Mold Litigation:  The Defense Perspective

 

Douglas G. Houser

Linda M. Bolduan

 

I.

Mold:  Not The Next Asbestos

Mold claims are a problem, but are more the product of media hysteria than the result of an actual health hazard.  There is still no scientific proof linking most mold health claims of “sick” people with “sick” buildings.  Mold claims are generally no more than water-damage claims in new clothes, packaged for greater jury appeal.  Most “mold” claims are, in reality, bad faith claims in disguise.  These claims are not a recent phenomenon. We have been handling them in the wet Pacific Northwest for some forty years.  In fact, concern with mold’s effects goes back at least as far as the Bible.[1]

Although Ballard[2] kick-started the current “mold rush” in 2001, there are mold cases dating back decades.  For example, in Thomas Roberts & Co. v. Calmar Steamship Corp.,[3] a case decided in 1945, the plaintiff sued the company that shipped cases of its canned beets from Baltimore to Seattle, alleging that the steamship company’s negligence resulted in moldy cases, rusty cans, and soiled labels.  The court found that the company’s bill of lading excepted it from liability for damage caused by mold, rust, and discoloration.  The court further held that the plaintiff could not recover under its marine insurance policy, which insured the canned beats for “loss or damage caused by sweat, fresh water, steam of hold, contact with oil and/or with other cargo.”[4]  This was true because the plaintiff could not establish the “essential cause” of the mold, rust, and stain, that is, “the excess moisture.”[5]

Since Ballard, however, homeowners have suddenly discovered mold everywhere, “lurking under sinks, behind wallpaper or under floorboards, and hearing from scientists that it can be a health hazard.”[6]  By January 2002, some 10,000 mold lawsuits were in the legal pipeline.[7]  Guy Carpenter & Co., a major re-insurance intermediary, has estimated that of those 10,000 suits, 5000 were brought against insurance companies for acting in bad faith; 2000 were brought against homeowner associations for improper maintenance; 1000 were brought against former owners of sold homes; and, 2000 were brought against builders for construction defects.[8]  The average mold-related construction defect claim is in the range of $10,000 to $20,000.  This sudden upsurge in the number of mold cases appears to be a uniquely American phenomenon.  Our understanding from reliable sources in Europe is that mold claims are not an issue on the Continent.

Given that mold “‘has been around forever, . . . is easily remediated, and its health threat . . . greatly exaggerated and virtually unproven by scientific fact,’” the number of mold cases indicates that the mold issue “is being blown out of proportion by public paranoia, media frenzy and plaintiffs’ attorneys.”[9]  According to R. Bryan Tilden, principal of Pittsboro, North Carolina, based Tilden & Associates, a training and consulting firm to the insurance industry, mold-related property damage allegations are no more than “‘water damage claims repackaged for jury appeal.’”[10]  Tilden believes that the asbestos model used by the plaintiffs’ bar will not work for mold because the potential for large verdicts “just isn’t there.”[11]  Tilden’s comment is borne out by data recently released by the Texas Department of Insurance (“TDI”).

On June 14, 2002, the TDI released data on mold claims for the two-year period from January 1, 2000, to December 31, 2001.  According to Department statistics, the average loss and allocated loss adjustment expenses per mold claim was $22,740, subject to certain qualifications,[12] a paltry amount, especially for a state that is arguably the birthplace of the “mold rush.”

One may reasonably wonder, then, why the plaintiffs’ bar has become enamored of mold cases.  It has been suggested that the answer lies in the opportunity for a plaintiff’s attorney to use a mold claim as a basis upon which to assert insurance company bad faith and to seek punitive damages.[13]  This notion is supported in part by the fact noted above that one-half of the approximately 10,000 mold lawsuits filed by January 2002 were brought against insurance companies for allegedly acting in bad faith.[14]  However, as will be discussed subsequently, appellate courts are reversing or reducing bad-faith punitive damages awards against insurance company defendants in mold cases.

            The bottom line is that courts are frequently finding in favor of defendant insurers in mold cases.  Plaintiff insureds have been unable to meet their burden of proof, failing to establish that 1) mold was the cause of their loss; 2) mold caused their personal injury; or 3) the insurance company’s conduct in handling the insured’s claim warranted an award of punitive damages.

 

II.

Causation Issues

A. First-Party Insurance

            Homeowners insurance is often an “all-risk” policy, which typically insures against direct physical loss to covered property caused by “perils” not excluded under the policy.  “Perils are active physical forces which cause the loss of or damage to the insured property.”[15]

One commonly excluded peril in “all-risk” policies is “mold.”  Such “mold” exclusions may contain an exception that provides coverage for any “ensuing” loss to covered property when such loss is not otherwise excluded by the policy.[16]  However, as will be discussed subsequently, for an ensuing loss to be covered, it must be a second, separate “loss.”[17]

                        1. Direct Physical Loss

            Under an “all-risk” policy, the insured must first prove that a direct physical loss occurred to covered property during the policy period.[18]  In Columbiaknit, Inc. v. Affiliated FM Insurance Co.,[19] the court, construing Oregon law, addressed when mold damage constitutes a “direct physical loss” to property under an “all-risk” policy.  In Columbiaknit, rainwater entered the plaintiff’s warehouse and saturated some of the fabric and garments stored there.  The plaintiff’s “all-risk” property insurance provided coverage for “direct physical loss of or damage to” covered property.  At issue was what constituted direct, physical loss to the garments.

            The plaintiff contended that the policy language “direct physical loss” was ambiguous in that it raised a question as to whether damages must be “direct” or “physical.”  Under that theory, if damages need be only direct and not physical, the plaintiff could recover for purely economic loss.  The court disagreed, finding the language unambiguous and, under Oregon law, not to cover consequential or intangible damages such as depreciation in value.

            The arguments regarding coverage for economic loss aside, the plaintiff also asserted that the property stored in the warehouse suffered direct physical loss or damage due to direct contact with water or prolonged exposure to high humidity and mold and mildew.  The plaintiff sought a “liberal” interpretation of the phrase “direct physical loss” with respect to mold and mildew damages.

            In Farmers Insurance Co. v. Trutanich[20] and Largent v. State Farm Fire & Casualty Co.,[21] the Oregon Court of Appeals held that odor from the “cooking” of methamphetamine that permeated the carpets, drapes, and walls of a house constituted  “direct physical loss” to property.  According to the Columbiaknit court, Trutanich and Largent suggested that “physical damage can occur at the molecular level and can be undetectable in a cursory inspection.”[22]  Although recognizing that physical damage can occur at the molecular level, the court in Columbiaknit nevertheless emphasized that “physical damage need be distinct and demonstrable.”[23]  In the case at bar, to obtain coverage the plaintiff had to establish “the presence of a pervasive, persistent or noxious odor, or mold or mildew” or show that the fabric or garments were “physically changed” in a way that would lead to mold or mildew damage in the future.”[24]  The court commented:

 

However, it is important to distinguish between the necessity of washing the garment because of its strong odor, and the decision by the retailer not to sell the garment as new, merely because it has been exposed to elevated levels of spore counts, for example, and may or may not develop mold or mildew in the future.  The decision not to sell the garment as new, in the absence of distinct and demonstrable physical change to the garment necessitating some remedial action that would preclude honestly marketing as first quality goods, is not a covered loss.  Furthermore, such damage that requires remedial action to some items is not sufficient to prove such damage to all items . . . .

            . . . Trutanich instructs that goods with heightened spore counts may be damaged if they will later develop odor or other effects so as to now require washing or such treatment that they may not be sold as first-quality goods.[25]

 

In Prudential Property & Casualty Insurance Co. v. Lillard-Roberts,[26] a magistrate, following Columbiaknit, held that a house with “visible mold” that might not be removable sustained “‘distinct and demonstrable’” damage sufficient to constitute a “direct” and “physical” loss under an “all-risk” policy.[27]  In this case, water leaked into the insured’s home, allegedly because of the prior owners’ knowing and negligent repair of the roof and flashing.  The insured’s plumbing system also failed, backed up into the bathroom on the main floor, and flooded the main floor with approximately one inch of sewer water.  Mold resulted from these leak problems, and the insured moved out of the house after being diagnosed with systemic fungal disease allegedly due to her living there.  The insured sought coverage under an “all-risk” policy for the mold damage.

            The court agreed with the insurer that the policy’s requirement of a “direct” and “physical” loss precluded the insured from recovering “‘indirect, nonphysical losses,’ including consequential or intangible damages such as loss in value.”[28]  Thus, the question before the court, which it answered in the affirmative, was whether the insured had a claim for loss due to physical damage to her house and other structures caused by the presence of mold.  It also noted two cases not involving mold that had deemed “the inability to inhabit a building as a ‘direct, physical loss’ covered by insurance.”[29]  The court could find “no analytical difference between these cases and the case here where a house has allegedly been rendered uninhabitable by mold.”[30]

                        2. Causation

            To determine whether a first-party insurance policy provides coverage for mold losses, read the policy; read the policy; and read the policy again.  Many first-party insurance policies now exclude mold losses or cap a mold loss at a reasonably low limit, such as $5000.

                                    a. Proximate Cause

In the context of first-party property insurance, issues of causation often arise.  The question is:  What event caused a particular loss?  In our common experience, we tend to simplify causative events: Event A causes Loss B, the fire caused the house to burn down.  However, multiple events are often implicated in losses to property and, for purposes of determining coverage under a particular policy, the insurer needs to know which event “caused” the loss and whether that event is a covered peril.

