Insurance Claims and Bad Faith Law Blog

Katrina CatClaims Revisited: State Farm Settles, Is Sued Again.

    It appears that State Farm may have been sued again for Bad Faith as a result of Hurricane Katrina Catastrophe Claims -- indirectly, this time.

    There was once a settlement agreement, among many policyholders and State Farm, in Mississippi.  The proposed settlement agreement was subject to Federal Court approval.  The Federal Judge was confronted with more questions than answers when he was presented with the proposed settlement for his approval.  The Federal Judge refused to approve it, at least until the many questions were answered.

     State Farm then reportedly reached a settlement agreement of many of the same claims with the Mississippi Insurance Commissioner's Office.  This lengthy previous history was summarized in "Update to the Update:  New Settlement in Mississippi," posted on March 20, 2007 on "Insurance Claims And Issues".   

    It is now reported that the State of Mississippi, through the Mississippi Attorney General, filed a new Complaint on Monday, June 11, 2007 in Mississippi State Court.  The new Complaint contains allegations, it is reported, that State Farm breached the (first) settlement agreement and thus breached a contract.  The new Complaint contains demands for compensatory and punitive damages.  More will be posted as the Complaint becomes available.  As of the night of June 11, 2007, there was a momentary silence on the subject on the web sites of both the Mississippi Attorney General and the Mississippi Insurance Commissioner.

     Here is a link to State Farm's Press Release of June 11, 2007,which State Farm entitled "Mississippi Attorney General's Lawsuit Threatens to Disrupt Hurricane Katrina Settlement Process with MIssissippi Insurance Department". 

     Here is a link to the whole available story on "Insurance Claims And Issues".
   
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Partial Payment of Claims ... UPDATED!

     This post updates the post here on January 12, 2007 regarding:

Punitive Damages, Katrina and the Insurance Contract:  Lessons Revisited and a Tale Told in Pieces or in Parts.

   

     On January 31, 2007 Federal Judge L.T. Senter, Jr. entered an Order reducing the Punitive Damages Assessment in the Broussard case.  The Federal Judge reduced the Punitive Damages assessment in that case to 40% of what the Jury assessed, reducing the assessment from $2,500,000.00 to $1,000,000.00.  Here is a link to the Order:  Norman J. Broussard & Genevieve Broussard v. State Farm Fire & Cas. Co. (S.D. Miss. Case No. 1.06CV6, Order entered January 31, 2007) .  For another report on this same decision, go to the February 1, 2007 post on Insurance Claims And Issues.     

     The Federal Court's ruling on January 31, 2007 adds to the facts coming in about the bases for this lawsuit, about the Bad Faith allegations in it, and about the reasons behind the Jury's finding of entitlement to Punitive Damages under Mississippi law.

     The Homeowner's Policy involved in the Broussard case was "an 'all perils' policy in the case of the dwelling and a 'named peril' policy as to contents, i.e., windstorm."

     Second, the initial investigation by the Homeowner's Insurance Company showed clearly that the Policyholders' home "was reduced to a slab by Hurricane Katrina" and that the damage was caused more by flood than by wind, the Federal Judge wrote.

     The Insurance Company "did not obtain any expert opinion on this particular loss."

     Rather than obtaining any expert opinion, as the Federal Court noted, the Insurance Company instead established a procedure for homes reduced to nothing remaining except the slab, a procedure which it applied in the Broussard case.  The subject procedure was to use "the debris line" and declare that in the instance of only a slab remaining, all damage would be presumed to be caused by FLOOD which was NOT a covered loss, thereby leaving it to the Policyholders to bear the burden of proving damages caused by a covered loss such as WIND.

     Although not repeated at any length in the January 31, 2007 Order, the Federal Court had PREVIOUSLY RULED in that same case that the burden of proof was INSTEAD on the Insurance Company to prove at Trial in Court that all or part of the damages claimed by the Policyholders were EXCLUDED.

     The Homeowner's Insurance Company "relied on its flood exclusion to totally deny the claim."

     The Federal Judge held that there was clear and convincing evidence in the Broussard case supporting a finding by the Jury of entitlement to Punitive Damages.  There was in other words clear and convincing evidence, the Federal Judge wrote, "that Defendant acted in such a grossly negligent way as to evince willful, wanton, or reckless disregard for the rights of the Plaintiffs."

