Eighth Circuit Reverses Summary Judgment for Insurer, Finds Application of Mold Exclusion Requires Further Factual Analysis
January, 2003
Focusing on the lead-in language in a policy exclusion for “loss caused by . . . mold”, the Eighth Circuit reverses summary judgment for the insurer and holds that coverage for the insureds’ mold damage may indeed be provided by the homeowner’s policy at issue where the mold was caused by a covered peril (rupture of frozen pipes). Shelter Mutual Ins. Co. v. Maples, 2002 U.S. App. LEXIS 23143 (8th Cir.).
Facts
Mr. and Mrs. Maples, the insureds, lived abroad during the construction of their retirement home in Arkansas. Mr. Maples purchased a homeowner’s policy from Shelter Mutual for property coverage on his residence while it was under construction. Mr. Maples undertook reasonable measures to ensure his future home was winterized prior to its completion; the contractor was given a key and directions to winterize the Maples’ home in November, 2000. However:
[a]t 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 in April 2001. 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. Maples reported the loss to Shelter, and Shelter thereafter instituted this action to determine its duty to pay.
Analysis
The policy contained an exclusion for “loss caused by ... mold.” The Eighth Circuit held that this policy exclusion “does not automatically preclude coverage... It appears to us, then, that the determinative question is a factual one: whether the frozen pipe or the mold was the dominant and efficient cause of the loss.” The Eighth Circuit noted a clear difference between policy language that excludes coverage for loss “resulting directly or indirectly ... regardless of the cause of any of the following events” for example, and language that simply excludes “loss caused by” a particular peril.
The Eighth Circuit held that because a covered peril, the rupture of frozen pipes, caused an excluded peril, mold, to develop, further factual analysis was needed before coverage could be determined.
Learning Point:
Once again, a court, in the analysis of a mold claim, relied on established principles of contract interpretation. Although mold claims present a unique peril, they do not require a court to apply unique rules of policy analysis.
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