What has “caused” a loss in a case involving mold is a question that has led to extensive litigation.  The determination of causation in mold cases is extremely complicated when there are multiple events that have led to a particular loss -- was the loss caused by faulty workmanship that caused the leaky roof that led to the mold that caused the shower to turn green?

To determine causation where multiple events lead to a property loss, the majority of jurisdictions have adopted a “proximate cause” type analysis.[31]  Also sometimes called “efficient proximate cause,” “moving cause,” “predominant cause,” or combinations thereof,[32] the “proximate cause” of a loss is the “dominant, efficient one,”[33] the one that “sets in motion a chain of events that results in the loss without intervention of any new or independent source.”[34]  Thus, where there is an “unbroken connection” between the event and the injury, the act “causes” the injury, and an intervening event is not a proximate cause of the injury “unless it is efficient to break the causal connection.”[35]

As explained by the Supreme Court of West Virginia:

 

            [W]hen examining whether coverage exists for a loss under a first-party insurance policy when the loss is caused by a combination of covered and specifically excluded risks, the loss is covered if the covered risk was the efficient proximate cause of the loss.  No coverage exists for a loss if the covered risk was only a remote cause of the loss, or conversely, if the excluded risk was the efficient proximate cause of the loss.  The efficient proximate cause is the risk that sets others in motion. It is not necessarily the last act in a chain of events, nor is it the triggering cause.  The efficient proximate cause doctrine looks to the quality of the links in the chain of causation. The efficient proximate cause is the predominating cause of the loss.[36]

 

However, the efficient proximate cause doctrine applies only when there are at least two distinct perils, which “could each, under some circumstances, have occurred independently of the other and caused damage.”[37]  Conversely, the efficient proximate cause doctrine does not apply when a loss is caused by a “single cause, albeit one susceptible to various characterizations.”[38]  Moreover, an insured may not avoid a policy exclusion “merely by affixing an additional label or separate characterization to the act or event causing the loss.”[39]  Although the efficient proximate cause doctrine may be difficult in application, it may be stated simply:

 

§        Where a covered peril is the efficient proximate cause of the loss, there is coverage.

§        But, where an excluded peril is the efficient proximate cause of the loss, coverage is denied.

 

b. “Ensuing Loss”

The proximate cause analysis tells us whether a covered peril has caused the loss at issue. Depending upon the policy terms, to the extent a covered peril causes the loss, the policy will provide coverage, subject to any applicable exclusions.  However, a property policy may contain an ensuing loss clause, which may act as an exception to the exclusion for some, but not all, of the damage.

There are several types of ensuing loss clauses.  One type broadly covers any loss occurring subsequent to an excluded loss, so long as that subsequent loss is not excluded by the policy.[40]  A second type more narrowly covers losses subsequent to an excluded loss arising from specified perils.[41]

Most courts appear to agree that the ensuing loss clause is clear and unambiguous.  For example, in McDonald v. State Farm Fire & Casualty Co.,[42] the Washington Supreme Court opined:

 

The ensuing loss clause may be confusing, but it is not ambiguous. Reasonably interpreted, the ensuing loss clause says that if one of the specified uncovered events takes place, any ensuing loss which is otherwise covered by the policy will remain covered.  The uncovered event itself, however, is never covered.[43]

 

The purpose of the ensuing loss exception to an exclusion is to provide coverage only for certain losses that occur subsequent to an excluded loss, “not to enlarge the list of items covered under the policy.”[44]  Therefore, courts seek to ensure that the exception does not swallow the exclusion by precluding coverage for ensuing losses that are “directly related to the original excluded risk.”[45]

c. The Mold Cases

            Consumers should be aware that most standard homeowner policies typically do not cover losses caused by rust, rot, mold or other fungi.  Insurers generally consider mold a ‘home maintenance’ issue.”[46]  Washington Insurance Commissioner Kreidler’s comment is correct.  The standard homeowners policy in most states does not generally cover mold losses.  The current “mold rush” began in Texas, not only because of the $32 million award in Ballard and heightened press coverage of the mold “problem,” but because of the expansive coverage for water damage offered under the Texas HO-B policy.[47]  However, faced with insurers in Texas reporting poor financial performance because of growing mold claims and consumers complaining about rate hikes ranging from 14% to 200%, in 2002, the Texas Insurance Commissioner approved State Farm’s less-expensive, national “all-risk” homeowners policy form that excludes coverage for mold and foundation damage.[48]

According to Ron Dodd, Senior Vice President of State Farm’s Texas zone:

 

As much as we’d like to think that we need an insurance policy that’s unique to Texas, the fact of the matter is that the state’s existing policy provides insurance coverage for items that in almost every other state are considered a property owner’s maintenance responsibility. As a result, the costs of those maintenance[-]type activities have been rolled into the process that we all pay for homeowners insurance.[49]

 

i. Representative “No Coverage” Cases

In Myers v. State Farm Fire & Casualty Co.,[50] the insureds sought coverage for “unacceptable levels of mold” in their home.  Three experts investigated the contamination.  One concluded that the mold problem was caused by moisture in the crawl space resulting from defective plumbing.  A second expert concluded that the moisture in the crawl space and the resultant mold growth were due to both a defective plumbing system and defective construction of the crawl space.  The insurer’s expert concluded that the mold in the house was not directly related to the mold in the crawl space, but, rather, was the type of mold growth expected in a 100-year-old home.

The policy at issue covered “accidental direct physical loss” to covered property.[51]  It excluded from coverage, in part, “continuous or repeated seepage or leakage of water or steam from a . . . plumbing system . . . mold, fungus or wet or dry rot . . . [and] contamination.”[52]  The policy also contained a “faulty workmanship” exclusion.  The exclusions were followed by a “resulting loss” clause barring coverage for “any resulting loss . . . unless the resulting loss is itself a Loss Not Insured by this Section.”[53]  Based upon these exclusions, the court concluded that there was no coverage:

 

All of the damage that occurred to the [insureds’] home resulted from the continuous or repeated seepage or leakage of water from a plumbing system or plumbing fixture, from improper construction and grading, or from mold or fungal contamination. The policy’s plain language excludes coverage for those damages.[54]

 

The court also rejected the insureds’ contention that, even if their loss was not otherwise covered, the resulting loss provisions provided coverage for the loss of value to their home.  In Sentinel Management Co. v. New Hampshire Insurance. Co.,[55] the court construed an “ensuing loss” provision similar to the “resulting loss” provision in the case at bar.  In Sentinel, the court explained that a covered “ensuing loss” must be “a distinct peril” and not a “different classification[] of a single phenomenon.”[56]  In the instant case, the Myers court opined that the insureds could not explain how the home’s loss of value was separate from the property losses caused by the seepage of water, mold, fungus, contamination, or faulty workmanship:

 

The [insureds’] home lost its value because it was contaminated by mold or fungus. The loss of value was a loss to property.  There was no separate, covered cause, like a fire or a pipe that burst suddenly, that caused the loss of value to the [insureds’] home or the damage to their personal property.  To interpret the resulting-loss clause as urged by the [insureds] would negate the policy exclusions.[57]

 

In Prudential Property & Casualty Insurance Co. v. Lillard-Roberts,[58] the insured alleged, in part, that the mold damage to her house resulted from the faulty workmanship of the prior owners’ negligent repair of the roof and flashing.  The policy at issue contained a faulty workmanship exclusion, which stated: “We do not cover loss to property . . . caused by any of the following.  Any ensuing loss to property . . . not excluded or excepted in this policy is covered. . . . c. Faulty, inadequate or defective . . . repair.”[59]

The insurer argued that the loss was excluded because it was caused by faulty workmanship.  The court found a fact issue as to causation and denied the insurer’s motion for summary judgment on this exclusion.  Nevertheless, the court addressed the insured’s argument (made in a counterclaim for declaratory relief) that the faulty workmanship exclusion did not apply to bar coverage because the mold damage fell within the “ensuing loss” exception to the exclusion.  As understood by the court, the insured contended that the ensuing loss provision reinstated the coverage for mold damage “ensuing” from water leaks caused by faulty workmanship.  The insurer contended, however, that the mold was not an “ensuing loss” because there was no “intervening cause, other than time, beyond the initial water damage.”[60]

The court agreed with the insurer, stating that an ensuing loss clause “‘does not reinsert coverage for excluded losses, but reaffirms coverage for secondary losses ultimately caused by excluded perils.’”[61]

It emphatically concluded:

 

Though not inevitable, mold is a natural event that often manifests after and as a direct result of the entry of water caused by some other peril, such as a roof opened by a hailstorm, a leaky pipe or defectively installed roof flashing.  Mold cannot exist or sustain itself without some moisture source, such as water intrusion.  When water intrudes into a residence, mold, unlike fire, is not a surprise, particularly in the damp northwestern United States.  Because mold is a natural and expected, as opposed to a separate and independent, result of water damage, it cannot be an ensuing loss.  An ensuing loss requires an unexpected loss due to an intervening or contributing cause other than the mere passage of time.[62]

 

The court rejected the insured’s additional contention that toxicity from mold, as opposed to the mold itself, was not foreseeable and was therefore a covered ensuing loss.  Noting that “‘[m]olds are ubiquitous on our planet,’”[63] the court opined that it would be expected that illness would result when a water intrusion causes the mold to grow and consequently increases mold quantities to toxic levels.  Nevertheless, the court concluded that “‘removal of the mold would presumably also remove the mycotoxins.  As such the mycotoxins do not constitute a separate and independent loss resulting from mold.’”[64]  It noted that cases in other jurisdictions interpreting ensuing loss clauses supported the Lillard-Roberts court’s interpretation, citing in part, Acme Galvanizing Co. v. Fireman’s Fund Insurance Co.,[65] the leading “ensuing loss” case in the country.

