Mold Claims: Do They Really Trigger Coverage Under a CGL Policy?
October, 2002
Mold is ubiquitous on earth and has been around for as long as humans have. In fact, the Bible provides the perfect remedy when mildew is discovered in your house:
The priest is to order the house to be emptied before he goes in to examine the mildew, so that nothing in the house will be pronounced unclean. After this the priest is to go in and inspect the house. He is to examine the mildew on the walls, and if it has greenish or reddish depressions that appear to be deeper than the surface of the wall, the priest shall go out the doorway of the house and close it up for seven days. On the seventh day the priest shall return to inspect the house. If the mildew has spread on the walls, he is to order that the contaminated stones be torn out and thrown into an unclean place outside the town. He must have all the inside walls of the house scraped and the material that is scraped off dumped into an unclean place outside the town. Then they are to take other stones to replace these and take new clay and plaster the house.
If the mildew reappears in the house after the stones have been torn out and the house scraped and plastered, the priest is to go and examine it and, if the mildew has spread in the house, it is destructive mildew; the house is unclean. It must be torn down – its stones, timbers and all the plaster–and taken out of the town to an unclean place. Anyone who goes into the house while it is closed up will be unclean till evening. Anyone who sleeps or eats in the house must wash his clothes. But if the priest comes to examine it and the mildew has not spread after the house has been plastered, he shall pronounce the house clean, because the mildew is gone. (Leviticus 14:33-49)
In light of mold’s history on earth, it is quite surprising that mold and mildew claims have become the subject of heightened public awareness and media attention. Such newfound attention has resulted in a dramatic increase in the filing of mold-related claims. The increase has insurers looking to determine their potential exposure with respect to these claims. One of the pivotal coverage issues faced by insurers is whether the mold-related claim triggers coverage under their commercial general liability (CGL) policy, hereby activating their defense and indemnity obligations.
CGL Coverage Claims
Claims for mold liability generally seek coverage under a CGL policy’s “bodily injury,” “property damage” or “personal injury” coverage. The majority of mold claims allege property damage as a result of construction defects within homes in large subdivisions, schools, hospitals, office buildings and even courthouses. The claims typically include allegations of bodily injury, including emotional distress, memory loss, respiratory problems and brain damage. Some of the claims seek coverage under the “personal injury” coverage of the policy on the theory that the mold condition results in a wrongful entry, eviction or invasion of the right of private occupancy.
The Trigger Issue
The insuring agreement of the typical CGL policy provides coverage for “bodily injury” or “property damage” taking place during the policy period. In order to determine whether an insurance policy is triggered by a claim, courts must determine when the date of the injury or damage should be deemed to have occurred. Unlike typical claims, where the date of loss is a single date that is limited in time, courts find it more difficult to calculate the loss date with respect to mold claims. To assist the courts with this issue, the following four principal trigger theories have been adopted:
Manifestation Trigger
Under this theory, only those policies on the risk on the date that the “bodily injury” or “property damage” is discovered or pinpointed are triggered.
Exposure Trigger
This theory states that each insurance policy on the risk during the time the claimant or property was exposed to the harmful condition is triggered.
Injury-In-Fact Trigger
Each policy on the risk on the date that the “bodily injury” or “property damage” is determined to have actually occurred is triggered.
Continuous Trigger
This theory triggers all policies on the risk from first exposure to an injurious condition through manifestation of injury or “property damage.”
Unfortunately, few courts have actually applied a specific trigger theory to a mold-related claim under a CGL policy. In West American Ins. v. Lindepuu and South Jersey Assets, Inc., 2000 U.S. Dist. LEXIS 17954 (E.D.Pa.), the insurer sought a declaratory judgement as to the extent of its obligation to continue to defend or indemnify the subcontractor and/or the developer, as an additional insured, under certain CGL policies issued to the subcontractor, for claims arising out of the residential development known as “The Beagle Club” in Vorhees, New Jersey. The underlying plaintiffs, a group of homeowners who purchased homes within the residential development, brought a class action alleging, inter alia, that the subcontractor negligently installed the doors and windows in their homes thereby resulting in excessive water condensation causing mold growth. The underlying plaintiffs sought repair or replacement cost.
