdi.state.tx.us/consumer/moldpub.html).
55 Farmers Insurance Group Endorsement H6102 2nd ed.
56 State Farm Fire & Casualty Co. Endorsement FE-5398.
57 Allstate Insurance Co. Deluxe Homeowners Amendatory Endorsement AP1421.
58 Safeco Insurance Companies Endorsement CHO-6133.
59 ISO Endorsements H0 04 26 04 02; H0 04 27 04 02; HO 04 28 04 02; H0 04 32 05 02.
60 See AAIS Bulletin 01-0622, dated November 16, 2001.
61 Arkansas Insurance Department Bulletin No. 10-2002, dated April 22, 2002; Louisiana Department of Insurance Advisory Letter Number 01-02, dated December 28, 2001.
62 Nebraska Department of Insurance Newsletter, Volume 4 Winter 2001.
63 See, e.g., ALASKA STAT. §§ 21.36.220, 21.36.235, 21.36.240 (Lawsource.com through 2001 Legis. Sess.); ARIZ. REV. STAT. §§ 20-1651 through 20-1656 (Lawsource.com through 2002/2003 Legis. Sess.); COLO. REV. STAT. §§10-4-109.7, 110-4-110.5; GA. CODE §§ 33-24-44 through 24-47 (Lawsource.com through 2001 Legis. Sess.); IOWA CODE §§ 515.80, 515.81A, 515.81B (Lawsource.com through 2001 Legis. Sess); ME. REV. STAT. tit. 24A §§ 3005, 3007 (Lawsource.com through 2003 Legis. Sess.); MISS. CODE § 83-5-28 (Lawsource.com through 2002 Legis. Sess.); MONT. CODE §§ 33-15-1103 through 33-15-1006 (Lawsource.com through 2001 Legis. Sess.); NEV. REV. STAT. 687B.310 through .340 (Lawsource.com through 2002 Legis. Sess.); N.H. REV. STAT. §§ 417-C: 1-4, 417-B:3-4 (Lawsource.com through2002 Legis Sess.); N.M. STAT. ANN. § 59A-18-29 (Lawsource.com through 2002 Legis. Sess.); N.M. ADMIN. CODE tit. 13 § 8.4.9 (Lawsource.com through 2001); N.Y. INS. §§ 3425 3426 (Lawsource.com through 2003 Legis. Sess.); N.C. GEN. STAT. §§ 58-41-15, 58-41-20 (Lawsource.com through 1986 Legis. Sess.); N.D. CENT. CODE §§ 26.1-30.1-2 through 26.1-30.1-8 (Lawsource.com through 2001 Legis. Sess.); OHIO REV. CODE §§ 3937.25 - .26 (Lawsource.com through 1988 Legis. Sess.); OR. REV. STAT. §§ 742.703 through 742.706, 742.224 (Lawsource.com through 2001 Legis. Sess.); UTAH CODE § 31A-21-303 (Lawsource.com through 2001 Legis. Sess.); VA. CODE ANN. §§ 38.2-231, 38.2-2114 (Lawsource.com through 2000 Legis. Sess.); WIS. STAT. § 631.36 (Lawsource.com through 2001/2002 Legis. Sess.); WYO. STAT. §§ 26-35-101 through 26-35-105 (Lawsource.com through 2002 Legis. Sess.).
64 Perry v. Economy Fire and Casualty Co., 311 Ill. App. 3d 69 (1st Dist. 1999).
65 See, e.g., Alaska (20 days; written notice mailed to the insured and to the agent or broker of record by first class mail to the last known address of the insured and must obtain a certificate of mailing through the U.S. Postal Service); Arizona (30 days; proof of mailing); Colorado (45 days; first class mail); Georgia (30 days; proof of mailing); Iowa (30 days; proof of mailing) Louisiana (30 days; mailing); Maine (30 days; proof of mailing); Mississippi (30 days; proof of mailing); Montana (30 days; proof of mailing); Nevada (30 days; proof of mailing); New Hampshire (45 days; proof of mailing with written explanation); New Mexico (30 days written notice); New York (at least 45 days and not more than 60 days; proof of mailing with written explanation); North Carolina (45 days; proof of mailing); North Dakota (10 days; proof of mailing); Ohio (30 days; proof of mailing); Oregon (30 days; proof of mailing); Utah (30 days first class mail or delivery); Virginia (45 days; registered or certified mail or return receipt); Wisconsin (60 days; first class mail or delivery with notice of insured’s right to cancel); Wyoming (45 days; personal delivery or proof of mailing).
66 203 Ill.2d 141 (2003).
67 215 ILCS 5/143.17a(b).
68 215 ILCS 5/143.17a(a).
69 215 ILCS 5/143.17a(b).
70 215 ILCS 5/397; 50 Ill. Adm. Code § 2301.100 (effective March 17, 1961).
71 Lundquist v. Allstate Insurance Co., 314 Ill. App. 3d 240 (2nd Dist. 2000).
72 Standard Fire Policy, Insuring Clause.
73 Standard Fire Policy, Lines 14 24.
74 See Illinois Department of Insurance Bulletin CB#2002-07, dated December 5, 2002; New Jersey Department of Banking and Insurance Bulletin No. 02-14, dated July 8, 2002; Connecticut Insurance Department Filing Review Guidelines Related to Mold Coverage in Personal and Commercial Insurance Policies, dated August 7, 2002.
Edward Eshoo, Jr. is a founding partner in the firm of Childress & Zdeb, Ltd., in Chicago, where he concentrates his practice in representing policyholders in first-party property insurance litigation. He is a member of the American, Illinois State, and Chicago Bar Associations, the National Association of Public Insurance Adjusters, the National Fire Protection Association, the Illinois Trial Lawyers Association, and the Association of Trial Lawyers of American, in which he is a co-chair of the Toxic Mold Litigation Group. Mr. Eshoo received his B.A. from Knox College and his J.D. from The John Marshall Law School. He served as a law clerk to the Honorable Howard C. Ryan of the Illinois Supreme Court from 1985 to 1987. Over the past 17 years, he has lectured on insurance related topics, and has authored articles and publications on first-party property issues, including Chapters 4 and 10 of the Illinois Institute of Continuing Legal Education Property Insurance Practice Handbook. Childress & Zdeb, Ltd., 515 North State Street, Suite 2200, Chicago, IL 60610, (312) 494-0200, email@example.com, www.childresszdeb.com.
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