In Acme Galvanizing, a case often cited with approval, the California Court of Appeal expressly stated that, for an ensuing loss to be covered, it must be an independent, covered peril separate from the initial excluded peril.  In that case, a steel kettle in the insured’s galvanizing plant ruptured, allowing several tons of molten zinc to spill, damaging or destroying the surrounding equipment.  The evidence showed that the rupture was caused by an inadequate weld.  The court ruled that the loss was caused by a latent defect, which was excluded under the all-risk commercial property policy at issue.

However, the insured contended that, even if the kettle rupture were caused by an excluded latent defect, the discharge of the molten zinc that damaged or destroyed the surrounding equipment was a covered “ensuing loss.”  The court disagreed.  The policy provided coverage for a loss precipitated by an excluded peril where the “loss by a peril not otherwise excluded ensues and then the Company shall be liable for only such ensuing loss.”[66]  The court interpreted this language to provide coverage only for an ensuing loss arising from a separate, independent, but covered peril resulting from the original excluded peril.  The court concluded that, in the case at bar, the ensuing loss clause did not apply to provide coverage for the insured’s loss:

 

[T]here was no peril separate from and in addition to the initial excluded peril of the welding failure and kettle rupture. The spillage of molten zinc was part of the loss directly caused by such peril, not a new hazard or phenomenon.  If the molten zinc had ignited a fire or caused an explosion which destroyed the plant, then the fire or explosion would have been a new covered peril with the ensuing loss covered.  That did not occur.[67]

 

            In Lexington Insurance Co. v. Unity/Waterford-Fair Oaks, Ltd.,[68] the insured sought coverage for mold damage to first- and second-floor apartments caused by a severe rainstorm and flooding.  The insurer denied coverage based upon the policy’s Pollution and Contamination Exclusion, which provided, in pertinent part:

 

This policy does not cover loss or damage caused by, resulting from, contributed to or made worse by actual, alleged or threatened release, discharge, escape or dispersal of CONTAMINANTS or POLLUTANTS, all whether direct or indirect, proximate or remote or in whole or in part caused by, contributed to or aggravated by any physical damage insured by this policy.

. . . .

“CONTAMINANTS or POLLUTANTS means any . . . irritant or contaminant . . . , which after its release can cause or threaten damage to human health or human welfare or causes or threatens damage, deterioration, loss of value, marketability or loss of use to property insured hereunder, including . . . fungi . . . .”[69]

 

The insurer argued that the insured’s mold losses fell within the above exclusion because the mold spores that caused the damage were “fungi” that could “cause or threaten damage” to human health or property.   The insured contended that the exclusion did not apply because the mold in the apartments did not “escape” and was not “released, discharged or dispersed” within the meaning of the exclusion.[70]  The insured’s contention was based upon expert testimony that mold and mold spores already exist at de minimis levels in all apartment environments.

The court disagreed with the insured, noting the insurer’s expert testimony regarding the manner in which mold spreads under wet conditions.  The testimony established that, “under normal conditions, fungal mold spores exist at safe levels on the exterior and the interior of virtually all homes and businesses.”[71]  However, where additional water (e.g. flooding) improves the living conditions for mold spores, the existing spores reproduce by giving off reproductive spores that are dispersed into the air and consequently into the surrounding environment,[72] giving off mycotoxins that “are” dangerous to human health.[73]

Based upon the insurer’s expert testimony and evidence showing that there were elevated, unsafe levels of mold in the apartments, the court concluded that “[t]he mold that was the cause of the damage at issue was dispersed within the covered properties and, consequently, that the damage caused thereby falls within the scope of the Pollution and Contamination Exclusion contained in the policy.”[74]

In Cooper v. American Family Mutual Insurance Co.,[75] dry wall and flooring in the insured’s master bedroom and hall closet were damaged by a plumbing leak.  Pursuant to the insured’s homeowners policy, the insurer paid for repairs to the drywall and flooring, but denied coverage for mold damage allegedly caused by the leak. The insured brought suit, seeking payment for mold remediation.

The policy at issue covered “risks of accidental physical loss . . . unless the loss is excluded in this policy.”[76]  It excluded “smog, rust, corrosion, frost, condensation, mold, wet or dry rot” “regardless of any other cause or event contributing concurrently or in any sequence to the loss.”[77] However, the policy did cover “resulting loss” to covered property “not excluded or excepted in this policy.”[78]

Based upon that policy language, the insured contended that because water damage was a covered loss under the efficient proximate cause rule, the resulting mold was also covered.  Consequently, the insurer was liable for mold remediation, mold damage to personal property, and additional living expenses incurred during the time the mold was being remediated.  On the other hand, the insurer argued that the insured’s damages were caused by mold and therefore there was no coverage because the policy expressly excluded coverage for mold “regardless of any other cause or event.”[79]

As explained by the Arizona federal court, the efficient proximate cause rule would permit the insured to identify an insured peril as the proximate cause of the loss “even if subsequent or concurrent events are specifically excluded from coverage.”[80]  However, the court noted that Arizona had not adopted the efficient proximate cause rule, and therefore, the insurance company was permitted to limit its liability pursuant to the anti-concurrent causation language in its policy.  Nevertheless, in holding that there was no coverage for the mold losses “even though a covered water event may have also contributed to the loss,”[81] the court opined:

 

Even in the absence of the concurrent causation clause, it is clear–and should be to a layman–that loss caused by mold is excluded.  Unlike some coverage issues, where analysis and rhetoric move one from a state of complexity to a state of simplicity and clarity, the reverse is true with the mold exclusion in this policy.  The policy says loss caused by mold is excluded.  Enforcing the policy as written, this Court concludes loss caused by mold is excluded.[82]

 

The court also rejected the insured’s argument that the “resulting loss” clause (i.e., ensuing loss clause) contradicted the policy’s exclusions.  The court found that the clause, “[b]y its very wording . . . only reaffirms coverage for resulting loss ‘ . . . not excluded or excepted in the policy.’”[83]  It noted other jurisdictions also holding that “the resulting loss provision does not reinsert coverage for excluded losses, but reaffirms coverage for secondary losses ultimately caused by excluded perils.”[84]

In addition, the court rejected the intervener’s argument that the mycotoxins released by the mold constituted a “separate and independent” loss resulting from the mold and were therefore a covered ensuing loss under the policy’s “resulting loss” clause.  The court opined that the intervener’s own EPA official publication stated that mycotoxins were produced and released by mold.  It found that, “therefore, removal of the mold would presumably also remove the mycotoxins . . . [and,] [a]s such, the mycotoxins do not constitute a separate and independent loss resulting from mold.”[85]

Quoting with approval Acme Galvanizing Co. v. Fireman's Fund Insurance Co.[86] in which the California Court of Appeal had expressly stated that for an ensuing loss to be covered it must be an independent, covered peril separate from the initial excluded peril, the Arizona Federal District Court in Cooper emphatically concluded:

 

            Here, there is no separate and independent peril. The claimed damage is mold. The proposed remediation is removal of the mold. Calling it a pollutant does not change the result.  It is still mold.  The policy expressly excludes any losses that are caused by and result from mold. The “resulting loss” clause does not resurrect the excluded peril to provide coverage.[87]

 

In Point Triumph Condominium Ass’n v. American Guarantee & Liability Insurance Co.,[88] the Association owned a condominium complex in a small town located near the mouth of the Columbia River.  Situated only a mile and a half from the Pacific Ocean, the condominium complex has been exposed to normal violent wind and rainstorms.  Beginning in 1993, Point Triumph began experiencing problems with water penetration into buildings finished with a siding material called “Forestex.”  The single building finished with cedar siding, as distinguished from “Forestex,” did not experience any water penetration problems.  Point Triumph sought coverage for damage to the buildings sided with Forestex, alleging damage “as a result of weather.”  The insurer denied coverage, asserting that, based upon its investigation, the damage was due to failure of the siding; i.e., the siding “developed buckling” and then wind blew rainwater under the siding, causing wet and dry rot in the buildings.

The subject policy excluded, among other things, loss resulting from “fungus, decay, deterioration, hidden or latent defect or any quality in the property that causes it to damage or destroy itself” and faulty workmanship or materials.[89]  Based upon the record before it, the court found that the plaintiff’s damages consisted of “fungus,” “decay,” and “deterioration,” causes of loss expressly excluded from coverage.  Further, it determined that faulty workmanship or materials, also expressly excluded from coverage under the policy, caused the damage.

However, the plaintiff contended that the efficient proximate cause of its loss was covered wind-driven rain.  The court disagreed, concluding that there was no evidence in the record that wind-driven rain, “a common phenomenon on the Oregon Coast,”[90] would have damaged the plaintiff’s buildings absent defects in the materials or inadequacies in their construction or maintenance.