     That ruling affirmed the issue of Mr. and Mrs. Broussards' entitlement to Punitive Damages under the facts of this case.  As to the amount of Punitive Damages, to $1,000,000.00, the Mississippi Federal Court reduced them as noted, doing so both under Mississippi State law and under "due process considerations under the United States Constitution."

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Jury Pools in the Wake of Katrina in Mississippi.

    Bad Faith Cases receive careful attention.  Part of the focus in every Bad Faith Case is the potential Jury Pool, or the Venire.  They are the people deciding issues of fact and who they are is clearly important.

    Before Katrina struck Mississippi, most Mississippians were like most residents of the rest of the Gulf Coast.  Few people carried Flood Insurance.  However, the focus on Insurance Coverage for Katrina Damages Claims can divert attention from the fact that many people did not have Property Insurance Coverage or  Homeowner's Insurance  either.

     They are the people who make up the Venire for Mississippi Bad Faith Cases like the recent case reported in newspaper articles and in a post here on January 15, 2007.

    Briefly, the recent case in Mississippi involved First-Party Bad Faith Claims including Punitive Damages Claims.  A Federal Judge directed a verdict for the full Policy Limits available under a Homeowner's Policy.  The case went to the Jury on the question of Punitive Damages under Mississippi law, which is fully discussed in the January 15, 2007 post.  Without repeating all of that post here, in general terms Mississippi law allows the assessment of Punitive Damages for Bad Faith Breach of Contract and it can be Bad Faith not to pay any part of Damages which are covered.

    It is reported that the Homeowner's Insurance Company in that case never made an offer.

    The Jury assessed $2,500,000.00 in Punitive Damages.

     See the detailed discussion of the situation in which these potential Jury members live today, Peter Whoriskey, "As Aid Lags, Volunteers Shoulder Rebuilding on Gulf Coast/Local Gratitude Mixes With Frustration Over Government's Failures" (Washington Post, Sunday, January 28, 2007, p. A03), and the discussion generally of Venires available for Katrina Cases across the Gulf Coast, in Insurance Claims and Issues.

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Partial Payment of Claims ....

                Punitive Damages, Katrina and the Insurance Contract:                           Lessons Revisited and a Tale Told in Pieces or in Parts.   

    An Insurance Company has been assessed $2,500,000.00 in Punitive Damages by a Jury in Federal Court in Mississippi.  Here is the Punitive Damages Verdict that was filed on Thursday, January 11, 2007:  Download Broussard_v. State Farm Fire & Casualty Co. Verdict January 11, 2007 (S.D. Miss. Case No. 1.06.cv6).pdf.

    The Federal case involves Claims for Damages following Hurricane Katrina.  News outlets began broadcasting the report on the evening of the day this Punitive Damages Verdict was filed, and news outlets continued to report on this Verdict the next day, as expected.  An insightful article is published online at Bloomberg.com.  Here is a link to it:  Lawrence Viele Davidson & Erik Holm, "State Farm Must Pay Couple $2.7 Million for Katrina (Update4)" (www.bloomberg.com/apps/news, dateline Jan. 11, 2007 (Bloomberg)).  The Punitive Damages Verdict was also blogged.  See for example Insurance Claims and Issues Blog.  This post will suggest some missing information that may be needed in order to understand how this Verdict was rendered and to explain something of what it means.

    As was noted at the beginning,  the  Broussard case is one of many Hurricane Katrina-related lawsuits.  It involves Insurance Coverage Claims for Damages to a Home.  It clearly also involves a claim for Punitive Damages under Mississippi law since that Punitive Damages Claim went to a jury.  Although the Complaint does not appear to be accessible in the Federal Court's online docket as the case was removed to Federal Court from Mississippi State Court, piecing together various reports about this particular case with established Mississippi case law yields the following possible scenario.

