Post-Flood and Mold Damage to Stored Goods Not Covered Under a Comprehensive Transportation and Storage Liability Policy
January, 2003
A claim filed by a moving and storage company for property damage to stored property caused by a series of warehouse floods was not covered under the storage company’s comprehensive transportation and storage liability policy. The Ninth Circuit determined that the policy was not in effect during the damage-causing flood, and that the policy’s exclusion for “gradual deterioration” precluded coverage for the rust, mold and mildew that developed on the property after the initial flood damage. Insurance Co. of North America v. G.F. Snyder Moving & Storage Inc., 52 Fed. Appx. 899 (9th Cir. 2002).
Facts
David Humphrey contracted with Snyder for moving and storage of personal property in 1990. Prior to Humphrey’s contract with Snyder, a series of floods occurred at the Snyder storage facility. Humphrey’s property was damaged by the after-effects of the floods such as rust, mold and mildew at the facility. “Humphrey was not notified of the floods and was not aware of the damage to his property until he arranged to have the property delivered in August of 1993.” Once Humphrey’s property was delivered he “immediately contacted the warehouse to report the damage.”
Humphrey later filed suit against Snyder. Snyder’s insurer concluded that “the damage at issue occurred prior to the policy’s...effective date, and that the lawsuit raised claims that would not have been covered by the policy even if it had been in effect.”
Meanwhile, Snyder’s insurer instituted a declaratory action in the U.S. District Court for the District of Arizona. The court determined that coverage was not provided by the policy, holding that the floods occurred before the policy’s inception date and that the policy exclusion for “gradual deterioration” precluded coverage for Humphrey’s property damage. Snyder appealed.
Analysis
The Ninth Circuit affirmed. Under the policy’s definition of “occurrence,” the cause of damage must take place “during the period of insurance.” The court held that Humphrey’s property was damaged by a peril that occurred prior to the effective policy date. Further, the Ninth Circuit observed that the policy’s exclusion for “gradual deterioration was added specifically to exclude coverage for post-flood damage such as that suffered by the Humphrey property.”
Learning Point:
It is always important to definitively determine when the cause of damage occurred in a claim. In Snyder, the insurer was able to point to specific dates of pre-inception flooding to establish that its policy did not respond to the claimed loss.
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