In granting the insurer’s motion for summary judgment, the court opined:

 

The damage to plaintiff’s buildings was not a “natural” direct or indirect consequence of the rain, but instead was an abnormal occurrence that would not occur in the absence of other conditions, -- the faulty material, construction, or maintenance established by the record – that were specifically excluded from coverage under the policy. . . . [T]he rain cannot be characterized as the “dominant” or “most important” cause of loss. Accordingly, a trier of fact could not conclude that wind-driven rain constituted the efficient proximate cause.[91]

 

The court also rejected the plaintiff’s argument that the damage to the underlying structures of its buildings was covered even if the siding was defective.  The court declined to distinguish damage to the buildings’ structure and damage to the siding, opining that damage to the underlying structures was a “direct result” of the defects in material, construction, or maintenance excluded from coverage.[92]

ii. Some Representative “Coverage” Cases

In Bruce Oakley, Inc. v. Farmland Mutual Insurance Co.,[93] Oakley stored its harvested soybeans in a 500,000 bushel storage bin.  When some of Oakley’s employees began to unload the storage bin, they noticed that some of the soybeans were charred and blackened, and several people saw the blackened beans “amidst heat, smoke, and steam.”[94]  Oakley sought coverage for its loss.  The policy at issue stated:

 

We will not pay for loss, damage, or expense caused by, resulting from, contributed to or aggravated by the following causes, except that ensuing fire is covered unless otherwise excluded:

. . .

(2) Wear and tear; deterioration; rust corrosion, or erosion; wet or dry rot; mold; inherent vice; latent defect.[95]

 

The trial court granted Oakley’s motion for summary judgment and awarded it more than $300,000 for the loss of the soybeans, pre- and post-judgment interest, costs, and attorney fees.  The Eighth Circuit affirmed.  Oakley’s expert testified that the beans in the storage bin had been unaerated and moist, allowing mold to form.  As the mold grew, the moisture content of the beans increased, generating heat and eventually causing the beans to burn.  At issue before the court was whether the “ensuing fire” exception to the mold exclusion applied.

Because the policy did not define the term “fire,” the court looked to various dictionaries, concluding that the witnesses had observed “fire” according to at least two of the dictionary definitions, i.e., they had observed smoke, heat, and orange light.  The court therefore held that Oakley could recover under the “ensuing fire” exception to the exclusion because “the policy should be interpreted in a manner most favorable to the insured.”[96]

In the alternative, the court found coverage because heat damaged the beans, but heat was not “explicitly listed” as one of the policy exclusions.[97]  Because the insurance company did not articulate whether heat damage was covered when there was also fire damage, the court construed the policy in favor of the insured to provide coverage.  The court opined, “[t]here is nothing in the policy that excludes coverage of damage to beans due to heat; the insurance company should have explicitly listed heat damage as an exclusion if it was inclined to deny coverage for such damage.”[98]

In Bowers v. Farmers Insurance Exchange,[99] Bowers owned a rental house. Without her knowledge, tenants converted the basement of the house into a hothouse for growing marijuana.  The cultivation of the marijuana caused damage to the house, including the growth of mold throughout the structure.  As described by the court:

 

[T]he tenants diverted all of the heat from the furnace to the basement in order to create a marijuana grow room.  They irrigated the marijuana plants under grow lights.  This created a sauna-like environment in the basement.  Additionally, they sealed the house and thereby trapped the water vapor generated by their activities in the basement.[100]

 

Bowers sought coverage under a landlord’s protection policy for warped paneling in the basement and the clean up of mold-related damage.  The insurer paid for the damaged paneling, but denied coverage for the mold damage, asserting it was not covered under the policy.  The policy covered loss from vandalism, but not from “mold.”  Bowers contended that her loss was covered vandalism because the tenants willfully, wantonly, and recklessly damaged her property.  However, the insurer argued that Bowers’ loss was due to mold, and mold losses were expressly excluded by the policy.  At issue was whether the efficient proximate cause of Bowers’ loss was the tenants’ vandalism, a covered peril, or the mold, an excluded peril.

Under Washington law, when an insured peril is the proximate cause of a loss, there is coverage, “even if subsequent events in the causal chain are specifically excluded from coverage.”[101]  In the case at bar, the court found that there could be no reasonable difference of opinion regarding the proximate cause of Bowers’ loss, holding that it was the tenants’ acts, that “‘in an unbroken sequence . . . [produced] the result for which recovery is sought[.]’”[102]

In Home Insurance Co. v. McClain,[103] the roof on the new addition to the McClain’s home leaked.  The McClains subsequently discovered that the leaking water had soaked the studs behind the interior walls, damaging the walls, ceilings, and subfloors.  Mold and bacteria apparently flourished in the damp environment.  The McClains’ residence became uninhabitable.  They sued the builder of the addition.  The case settled and the builder went out of business sixty days after the settlement.  The McClains then sought coverage under their homeowners policy.  The policy at issue excluded losses caused by “rust, rot, mold or other fungi,” but did cover “ensuing loss caused by . . . water damage . . . if the loss would otherwise be covered under this policy.”[104]  The insurer denied coverage, asserting the policy’s mold exclusion.  The McClains sued.  The trial court found for the McClains, thereby determining that the mold exclusion did not apply.  The Texas Court of Appeals affirmed.

On appeal, the McClains argued that the policy covered ensuing loss from water damage  -–  in this case, the loss from the mold and fungi.  The appeals court agreed.  “To be an ensuing loss caused by water damage, the mold and fungi would necessarily have to follow or come afterward as a consequence of the water damage.”[105]  It was uncontroverted that the claimed damages resulted from water leaking from the roof.  The court concluded that “the water from the leaking roof pooling in the crawl spaces caused the mold and fungi . . . . Consequently, the loss that followed the water damage was caused by water damage.  Therefore, under the facts of this case, the exclusion for fungi and mold damage does not apply.”[106]

 

d. Anti-Concurrent Causation Clauses

To preclude application of the efficient proximate cause doctrine, insurers have added language to all-risk policies providing that loss or damage is excluded “‘regardless of any other cause or event that contributes concurrently or in any sequence to the loss.’”[107]  “Most” courts that have addressed the issue have found such exclusionary language enforceable.[108]  They generally reason that the parties to an insurance contract can opt out of the efficient proximate cause doctrine by clear and unambiguous exclusionary language.[109]

For example, in Toumayan v. State Farm General Insurance Co.,[110] there were unusually heavy rains in the St. Louis area.  The land at the rear of the insureds’ property moved downward and away from their home, causing the concrete patio and retaining wall to sink.  The insureds sought coverage under their homeowners policy for their loss.  The insurer denied their claim.

Sometime later, the insureds had a large portion of the land at the rear of their residence excavated for the purpose of stabilizing the land, and replacing the destroyed patio and retaining wall.  During the excavation, the insureds discovered a broken sewer line leading from beneath their residence out toward the rear of their home and found evidence of previous attempts at repair or remediation.  They eventually brought suit against the insurer, alleging breach of contract and vexatious refusal to pay.  The trial court granted summary judgment in favor of the insureds on the breach-of-contract claim and in favor of the insurer on the vexatious-refusal-to-pay claim.  The insurer appealed.  The Missouri Court of Appeals reversed on the breach-of-contract claim.

The policy at issue contained an earth movement exclusion, barring coverage for “the sinking, rising, shifting, expanding or contracting of earth, all whether combined with water or not . . . .”[111]  The appeals court found that the exclusion applied to bar the insureds’ loss.  However, the insureds argued that the cause of their loss was water saturation from the broken sewer pipe, a peril specifically covered by a “back-up of sewer or drain endorsement.”[112]  Therefore, it was irrelevant that the resulting damage was caused by an excluded peril, i.e., earth movement.  The insureds’ argument thus relied upon an application of the efficient proximate cause doctrine.

As explained by the court:

 

If the language of the sewer endorsement covered the specific facts of this case and the efficient proximate cause doctrine applied, then plaintiffs [the insureds] could recover under the policy because a covered risk under the endorsement, a broken sewer pipe, set in motion a sequence of events which ultimately caused the loss from an excepted risk, earth movement.[113]

 

However, the court determined that the efficient proximate cause doctrine could be applied only if the policy did not contain pertinent exclusionary language or was ambiguous.  The policy contained the following exclusionary language:

 

We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events.  We do not insure for such loss regardless of: (a) the cause of the excluded event; or (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss; or (d) whether the event occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these: (listed exclusions).”[114]

 

The Toumayan court found this exclusionary language was “unambiguous” and prevented application of the efficient proximate cause doctrine.[115]  It therefore reversed the trial court’s grant of summary judgment in favor of the insureds and remanded the case to the trial court.[116]

Although most jurisdictions find anti-concurrent clauses enforceable, there are some exceptions. For example, in Safeco Inurance. Co. of America v. Hirschmann,[117] the Washington Supreme Court, relying upon its prior decisions, expressly held that “[w]hen an insured risk sets into operation a chain of causation in which the last step may be an excluded risk, the [anti-concurrent cause] exclusion will not defeat recovery.”[118]  The court did note, however, that such a clause “may operate to circumvent coverage for losses resulting from causal chains in which excluded perils are the only proximate causes, or chains in which an excluded peril is the efficient proximate cause.”[119]

Similarly, in Murray v. State Farm Fire & Casualty Co.,[120] the West Virginia Supreme Court declined to enforce an anti-concurrent causation clause like that quoted above, finding that enforcement would conflict with the reasonable expectations of the parties.  Relying upon the California Court of Appeal’s opinion in Howell v. State Farm Fire & Casualty Co.,[121] discussed below, the court reasoned that “‘[n]o reasonable person would pay for insurance against some future peril if it were possible for the insurer to avoid liability by discovering an excluded peril somewhere in the chain of causation.’”[122]

The court concluded that, because the anti-concurrent causation clause at issue conflicted with what the court considered to be the reasonable expectations of the parties, the clause should be construed “to allow coverage for losses proximately caused by a covered risk, and [to] deny coverage only when an excepted risk is the efficient proximate cause of the loss.”[123]

B. Third-Party Insurance

In contrast to first-party insurance, which typically provides coverage for losses incurred directly by the insured -- for example, loss to insured property -- third-party insurance provides coverage to the insured for claims brought by third parties.  Courts view first-party and third-party policies as distinct and generally decline to apply the same rules to both types of policies. There have been very few mold cases brought in the context of third-party insurance.