    "At its core, Plaintiffs' cause of action is based on an alleged breach of contract.  The Complaint does not even contain separate counts."  Download Broussard_v. State Farm Fire & Casualty Co., Order on Motion for Partial Summary Judgment entered November 6, 2006 (S.D. Miss.  Case No. 1.06cv6).pdf.  The Federal Court's November 6, 2006 Order also provides the information that the Court itself did not have a lot of allegations and exhibits to go on.  Although the Complaint attached a specimen Homeowner's Policy, it was not the policy issued to Mr. and Mrs. Broussard.  "This attachment does not disclose the policy limits.  The Plaintiffs' residence apparently was reduced to a slab by the storm, although it takes a lot of reading to reach that conclusion.  The tension in the record is between the damages sustained by Plaintiffs and the manner in which their claim was handled by Defendant."  Id.

 In a later Order, the Federal Court repeated that "Plaintiffs' cause of action at its core is based on an alleged breach of contract."  The Federal Judge also acknowledged a very important Claim:  "Plaintiffs also assert that they are entitled to punitive damages and/or extra-contractual damages due to the Defendant's alleged bad faith conduct in handling and denying their claim."  Download Broussard_v. State Farm Fire & Casualty Order on Motions In Limine entered on December 28, 2006 (S.D. Miss. Case No. 1.06cv6).pdf.

    The Policyholders' Insurance Company never made an offer for any part of the  Claim.  A spokesperson for the Insurance Company is reported as stating that it was sued by the Policyholders after it had refused to pay anything on their Claim.  See the news report by Joseph B. Treaster, "State Farm Told to Pay Gulf Claim" (New York Times, Friday, January 12, 2007).

   However, according to the Federal Judge's Law Clerk and reported in the same article in The New York Times, Experts for the Insurance Company stated in unspecified documents filed in the Court File, that some damage to Mr. and Mrs. Broussard's home was caused by Wind, a Covered Peril.

    Further, before Trial of the Broussard case, the same Federal Judge ruled in other cases pending before him, that (1) presumably similar Flood or Water Exclusions will exclude Coverage for all damage caused by Flood or Water, in part here pertinent, but that (2) the Policy does not exclude all Coverage if part of the Damages are caused by Flood.  These rulings were certainly generally known, as previously noticed by a Federal Judge in the Eastern District of Louisiana, for example, and in a post on  December 5, 2006 here and in Insurance Claims and Issues Blog.

    Thereafter, the Insurance Company could defend against Punitive Damages only by (1) paying or perhaps at least making an offer to pay the clearly covered part of the Claim or (2) successfully arguing the total applicability of the Flood or Water Exclusion to exclude all damages.

    Mississippi standards for assessing Punitive Damages in First-Party Bad Faith cases have been pretty clear for a very long time.  Mississippi  requires more than proof of First-Party Bad Faith and certainly requires more than proof of carelessness, for example.  "Carelessness, however, does not rise to the level of bad faith required for plaintiff to prevail on her [Punitive Damages] claim."  Mixon v. Provident Life & Accident Insurance Co., 616 F. Supp. 139, 142 (S.D. Miss. 1985), aff'd mem., 783 F.2d 1061 (5th Cir. 1985).   Mississippi Punitive Damages law requires more than a finding that a credit life insurer, for example, in another First-Party Bad Faith case "lacked an arguable reasonable basis for denying the claim....  A further finding is required showing malice or gross negligence or disregard of the insured's rights."  Barber v. Balboa Life Insurance Co., 747 So. 2d 863, 868 (Miss. Ct. App. 1999).  These and similar rulings are further addressed at much greater length in, for example, Dennis J. Wall, Litigation and Prevention of Insurer Bad Faith (2nd Ed. 1994), published by West Publishing Company online and in print.

    Further, as early as 1979 the Mississippi Supreme  Court held that a  Punitive Damages instruction is properly given to a Jury, and a First-Party Insurance Company is properly assessed Punitive Damages, where the First-Party Insurance Company declines to pay all of its Policy Coverage where some of its Coverage applies.  See Travelers Indemnity Co. v. Wetherbee, 368 So. 2d 829, 833-35 (Miss. 1979) and the cases discussed by the Supreme Court of Mississippi in that decision.  These Mississippi rules of law were visited by the same Federal Judge assigned to the Broussard lawsuit, in an earlier case in which he also cited to Travelers Indemnity Co. v. Wetherbee (Miss. 1979), for example.