One of the key issues addressed by the court was which policies should govern the action. The developer argued that the policies issued to the subcontractor that were in place when the doors and windows were installed should govern the action. The developer relied on the “multiple trigger” theory of liability utilized by the Pennsylvania Supreme Court in J.H. France Company v. Allstate Ins. Co., 534 Pa. 29, 626 A.2d 502 (Pa. 1993), which stated that coverage is triggered under a CGL policy for asbestos-related claims at the time of the inital exposure, continues during the progression of the disease and ends with the disease’s eventual manifestation. The court reasoned that since the subcontractor was insured both at the time the windows and doors were installed and when the alleged problems were discovered, the risk of insurance coverage termination which justifies use of a multiple trigger in asbestosis and other latent disease cases is not present in this case. Thus, the court applied a “manifestation trigger” theory and held that the action is governed by those policies in effect when the damage to the plaintiffs’ homes was discovered.
Similarly, in Liberty Mutual Ins. Co. v. Ravannack, 2002 WL 441334 (E.D.La.)1, the plaintiffs filed suit against several contractors alleging damages as a result of the construction defects in their home. The plaintiffs’ home was built in 1992. In 1999, the plaintiffs allegedly discovered that water had intruded into their home, saturating various areas of their carpeting and causing mold growth. The plaintiffs further alleged that the mold caused bodily injury to their children who were continuously exposed to mold during the period while they lived in the house. It was determined that the excessive moisture in the plaintiffs’ house was caused by the exterior insulation and finish system (“EIFS”) installed on the outside of the home. An insurer for the subcontractor who installed the EIFS moved for summary judgment arguing that its CGL policy was not in effect when the home was constructed, when the plaintiffs discovered water infiltration in the home, when the plaintiffs discovered the cause of the water infiltration, nor when the plaintiffs put their homeowner’s insurer on notice of the damage. In fact, the insurer’s policy was not in effect until January 18, 2000.
The United States District Court for the Eastern District of Louisiana denied the insurer’s motion for summary judgment ruling that there is possible coverage under the policy. The court reasoned that the alleged bodily injury may have occurred during the policy period and that there may be both “bodily injury” and an “occurrence” which would trigger policy coverage. According to the court, the manifestation theory should be applied with respect to the plaintiffs’ property damage claims, but the exposure theory should be applied with respect to the plaintiffs’ bodily injury claims since the plaintiffs suffered bodily injury during multiple policy years.
The court appeared willing to find for the insurer with respect to the property damage claims on the basis that its policy was not on the risk at the time of manifestation. However, the court applied an exposure trigger to the claims for bodily injury to the children who allegedly had continuous exposure to mold while living in the home. Because it was alleged the children had been exposed to mold during the policy period, the court opined that coverage was possible and therefore, summary judgment for the insurer was denied. The court did not address the link between exposure to mold and manifestation of the injury.
Learning Point:
Plaintiffs pleading mold damage to trigger the duty to defend and ultimately claim indemnity. As indicated in Lindepuu and Ravannack, which trigger theory will be applied depends greatly on the specific facts at issue. For example, with respect to property damage caused by mold, it may be difficult to determine when and how the mold growth began. In some cases, mold may develop quickly or grow undetected for long periods of time before discovery. On the other hand, the trigger of coverage for mold bodily injury claims will be directly related to the medical cause of the injury. Inevitably, the courts will be guided by the science, or lack thereof, behind the injury in deciding which trigger theory to apply. Since the jury is still out as to whether mold causes bodily injury, such a task will be very difficult.
1. Reported on in Volume 2 of the 2002 CM Report of Recent Decisions at p.11.
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