Third-party commercial general liability (“CGL”) policies may provide, in part, that the insurer: “will pay those sums that the insured becomes legally obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies.  We will have the right and duty to defend the insured against any ‘suit’ seeking those damages. . . .”[124]

1. Trigger of Coverage

CGL policies typically require a covered event to take place during the policy period.[125]  When a particular event takes place can be difficult to determine where a loss occurs over a long period of time.  The timing of an event has been a litigious issue in cases involving long-term environmental contamination.  Because mold losses often similarly occur over a period of time, environmental contamination cases may be instructive in determining how a court will deal with mold contamination cases.

In cases involving long-term environmental contamination, courts have generally adopted one of four triggers, sometimes adopting different triggers depending upon whether bodily injury or property damage is at issue.

 

·        Exposure Trigger.  Coverage is triggered at all points during exposure to a harmful substance.  Courts have adopted this trigger most often in cases involving asbestos-related bodily injury claims, where there is medical evidence that exposure and injury have occurred in close temporal proximity.

·        Manifestation Trigger.  Coverage is triggered when the injury or damage first becomes reasonably capable of diagnosis or is first discovered.

·        Injury-in-Fact Trigger.  Coverage is triggered when actual injury or damage is found to exist, or proved in retrospect, regardless of when the injury or damage first became manifested or when exposure to a harmful substance occurred.

·        Hybrid Trigger.  Some courts have adopted a continuous or “triple trigger” theory, where coverage is triggered at all points from first exposure to the harmful substance until the injury or damage is manifested.  A few courts have adopted a “double trigger,” where coverage is triggered either when the claimant is exposed to the harmful substance or when the claimant’s condition resulting from that exposure manifests itself.  Both of these hybrid triggers provide a broad range of coverage, which is likely to result in more than one insurer being required to defend and indemnify an insured.

 

Oregon, for example, has adopted an “injury-in-fact” theory, i.e., an “actual injury” theory.  In St. Paul Fire & Marine Insurance Co. v. McCormick & Baxter Creosoting Co.,[126] the insurers sought a declaratory judgment that the policies at issue did not cover the costs incurred in investigating and correcting environmental contamination resulting from operations at the insured’s wood treatment plants.  The subject policies provided coverage for either “accidents” or “occurrences” taking place during the policy period.  The Oregon Supreme Court held that, by their terms, those policies were triggered only where an accident or occurrence took place during the policy period.  The court rejected the insurers’ arguments that the policies were not triggered until the property damage was discovered or until the time when the insured’s liability became fixed.

However, the court noted that the policies also provided that the insurers would pay “‘all sums which the insured shall become legally obligated to pay.’”[127]  It understood that language to allow coverage for damages that might be assessed against the insured in the future, concluding that the insured was covered for damages that it became legally obligated to pay “even after the policy period, so long as an ‘occurrence’ took place during the policy period.”[128]

Under the Oregon “actual injury” trigger, an insured would more than likely have to show that the event leading to the mold growth took place during the policy period, not an easy proof because mold often results from the leakage or seepage of water over a long period of time so the “water maintenance history” of the building may become very important.

2. An “Occurrence”

CGL policies generally apply only to “bodily injury” or “property damage” that is caused by an “occurrence.”  An “occurrence” may be defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.”[129]

In Insurance Company of North America v. Snyder Moving & Storage, Inc.,[130] floods damaged goods in the insured’s warehouse.  The claimant, who had goods stored in the warehouse, brought suit against the insured, asserting various claims for the damage resulting from the floods.  The insurance company brought a declaratory relief action, seeking a determination that there was no coverage under the insured’s liability insurance.

The policy at issue limited coverage to property “loss or damage which occurs during the policy period.”[131]  The policy period began October 18, 1990 and ended October 18, 1991.  Although the floods occurred at least forty-five days before the effective date of the policy, the insured asserted there was coverage for the post-flood damage, such as rust, mold, or mildew, to the extent that damage occurred during the policy period.  The policy at issue defined an insured “occurrence” as “an accident that takes place during the period of insurance under this policy, or in the absence thereof, a continuous or repeated exposure during the period of insurance under this policy to conditions which unexpectedly cause loss or destruction or damage to physical property.”[132]

The insured contended that the “continuous or repeated exposure” language provided coverage for the post-flood property damage.  The court disagreed, finding the insured’s proposed construction “contrary to the plain meaning of the insurance contract.”[133]  It found that the damaged property was not subject to “continuous or repeated” exposure to flood water “or any other damaging condition” during the policy period.[134]  Rather, the damage was “entirely” due to floods that occurred prior to the policy’s effective date.  The court concluded that there was no “occurrence” under the policy:

 

Although the rust, mold and mildew damage may have worsened due to the property’s continued storage at the warehouse, this fact does not establish that the property was exposed to a damaging condition during the policy period, or that any condition “unexpectedly” caused loss, destruction or damage. The policy clearly and unambiguously limits coverage to events or conditions that occurred “during the policy period.”  The “occurrence” for purposes of establishing coverage under the policy is the initial flooding and not the subsequent property deterioration.[135]

3. Pollution Exclusions

CGL policies generally contain an exclusion barring coverage for pollutants or contaminants. Whether mold losses fall within a liability policy’s pollution exclusion is likely to be a litigious issue.  Pre-1986 policies typically contain an exclusion barring coverage for the discharge of pollutants, unless that discharge was sudden and accidental.  Therefore, mold losses resulting from water leakage (that is involving maintenance issues) would likely not be covered.[136]

Post-1986 CGL policies generally contain an “absolute” pollution exclusion, which has dropped the “sudden and accidental” language and simply excludes coverage for “bodily injury” or “property damage” “arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants.”[137]  Courts generally find such exclusions unambiguous and enforceable.[138]

In 2002, ISO issued a special endorsement to CGL policies, effective May 1, 2002, entitled “Fungi or Bacteria Exclusion.”  Applicable to both Section I – Coverage A (Bodily Injury and Property Damage Liability) and Coverage B (Personal and Advertising Injury Liability), the purpose of the new exclusion is to foreclose “a potential avalanche of mold claims against liability insurers.”[139]

The new exclusion states, in part:

2. Exclusions

This insurance does not apply to:

            Fungi or Bacteria

            a. “Bodily injury” or “property damage” which would not have occurred, in whole or in part, but for the actual, alleged or threatened inhalation of, ingestion of, contact with, exposure to, existence of, or presence of, any “fungi” or bacteria on or within a building or structure, including its contents, regardless of whether any other cause, event, material or product contributed concurrently or in any sequence to such injury or damage.

            b. Any loss, cost or expense arising out of the abating, testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, remediating or disposing of, or in any way responding to, or assessing the effects of, “fungi” or bacteria, by any insured or by any other person or entity.

            “Fungi” is defined as any type or form of fungus, including mold or mildew and any mycotoxins, spores, scents or byproducts produced or released by fungi.[140]

 

III.

Personal Injury

Plaintiffs in mold cases may seek tort damages or insurance coverage for myriad health problems allegedly caused by exposure to mold.  For example, Erin Brockovich (of movie fame) brought a personal injury/construction defect suit against the builder of her home (as well as the former owner), claiming that shoddy construction resulted in water leaks and mold.  Brockovich stated that she suffered from respiratory ailments, facial rashes, chronic headaches, sinus infections, and other health problems, causing her to miss work.[141]  Other mold plaintiffs have claimed compromised immune systems from mold exposure,[142] as well as fatigue, forgetfulness, chronic bronchitis, neurological tremors, kidney lesions, speech and developmental learning problems, allergies, heart problems, and emotional distress.[143]

The question that arises is one of causality: Did exposure to mold cause the injury alleged?

A. Lack of Scientific Data

“‘Mold’ is the common term for multicellular fungi that grow as a mat of intertwined microscopic filaments” and “[f]ungi are ubiquitous in all environments and play a vital role in the Earth’s ecology by decomposing organic matter.”[144]

            However, although molds are “ubiquitous in the environment, and can be found almost anywhere samples are taken,” there are “no accepted standards for mold sampling in indoor environments or for analyzing and interpreting the data in terms of human health.”[145]  Rather, “most studies have tended to be based primarily on baseline environmental data rather than human dose-response data.  For these reasons, and because individuals have different sensitivities to molds, setting standards and guidelines for indoor mold exposure levels is difficult and may not be practical.”[146]

            Exposure to mold may cause a variety of illnesses, but other than allergies or asthma, such illnesses are not common to mold exposure in the home. According to the Centers for Disease Control and Prevention,

 

Fungi account for 9% of nosocomial infections, that is, infections originating or taking place in a hospital. Ingestion of foods contaminated with certain toxins produced by molds is associated with development of human cancer [e.g., aflatoxin].  Many respiratory illnesses among workers may be attributed to mold exposures.  Uncommon illnesses that collectively can be called hypersensitivity pneumonitis are caused by chronic exposures to high concentrations of mold and are almost exclusively limited to certain agricultural workers in particularly moldy environments.  Common illnesses caused by molds include allergic conditions such as hay fever and asthma.[147]

 

A report produced by the American College of Occupational and Environmental Medicine,[148] states that molds and other fungi may adversely affect human health in three ways: 1) allergy, 2) infection, and 3) toxicity.

