Thompson v. Fireman's Fund: Failure to Perform Destructive Testing May Lead to Insurer Liability in Mold Case
October, 2002
In our first Special Report on Mold, we noted that an insurer’s duty to investigate the property in a loss situation before it determines the amount at which the loss should be assessed presents special problems in mold contamination cases, as mold frequently does not develop until some time after the initial loss. See CM Special Report on Mold, Winter 2002, “Update: Recent Mold Related Decisions.” Additional problems may arise due to the fact that after development, mold contamination may not be detectable through routine investigation methods and may require extra-ordinary methods. In Thompson v. Fireman’s Fund Ins. Co., 2002 Cal. App. Unpub. Lexis 6511(Cal. App. 2nd Dist. July 16, 2002) (unpublished), the California Court of Appeal held that a property insurance carrier’s failure to perform destructive testing, under the facts therein, rendered the insurer potentially liable for tortious breach of the implied covenant of good faith and fair dealing and punitive damages.
The plaintiff in Thompson argued that his property insurer’s investigation of his damage claim was “unreasonable” because the insurer did not perform destructive testing (i.e., the breaking open of walls) to assess the extent of damage to his home due to rain water intrusion. The court agreed that evidence that the insured’s environmental consultant had “discussed” the need for destructive testing with the claims adjuster was sufficient to allow a jury to determine if the insurer’s investigation was “unreasonable.” While the decision is not a published opinion, and may be cited or relied upon only in limited circumstances, property insurers may expect similar requests by property owners, particularly in situations involving known or suspected water intrusion, and should be aware that if a dispute later develops, the sufficiency of an insurer’s investigation may be challenged if it refuses to conduct such testing. •
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