The Church of the Palms discovered extensive mold damage inone of its buildings, which is insured under an all-risk policy with theCincinnati Insurance Co.
According to the policy, “The Church is covered by anall-risk policy, which excludes losses caused by rust, corrosion, fungus,decay, deterioration, hidden or latent defect or any quality in property thatcauses itself to damage or destroy itself or for losses resulting from faulty,inadequate or defective design, specifications, workmanship, repair, andconstruction.”
Purchase Bob Bruss reports online.
After discovering the mold, the church hired an expert whodetermined the building’s negligent construction and design most likely causedthe mold infestation.
The insurance company denied the church’s mold damage claim,pointing to the policy exclusion for fungus damage. But the church’s attorney arguedthe policy does not specifically exclude coverage for damage caused by mold.
However, the insurer replied that mold is a form a fungus,an excluded coverage under the policy.
If you were the judge, would you require the insurancecompany to pay the church for the damage due to mold?
The judge said no!
Both parties to this lawsuit have accepted the expert’sfindings that the likely reasons for the extensive mold damage are roofdeficiencies, improper installation of flashing, mold contamination in thewalls between the drywall and the insulation, mold/microbial contamination inthe mechanical rooms, and within the air-conditioning duct work, the judgeexplained.
However, after the insured proves a loss to its propertywhile the insurance policy is in force, the burden shifts to the insurer toprove the loss arose from an excluded risk, he continued.
Although the insurance policy omits the word”mold” in its exclusions, the insurer argues mold is a fungus, whichis excluded from coverage, the judge emphasized. The church does not disputethat mold is a fungus, he noted.
Because mold is a fungus, and the church’s mold problemsdeveloped gradually and were not associated with a single insured fortuitousevent, such as a rainstorm, the insurance policy fungus exclusion preventscoverage for the mold damage, the judge ruled.
Based on the U.S. District Court decision in Church ofthe Palms Presbyterian v. Cincinnati Insurance Co., 404 Fed.Supp.2d 1339.
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Copyright 2006 Inman News