 

·        Allergy.  According to the report, the “most common form of hypersensitivity to molds” can lead to allergic asthma or allergic rhinitis.[149]  However, the existence of a “vague” relationship among mold colonization, mold in foods, and a “generalized mold hypersensitivity state” is not supported by reliable scientific data.[150]

·        Infection.  The report states that opportunistic fungal infections in which there is deep tissue invasion “are primarily restricted to severely immunocompromised subjects.”[151]

·        Toxicity.  Some species of fungi, including some molds, can produce “mycotoxins.”  Not all mycotoxins are harmful – for example, penicillin is a mycotoxin.  Mold plaintiffs frequently allege that inhalation of mycotoxins causes a variety of symptoms.  The report states: “Current scientific evidence does not support the proposition that human health has been adversely affected by inhaled mycotoxins in the home, school or office environment.”[152]

 

Another important fact is that the mere presence of fungi that are capable of producing mycotoxins does not establish that mycotoxins are also present.  “The amount (if any) and type of mycotoxin produced is dependent on a complex and poorly understood interaction of factors that probably include nutrition, growth substrate, moisture, temperature, maturity of the fungal colony, and competition from other microorganisms.”[153]  Moreover, mycotoxins are not significantly volatile, i.e., they do not float around in the air.  Therefore, any inhalation exposure requires the generation of a fungal “aerosol.”

The report concludes:

 

Adverse effects of molds and mycotoxins have been recognized for centuries following ingestion of contaminated foods.  Occupational diseases are also recognized in association with inhalation exposure to fungi, bacteria, and other organic matter, usually in industrial or agricultural settings.  Molds growing indoors are believed by some to cause building-related symptoms.  Despite a voluminous literature on the subject, the causal association remains weak and unproven, particularly with respect to causation by mycotoxins.  One mold in particular, Stachybotrys chartarum, is blamed for a diverse array of maladies when it is found indoors.  Despite its well-known ability to produce mycotoxins under appropriate growth conditions, years of intensive study have failed to establish exposure to S.chartarum in home, school, or office environments as a cause of adverse human health effects.  Levels of exposure in the indoor environment, dose-response data in animals, and dose-rate considerations suggest that delivery by the inhalation route of a toxic dose of mycotoxins in the indoor environment is highly unlikely at best, even for the hypothetically most vulnerable subpopulations.[154]

 

 

B. Rejection of Expert Testimony

Under the general rule of Daubert v. Merrell Dow Pharmaceuticals, Inc.,[155] the admission of expert testimony depends upon whether the testimony will be reliable and helpful to the court.  As is well-known, the Daubert Court abandoned the “general acceptance” test for the admissibility of expert scientific evidence originally established in Frye v. United States.[156]  Instead, the Court adopted new standards based upon the Federal Rules of Evidence.

The Daubert Court held that, under Fed. R. Evid. 702, the trial court, as gatekeeper, must 1) determine whether the expert’s testimony reflects “scientific knowledge,” a requirement that goes to reliability, and 2) whether the testimony will assist the trier of fact to understand or determine a fact in issue, a requirement that goes primarily to relevance.  The Court, emphasizing that the inquiry under Rule 702 is a “flexible one,” noted a number of factors that a trial court could consider in determining admissibility: 1) whether the theory or technique has been tested; 2) whether the theory or technique has been subjected to peer review and publication; 3) the known or potential error rate for a particular scientific technique; and 4) the theory’s or technique's acceptance in the relevant scientific community.[157]  The Court noted, however, that “‘[a] reliability assessment does not require, although it does permit, explicit identification of a relevant scientific community and an express determination of a particular degree of acceptance within that community.’”[158]

In Ballard v. Fire Insurance Exchange,[159] the court rejected the proffer of the plaintiff’s expert testimony, finding it unreliable.  In Ballard, Mr. Allison, the husband of Melinda Ballard, asserted claims for toxic encephalopathy allegedly resulting from his exposure to toxic mold.  Allison sought to introduce at trial the testimony of experts that the mold found at Ballard’s home caused illnesses like those at issue.  The insurer moved to exclude the causation opinions, contending that they were not sufficiently reliable to establish that molds can cause personal injury.[160]  The Texas trial court granted that motion.[161]

In granting the motion to exclude, the trial court reasoned that the underlying scientific data was not reliable under the ruling of the Texas Supreme Court in Merrell Dow Pharmaceuticals, Inc. v. Havner.[162]  Havner addressed the admissibility of evidence from epidemiological studies that “examine existing populations to attempt to determine if there is an association between a disease or condition and a factor suspected of causing that disease or condition.”[163]  Epidemiological studies provide only statistical information and cannot establish the actual cause of a particular individual’s disease or condition.  Havner held that evidence from such studies is generally admissible in toxic tort cases if it shows that there is a doubling of the risk of injury when exposed to the substance at issue and that there is a high probability (ninety-five percent) that, if the pertinent studies were repeated, they would produce the same results ninety-five percent of the time.  In Ballard, the court concluded that the evidence proffered by Ballard’s experts did not meet the Havner standard and was therefore not admissible.[164]

The Texas Court of Appeals affirmed the trial court’s rulings granting the defendant insurer’s motion to exclude Allison’s causation experts.[165]  The appeals court noted that, if an expert relies upon epidemiological studies, then those studies must meet the criteria specified in Havner.  Because Allison’s experts relied upon such a study, and the study did not meet the Havner criteria, the appeals court held that the trial court had not abused its discretion in excluding the testimony of the experts.  On February 21, 2003, the appeals court denied Allison’s petition for a rehearing.[166]

Similarly, in National Bank of Commerce of El Dorado v. Associated Milk Producers, Inc.,[167] the Eighth Circuit Court of Appeals affirmed the trial court’s refusal to admit expert testimony that the plaintiff’s laryngeal cancer was caused by workplace exposure to aflatoxin.  Aflatoxin  is a mycotoxin.  The appeals court, reviewing the trial court’s decision for abuse of discretion, concluded that the trial court, in its gatekeeping role, had correctly determined that the plaintiff’s proffered expert testimony did not meet the Daubert standards for reliability and relevance.[168]

But some courts have permitted juries to consider “expert testimony” on causation issues involving mold and health.  For example, in Mondelli v. Kendel Homes Corp.,[169] the Nebraska Supreme Court held that the trial court had abused its discretion in excluding the plaintiffs’ expert testimony that mold causes injury.  In Mondelli, the plaintiffs alleged that mold resulting from leaking exterior walls in their home caused breathing difficulties and asthma. The expert would have testified that, based upon a peer review of the scientific literature, molds are a cause of asthma and allergic rhinitis.  At the time of the trial, Frye applied, and the trial court found that there were no accepted standards for environmental air in residences and that the expert’s testimony would not have general acceptance in the scientific community.

The Nebraska Supreme Court reversed, finding that the expert had established the requisite general acceptance and noting that the expert had a background in toxicology and biology, had studied numerous publications concerning allergies and immunology, and had reviewed the test data on the plaintiffs’ home.  Based upon that evidence, the court concluded that the expert’s opinion “was probative on the issue of causation.”[170]

In New Haverford Partnership v. Stroot,[171] the Delaware Supreme Court similarly affirmed the trial court’s admission of the plaintiffs’ expert testimony linking mold and health effects, but under Daubert, rather than Frye, as in Mondelli.  The plaintiff Stroot alleged a worsening of asthma symptoms and specified cognitive deficits; the plaintiff Watson alleged the development of a permanent mold allergy.  The court rejected the defendant’s argument that the expert causation opinions proffered by the plaintiffs were flawed because the experts had not excluded other possible causes of the plaintiffs’ injuries.  The plaintiff Stroot, for example, was a smoker and had a dog even though she was allergic to dogs.  The court noted that one of plaintiffs’ experts testified that he had followed “the scientifically accepted procedure of obtaining a medical history and a detailed questionnaire from the plaintiffs [and] . . . then ruled out other possible causes of plaintiffs’ health problems by reviewing that information together with the blood test results and the data collected from the apartment buildings.”[172]  The court opined that these facts supported the trial court’s decision to admit the causation opinion, stating that “[t]he foundation for an expert’s causation opinion need not be established with the precision of a laboratory experiment.”[173]

It has been suggested that the more severe and specific the illness or injury alleged, the less likely it is that a court will admit expert causation testimony.[174]  Arguably, the cases do indicate that courts appear less likely to admit a plaintiff’s expert causation testimony when there are allegations of brain injury or cancer than when there are allegations of asthma or respiratory problems.  It is suggested that the more severe the illness allegedly resulting from mold exposure, the easier it is for a defendant to demonstrate that there is no credible medical evidence showing such a link -- for example, between mold and laryngeal cancer.[175]  Whether a court relies upon Frye or Daubert to determine admissibility may also be a factor.

IV.