    The same Federal Judge who submitted a Punitive Damages Claim to a Jury in Broussard similarly submitted a Punitive Damages Claim to a Jury several months earlier in another First-Party Bad Faith case -- which also involved a similar Claim that "Hurricane Katrina completely destroyed Plaintiffs' home" and unresolved "issues related to claim handling", particularly handling the Claim after "a report in November, 2005, indicated that damage was due in part to something other than water."  In that earlier decision, the Homeowner's Insurance Company did tender payment "in August 2006" -- and the Policyholders' Punitive Damages Claim still went to a Jury:  Download Odom_v. Armed Forces Insurance Co. (S.D. Miss. Case No. 1.05cv669, Order entered on August 31, 2006 on Defendant's Motion for Partial Summary Judgment).pdf.

    The Policyholders' lawyers in the Odom case are also the Policyholders' lawyers in the Broussard case.

    Back to the Broussard case and January 11, 2007.  At Trial, there was reportedly evidence that, at the least, the Flood or Water Exclusion did not exclude all damages. 

    The Federal Trial Judge directed a verdict on Compensatory Damages, awarding Mr. and Mrs. Broussard $233,292 under their Insurance Policy, it is reported in both of the news articles linked above.  The Federal Judge also thereby directed a verdict on entitlement to Punitive Damages.  The Jury in that case then unanimously returned its Punitive Damages Verdict less than three hours later.

    Mississippi is not, of course, the only State that requires payment of clearly covered Claims in Good Faith under First-Party Insurance Policies.  Almost all do, and recent examples always seem to be at hand, such as in Florida.  See the post entitled,  "CatClaims, Coverage, Part Disclaimer With Part Payment .... And Florida Statutory Bad Faith" on November 17, 2006, for example, in Insurance Claims and Issues Blog.  The same lessons apply in one State as in another, and in one reported case as in another with the same result.  The law applied by the  Mississippi Federal Court in the  Broussard case is not new law, and neither is the result, it appears.

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.

Contamination Exclusion in First-Party Policy Held Ambiguous to 911 Damages.

    On December 21, 2006, the Federal Second Circuit Court of Appeals reversed Summary Judgment and remanded for the Federal Trial Court to take evidence on the intent of a First-Party Property Insurance provision.  Here is a link to the Second Circuit Web Site, where you can reach this case by clicking on "Decisions":  Parks Real Estate Purchasing Group, et al. v. St. Paul Fire & Marine Insurance Co., et al. (Second Circuit Case No. 05-5890, Opinion Filed December 21, 2006).  Here is a brief summary why.

    Parks Real Estate and the other Plaintiffs-Appellants in this case, filed their Complaint to recover under a First-Party Property Policy, in pertinent part, "for building damage caused by particulate matter emanating from the collapse of the World Trade Center Twin Towers".  (Slipsheet at 1.)  Their Proof of Loss notified the insurance company that the Plaintiffs "has sustained damage" to a Building, together with Business Interruption Loss, totaling some $18,400,000.00.  (Id. at 5.)

    The Plaintiff Policyholders owned an "insured Building [that] was located a few blocks from the World Trade Center."  (Id. at 4.)  On 911, the World Trade Center Twin Towers were both struck and collapsed in a terrorist attack, causing particulates from the pulverized buildings to spread across New York City, among other things.  "The particulate matter apparently penetrated the Building and settled in its mechanical and electrical systems."  (Id. at 3.)

    The subject Policy is "an 'all-risk' property insurance policy providing that [the insurance company] would '[p]rotect against risks of direct physical loss or damage except as indicated in the Exclusions", said the Second Circuit.  (Id. at 13.)  The defendant insurance company that issued the Policy filed a Motion for Summary Judgment against Coverage, arguing that the subject  Policy's "Contamination Exclusion" barred all Coverage claimed by the Plaintiffs.  This Policy's Contamination Exclusion provides that Coverage is barred for "loss or damage caused by or made worse by any kind of contamination of ... products or property covered by this insuring agreement.'"  (Id. at 5-6.)

    The Second Circuit now holds that this First-Party Property Insurance Contamination Exclusion is ambiguous, that Summary Judgment for the insurance company in this case is reversed, and, further, that all parties "should be allowed to introduce evidence" in the Federal Trial Court regarding the intent of this Contamination Exclusion.  (Id. at 18-19.)