Bad Faith, Punitive Damages, And Mold Claims

When an insurer breaches the covenant of good faith and fair dealing generally implied in an insurance contract, recovery in tort may be possible, based upon a theory of insurance company “bad faith.”  Bad faith, which involves a finding of “‘deliberate or reckless failure to place on equal footing the interests of [the insurer’s] insured with its own interests . . . .,’”[176] may result in an award of punitive damages against the insurance company.  Findings of insurer bad faith in mold cases have resulted in some initially huge punitive damages awards to plaintiffs.  Appellate courts, however, are reversing or reducing those awards, finding them unreasonable and unconstitutionally excessive.[177]

For example, in Ballard v. Fire Insurance Exchange,[178] Mary Ballard had a plumbing leak in a bathroom in her twenty-two-room mansion.  Several months later, the hardwood floor buckled. When the floor did not dry, Ballard contacted her insurer, Fire Insurance Exchange (“FIE”).  FIE sent out an adjuster, who attributed the damage to slab settling, which was not covered under Ballard’s policy as compared to water damage, which was a covered peril under the policy.  Later, a FIE engineer reported that Ballard had two leaks:  one in the bathroom and one in the kitchen.  Ballard’s contractor advised removing the damaged floor in order to avoid the development of mold.  Ballard alleged that, despite repeated warnings about dangerous mold, the FIE adjuster refused to pay for floor removal.  Instead, the adjuster allegedly wanted to remove only the most severely damaged boards, replace them with plywood, and cover the replacement plywood with carpet remnants.

FIE offered to settle the case for $108,316.  Ballard refused to settle because, by the time of the settlement offer, the damage had already spread to windows, door frames, stairs, and walls and because the contractor estimated repair costs at between $160,000 and $197,000.  FIE engineers then examined the additional moisture damage, finding the black mold Stachybotrys atra behind the refrigerator.  Ballard alleged that she, her husband Ronald Allison, and her three-year-old son became ill from the mold.

Ballard and Allison sued the insurer.  The jury originally awarded $12,000,000 in punitive damages and $5,000,000 in damages for mental anguish, in addition to actual damages and attorney fees ($2,547,350 to replace the home; $1,154,175 to remediate the home; $2,000,000 to replace the home’s contents; $350,000 for past and future additional living expenses; $176,000 for appraisal costs – reversed by the appeals court; and $8,891,000 for attorney fees).[179]

On appeal, the Texas Court of Appeals held that there was “some evidence” to support the jury’s finding that the insurer had breached the duty of good faith and fair dealing under Texas law, which was sufficient to uphold the jury’s award of actual damages, less the amount for the plaintiffs’ appraisal costs.  However, the appeals court vacated the jury’s punitive damages award and award for mental anguish.  The jury had awarded punitive and mental anguish damages based upon conduct committed “knowingly and fraudulently,” as required under the Texas Insurance Code.  “Knowingly” is the “actual awareness . . . of the falsity, deception, or unfairness of the conduct in question.”[180]  “Actual awareness is more than conscious indifference toward another’s rights or welfare.”[181]  Although the appeals court determined that there was “some evidence” from which the jury could have found that the insurer had breached its duty of good faith and fair dealing, the court found no evidence that the company “was actually aware that its actions toward Ballard were false, deceptive, or unfair -- that is, that [the insurer] was more than consciously indifferent to Ballard’s rights and welfare.”[182]

Under Texas law, if a claimant relies upon a statute establishing a cause of action “and authorizing exemplary damages in specified circumstances or in conjunction with a specified culpable mental state, exemplary damages may be awarded only if the claimant proves by clear and convincing evidence that the damages resulted from the specified circumstances or culpable mental state.”[183]  However, because the court found “no evidence of a knowing violation,” it reversed the jury’s awards of punitive and mental anguish damages, rendering judgment that Ballard take nothing for those claims.[184]  On February 21, 2003, the Texas appeals court denied Ballard’s petition for a rehearing.[185]

In another mold case, Anderson v. Allstate Insurance Co.,[186] the Ninth Circuit Court of Appeals reversed an $18 million punitive damages award because there was no evidence that the homeowners insurer had acted with malice, oppression, or fraud as required under California law.  In Anderson, a water pipe broke in Anderson’s home, resulting in mold contamination.  Anderson sought coverage under his homeowners policy.  However, following a “contentious” adjustment process, Anderson brought suit, alleging breach of the implied covenant of good faith and fair dealing.  The jury found that the insurer had acted maliciously and oppressively in not providing full compensation for repairs, including elimination of the mold.  The jury awarded Anderson nearly $485,000 in compensatory damages and, based upon a finding a bad faith, $18 million in punitive damages.  The district court reduced the punitive damages award to five times the compensatory damages.  The insurer appealed.

Under California law, a duty of good faith and fair dealing is implied in every insurance contract.  The test in first-party cases is whether the insurer’s refusal to pay policy benefits is unreasonable, rather than negligent or the result of bad judgment.[187]

The Ninth Circuit found sufficient evidence in the record for the jury to determine that the insurer’s conduct was “more than a simple mistake or legitimate dispute as to coverage and damages” and therefore “could properly find that [the insurer] breached its duty of good faith and fair dealing.”[188]  The court therefore affirmed the award of compensatory damages, but reversed the punitive damages award because Anderson had not met the requisite burden of proof for exemplary damages.  A breach of the duty of good faith and fair dealing does not automatically lead to punitive damages.  “‘The conduct required to award punitive damages for the tortious breach of contract . . . is of a different dimension’ than that required to find bad faith.”[189]

To recover punitive damages under California law, a plaintiff must establish “by clear and convincing evidence malice, oppression or fraud” on the part of the insurer.[190]  “Malice” is “‘conduct which is intended . . . to cause injury to the plaintiff or despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others.’”[191]  “Oppression” is “‘despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.’”[192]

In affirming the jury’s finding of bad faith, the appeals court opined that there was sufficient evidence for the jury to find that the insurer had acted unreasonably in handling Anderson’s claim.  In particular, the court noted that the insurer’s actions of refusing to resolve the coverage issue, refusing to consider evidence of additional loss, offering settlement while withholding a final coverage determination, and failing to communicate with respect to asbestos and mold exposure “all support[ed] a finding of bad faith liability.”[193]  However, the court concluded that the insurer’s conduct did “not reach the level of ‘despicable conduct that subjects a person to cruel and unjust hardship in conscious disregard of that person’s rights.’”[194]

V.

Practical Tips For Adjusting Mold Claims

 

·        Use fair claims-handling practices.  An insurer may face its greatest exposure from potential claims-handling causes of action.  The insurer can practically count on unfounded allegations by insureds of improper claims handling.

·        Investigate promptly.  It is critical that the insurer respond promptly to any water-related claims.  Any delay in responding to a water-related claim will undoubtedly result in bad faith claims.

All complaints should be treated seriously because mold grows very rapidly in a damp environment.  In its Guidelines on Assessment and Remediation of Fungi in Indoor Environments, the New York City Department of Health has stated that “[a]n immediate response (within 24 to 48 hours) and thorough clean up, drying, and/or removal of water damaged materials will prevent or limit mold growth.”  The “[e]mphasis should be on ensuring proper repairs of the building infrastructure, so that water damage and moisture buildup does [sic] not recur.”[195]

·        Reserve rights.  A full reservation of any and all rights and possible defenses and a reminder of the insured’s duty to dry out and mitigate the loss is desirable as soon as the insurer receives notices of any water-related loss.

·        Investigate “water history.”  Consider whether the insured property has a history of mold and maintenance problems and whether the policyholder has made multiple water-damage claims.

·        Remediate aggressively.  Remind the policyholder, in writing, of its duties to preserve and “[p]rotect the property from further damage” by making “reasonable and necessary repairs.”[196]  Suggest respected contractors experienced in the drying out of buildings and the prevention or minimization of mold.  Follow up to ensure that the insured is meeting its contractual obligations to prevent or minimize mold.

·        Considering moving at-risk individuals.  Where mold damage is at issue, insureds may want to move out of their mold-contaminated houses.  Consequently, they may seek coverage for moving costs under “alternative living expenses” provisions in their policies.  Depending upon the facts of each claim, an insurer may, in some extreme instances, want to consider paying an insured’s expenses for alternative living arrangements during the time the insured’s house is being repaired.

·        Read the policy.  Remember that the term “all-risk” is not “’synonymous’” with the term “‘all-loss.’”[197]

q      Is there a “direct physical loss”?  When analyzing a property policy, the first question that must be addressed – before considering any exclusions – is whether there has been a “direct physical loss” to covered property. It is critical that an insurance company not overlook this threshold issue.

q      Is there a covered loss?  To the extent that there has been a “direct physical loss” to covered property, the next question that must be addressed is generally whether that “direct physical loss” was caused by a covered cause of loss not otherwise excluded by the policy.  As noted above, “all-risk” policies typically exclude coverage for property damage “caused by” mold.  At issue then is whether some other, covered cause of loss caused the particular damage.

·        Hire experienced counsel.  If it appears that a claim is going to be litigated, or is in litigation, the insurer should consider hiring counsel with strong experience in claims involving construction defects and toxic torts.  “Mold” law is in a state of flux.  Legal expertise will be extremely helpful in keeping abreast of new developments and selecting experts in this constantly evolving area of the law.

            In addition to the specific issues related to mold claims, there are some fundamental questions insurers and their counsel should ask in coverage disputes:

·        Was the property insured?

·        Did the claimant have an insurable interest in the insured property?

·        Did the loss occur during the policy term?

·        How was the loss caused?  It is important to focus on the “how,” rather than the “why.”  Insurance claims that go into litigation over causation disputes might more appropriately be called “fact suits,” rather than “law suits.”

 

VI.