    Parenthetically, the insurance company's Motion for Summary Judgment also presented arguments that the Policy's "Mechanical Breakdown" and "Wear and Tear" Exclusions applied.   (Id. at 6.)  The Federal District Court held however that these particular Exclusions did not apply (id. at 11), and they were not otherwise addressed by the Second Circuit.

    Best wishes to all for a Happy New Year!

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE IN THAT JURISDICTION, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.
 

Where "regardless of cause" Means "REGARDLESS OF CAUSE" ....

        And an Undefined "Flood" in an Insurance Policy Does Not Mean
        Water Washout Allegedly Caused by Negligence  of Human
        Beings.

    A Federal Judge in Louisiana is faced with a special set of claims.  The Consolidated Case of all of these claims would be special by reason of the claims alone.  There is another reason the Consolidated Federal Case is special.  The Federal Judge just issued an 85-page Opinion ordering the Coverages of almost as many Insurance Companies.  Here is a link to this Order which is now "attached" to this post:  In re:  Katrina Canal Breaches Consolidated Litigation Pertains to Insurance (E.D. La. Case No. 05-4182 et al., Opinion Filed Mon., Nov. 27, 2006).

    Each of the Claimants in that Consolidated Insurance Coverage Case has sued her and his own Insurance Company for Insurance Coverage for Damages after Hurricane Katrina in the City of New Orleans.  However, the claims they allege are not alleged for Damages caused by the Hurricane .  The claims are for Damages allegedly caused by the alleged negligence of People, i.e., the members of the Board of Commissioners for the Orleans Levee District.   Parenthetically, the Federal Judge kept all the Insurance Coverage Claims for disposition in Federal Court, but remanded all Damages claims against the Orleans Levee District to Louisiana State Court.

    "This case began the stream of complaints that have been filed as a result of damages arising out of all levee breaches which occurred in the aftermath of Hurricane Katrina."  So begins the very recent Order on various motions by  the U.S. District Judge in In Re:  Katrina Canal Breaches Consolidated Litigation/Pertains to Insurance" (Eastern District of Louisiana).

    This is a summary of the 85-page Order of the Federal Court.  It is a summary of some of the significant Insurance Coverage Issues addressed by the Federal Judge. 

    1.  All of the Policies involved in this Consolidated Federal Case were Homeowners Policies and they all provided "all-risks" Coverage, said the Federal Court.  That means that, in the face of many Federal Rule 12(b) Motions to Dismiss in particular, said the Federal Judge, "under Louisiana law, unless there is a specific exclusion for the type of water damage that an insured has incurred, coverage is presumed under these policies.  The focus of a court's inquiry then is on the relevant exclusions to coverage."  (The Federal Judge, it should be pointed out, also confronted and resolved Motions for Judgment on the Pleadings and Motions for Summary Judgment, although most of the Motions were Rule 12(b) Motions to Dismiss.)  The quoted ruling is found on page 9.  The Homeowners Policies are quoted in pertinent part in the opinion.   "ISO Policies" are quoted by the Court on page 15; State Farm Policy language is published on page 16, and Hartford Policy language is found on pages 16-18.

    2.    The State Farm and Hartford Policies are held to Exclude Coverage for "flooding" regardless of cause, in this Federal Order under Louisiana law.   After consulting and analyzing numerous authorities, the Federal Judge ruled that a disaster caused by the alleged negligence of Human Beings regarding levee breaches and ensuing water damage is not an otherwise undefined "flood" in the first place.  Hurricane Katrina may have caused a "flood", but the Claimants in this case did not sue for alleged Katrina Damages -- they sued for Damages that resulted after Katrina was all or almost totally gone.

    The State Farm and Hartford Exclusions for damage by flooding "regardless of cause", however, are held to mean exactly what they express in the attached ruling which of course applies to all of these consolidated cases.  (Pages 50 and 73 regarding State Farm; Pages 53-54 regarding Hartford).  [Emphasis added.]

    3.    ISO Flood Exclusions, which the Federal Judge referred to as "Water Damage Exclusions," were held to be ambiguous in this particular Consolidated Coverage Case.  Under Louisiana law, an ambiguous Insurance Policy provision is strictly construed against the Insurance Company since, said the Federal Judge, the Policy provisions are prepared by the Insurance Company and in Louisiana an Insurance Policy is commonly referred to as an adhesion contract.  (Page 10.)  "ISO Policies" subject to this ruling and strict construction were issued by many Insurance Companies which are Defendants in this Consolidated Insurance Case.  (See, for example, the Federal Judge's rulings regarding all these types of Policies on pages 15, 39, 44-45, 58, 65-66, 68-69, 74, 74-75, and 77-78.)

    The Federal Judge in part analyzed case law from other Gulf Coast States in the course of reaching the ruling of ambiguity, such as case law from Alabama and from Florida, as well as from North Carolina, an Atlantic Coast State which has had some experience too with Hurricanes (page 13).  Of particular interest to Florida Attorneys, the Federal Judge's attached Opinion focuses at one point on a decision of the Supreme Court of Florida (pages 35-36).

    Further, those familiar with rulings previously issued by the Federal Court in the Southern District of Mississippi will find them analyzed in the attached Opinion, too.  The guts of those rulings were attached to "anti-concurrent cause" Exclusions, which did not yet apply in the Federal Consolidated Coverage Case in Louisiana, Order attached; the Federal Judge in the Eastern District of Louisiana distinguished those rulings because there were no allegations presented in the challenged complaints in Louisiana Federal Court that involved any more than one cause.  (Pages 49 and 71.)  The Federal Court noted in the attached Order that the actual evidence may reflect more than one cause, and the Court would in that case revisit the anti-concurrent cause Exclusions relied on by the Insurance Companies, at that time.  (See for example Pages 33, 69, and 78.)

    4.    The Federal Court in the attached Eastern District of Louisiana Consolidated Insurance Coverage case concluded its rulings by candidly holding that there is a substantial ground for differences of opinion as to the governing Insurance Law Questions, such that the Court ordered that an immediate appeal may be taken from these orders.  (Page 85.)

    A Notice of such Appeal is expected on or before Thursday, December 7, 2006.  Further known developments, if any, in this Consolidated Insurance Coverage Case will be posted here.

REMINDER: THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP. ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR INSURANCE ISSUE, THE JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.
   

MOLD COVERS HOMES, HELD: INSURANCE DOES NOT COVER MOLD

                    Who Rebuilds and Repairs Where No Insurance Exists.

[THIS POST WAS ORIGINALLY PLACED ONLINE ON OCTOBER 11, 2006.  A POSTSCRIPT HAS BEEN ADDED THIS 16th DAY OF DECEMBER, 2006.]

    It is a fact that mold covers homes.  It is held under a standard Exclusion that insurance does not cover mold in Fiess v. State Farm Lloyds, 2006 WL 2505995 (Tex. Case No. 04-1104 Opinion Filed Aug. 31, 2006, answering this Question Certified by the Federal Fifth Circuit Court of Appeals) (subscription required), public access provided by Texas Supreme Court.

   The Fiess case in Texas involved a standard Exclusion used throughout the United States for "ensuing loss".  In a homeowner's policy, including the one in Fiess, water damage is ordinarily listed as a covered peril.  An Exclusion for "ensuing loss" excludes all coverage, however, for damage that ensues from an otherwise covered peril.  The modern homeowner's policy adds "mold" to the list of excluded ensuing loss.

    In Fiess, the Supreme Court held that mold damage is an excluded ensuing loss even though water damage is otherwise covered.  As a Federal Court recently held:  "After Fiess, even if the water damage is otherwise covered, resulting mold contamination is not."  Download gordon_publicly_issued_opinion_and_order_9_27_06.pdf

    The legal holding is clear.  The factual result is, well, a little more moldy and unclear.  The practical, if not legal question that remains, is:  Who will repair and replace when no insurance exists?

Postscript added Saturday, December 16, 2006:
The practical, if not legal question, that ended this post in October, 2006 still remains.  However, in the Fiess case itself, the Federal Fifth Circuit Court of Appeals affirms the District Court holding "that the Fiesses' Homeowners Form B (HO-B) policy did not cover mold contamination."   (Slipsheet at 1, Fifth Circuit Opinion Filed December 12, 2006.)  The District Court's holding and judgment of No Coverage now conforms to the Texas Supreme Court's "holding that the ensuing-loss provision did not provide coverage for mold contamination."  (Id. at 2.)

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.