Conclusion

Recent data suggest that homeowner claims for mold losses may have crested in 2002.[198]  We predict that we will see fewer and fewer mold claims from homeowners as new policy language makes very clear that mold losses are not covered or that mold losses are subject to some reasonable limit, for example, $5000.  However, Robert P. Hartwig, Senior Vice President and Chief Economist of the Insurance Information Institute suggests that the next battlefield for mold may be the commercial arena, implicating various commercial property and liability insurance policies.  Dr. Hartwig sees apartments, schools, office structures, and municipal buildings as the next “hot spots.”[199]

To date, there are no reliable loss statistics with respect to mold-related commercial general liability claims.  Most of those cases have not yet worked their way through the legal system.[200]  But, the number of new liability cases should be limited.  As discussed above, in 2002, ISO issued a special endorsement to CGL policies, effective May 1, 2002, entitled “Fungi or Bacteria Exclusion.”  Applicable to both Section I – Coverage A (Bodily Injury and Property Damage Liability) and Coverage B (Personal and Advertising Injury Liability), the endorsement expressly excludes from coverage losses for bodily injury or property damage resulting from mold.[201]

The National Association of Mutual Insurance Companies has established a website containing litigation updates as well as current news, education, state legislation, and scientific links.  The website is a valuable resource for anyone who wants to track the news on mold.[202]


ENDNOTES

 



           Submitted by the authors on behalf of the FDCC Property Insurance Section.

[1]           The Bible states:

Cleansing From Mildew

            The Lord said to Moses and Aaron, “When you enter the land of Canaan, which I am giving you as your possession, and I put a spreading mildew in a house in that land, the owner of the house must go and tell the priest, ‘I have seen something that looks like mildew in my 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 of 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 a 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.

            To purify the house he is to take two birds and some cedar wood, scarlet yarn and hyssop.  He shall kill one of the birds over fresh water in a clay pot.  Then he is to take the cedar wood, the hyssop, the scarlet yarn and the live bird, dip them into the blood of the dead bird and the fresh water, and sprinkle the house seven times. He shall purify the house with the bird’s blood, the fresh water, the live bird, the cedar wood, the hyssop and the scarlet yarn.  Then he is to release the live bird in the open fields outside the town. In this way he will make atonement for the house, and it will be clean.

            These are the regulations for any infectious skin disease, for an itch, for mildew in clothing or in a house, and for a swelling, a rash or a   bright spot, to determine when something is clean or unclean.

            These are the regulations for infectious skin diseases and mildew.

Leviticus 14:33 –14:57 (New International Version).

[2]           Ballard v. Fire Ins. Exch., No. 99-05252 (Tex. Dist. Ct., Travis County, June 1, 2001) (cited in Jury Awards $32 Million to Texas Homeowner in Mold Coverage Action, Mealey’s Emerging Ins. Disputes, Vol. 6, Issue 12, June 20, 2001, at 11).

[3]           59 F. Supp. 203 (E.D. Pa. 1945).

[4]           Id. at 206.

[5]           Id. at 210.

[6]           Christopher Oster, Insurers Blanch at Proliferation of Mold Claims, Wall St. J., June 6, 2001, at B1, 2001 WL-WSJ 2865760.

[7]           Mary Ellen Egan, The Fungus that Ate Sacramento, Forbes Mag., Jan. 21, 2002, at 32, 2002 WL 2213706.

[8]           See Mary Umberger, The Star that Upstaged the Economy, Chicago Trib., at 1, Jan. 13, 2002, 2002 WL 2612028.

[9]           Gary S. Mogel, Mold Is Weak Contender for Commercial Lines Crisis Crown, Nat’l Underwriter Vol. 107, No. 7, Feb. 17, 2003, at 10-11 (citing and quoting Dave Golden, director of commercial lines for the National Association of Independent Insurers, Des Plaines, Ill.).

[10]          Id. at 11 (citing Tilden).

[11]          Id.

[13]          See Randy J. Maniloff, Mold, The Hysteria Among Us, Exposure to Mold Causes Bad Faith Claims Against Insurers, Mealey’s Litig. Rep., Vol. 16, Issue 48, Oct. 22, 2002, at 18.

[14]          See Umberger, supra note 8.

[15]          Columbiaknit, Inc. v. Affiliated FM Ins. Co., No. Civ. 98-434-HU, 1999 WL 619100, at *3 (D. Or. Aug. 4, 1999) (citing Garvey v. State Farm Fire & Cas. Co., 770 P.2d 704, 710 (Cal. 1989)).  See McDonald v. State Farm Fire & Cas. Co., 837 P.2d 1000, 1003-04 (Wash. 1992) (in discussing “all-risk” homeowners policy, stating: “The insured must show the loss falls within the scope of the policy’s insured losses.”)

[16]          See, e.g., Insurance Services Office (“ISO”) Form HO 00 03.

[17]          See Acme Galvanizing Co. v. Fireman’s Fund Ins. Co., 270 Cal. Rptr. 405, 411 (Ct. App. 1990), review denied (Oct. 11, 1990).

[18]          Columbiaknit, 1999 WL 619100, at *5; Prudential Prop. & Cas. Ins. Co. v. Lillard-Roberts, No. CV-01-0362-ST, 2002 WL 31495830, at *7 (D. Or. June 18, 2002), motion to vacate denied, 2002 WL 31974401 (D. Or. Nov. 4, 2002) (following Columbiaknit).

[19]          Columbiaknit, 1999 WL 619100.

[20]          858 P.2d 1332, 1336 (Or. Ct. App. 1993).

[21]          842 P.2d 445, 446 (Or. Ct. App. 1992), review denied, 854 P.2d 940 (Or. 1993).

[22]          Columbiaknit, 1999 WL 619100, at *6.

[23]          Id. at *7.

[24]          Id. at *8.

[25]          Id. at *7.

[26]          No. CV-01-0362-ST, 2002 WL 31495830 (D. Or. June 18, 2002), motion to vacate denied, 2002 WL 31974401 (D. Or. Nov. 4, 2002).

[27]          Id. at *8.

[28]          Id. (citing Columbiaknit, 1999 WL 619100, at *5).

[29]          Id. at *9 (citing Western Fire Ins. Co. v. First Presbyterian Church, 437 P.2d 52 (Colo. 1968) (gasoline vapors made church uninhabitable); Matzner v. Seaco Ins. Co., 1998 WL 566658 (Mass. Super. Ct. Aug. 12, 1998) (carbon monoxide made apartment building uninhabitable).

[30]          Id.

[31]          Murray v. State Farm Fire & Cas. Co., 509 S.E.2d 1, 10 (W. Va. 1998).  Some jurisdictions have adopted a “concurrent causation” type analysis as opposed to a “proximate cause” type analysis.  Under the concurrent causation doctrine, recovery may be permitted “[w]here the loss is essentially caused by an insured peril with the contribution of an excluded peril merely as part of the chain of events leading to the loss.” 10 Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d §148.61 (1998).

[32]          Pioneer Chlor Alkali Co. v. Nat’l Union Fire Ins. Co., 863 F. Supp. 1226, 1231 (D. Nev. 1994).

[33]          Murray, 509 S.E.2d at 11 (quoting Couch on Insurance).

[34]          18 George J. Couch, Cyclopedia of Insurance Law §74:717 (2d ed. rev. 1983).  The California Supreme Court has noted that there could be unusual situations in which the efficient proximate cause rule would not be useful.  The court gave as an example a property loss resulting from the simultaneous crash of an aircraft into a structure (typically a covered peril in an all-risk policy) during an earthquake (typically an excluded peril when it operates alone to cause a loss).  Under those hypothetical facts, it might be impossible to determine which cause was the efficient proximate cause of the loss.  In such a “‘novel’” case, an analysis other than efficient proximate cause might be needed.  See Garvey v. State Farm Fire & Cas. Co., 770 P.2d 704, 713 n.9 (Cal. 1989).

[35]          Muller v. Globe & Rutgers Fire Ins. Co., 246 F. 759, 762-63 (2d Cir. 1917).

[36]          Murray, 509 S.E.2d at 12 (footnote omitted).  See also Farrell v. Royal Ins. Co. of Am., 989 F. Supp. 159, 164 (D. Conn. 1997) (“Thus, under an all risk policy, where the efficient cause of loss is a covered risk, coverage is not defeated merely because an excluded risk contributed to the loss or constituted the loss (unless the policy expressly excludes such loss regardless of the antecedent cause.”)); State Farm Fire & Cas. Co. v. Von Der Lieth, 820 P.2d 285, 290-91 (Cal. 1991) (“[T]he scope of coverage under an all-risk homeowner’s policy includes all risks except those specifically excluded by the policy. When a loss is caused by a combination of a covered and specifically excluded risks, the loss is covered if the covered risk was the efficient proximate cause of the loss. . . . [T]he question of what caused the loss is generally a question of fact, and the loss is not covered if the covered risk was only a remote cause of the loss, or the excluded risk was the efficient proximate or predominate cause.”) (citations omitted). Cf. Assurance Co. of Am., Inc. v. Jay-Mar, Inc., 38 F. Supp. 2d 349 (D.N.J. 1999) (noting that New Jersey’s lower courts have found coverage where the included cause of loss is either the first or the last step in the causation chain and that “[t]his is broader coverage than that provided by the courts in a number of other states,” i.e., those courts adopting the efficient proximate cause doctrine and holding that a loss is covered where the first step in the causation chain is a covered risk).

[37]          Finn v. Cont’l Ins. Co., 267 Cal. Rptr. 22, 24 (Ct. App. 1990).

[38]          Chadwick v. Fire Ins. Exch., 21 Cal. Rptr. 2d 871, 874 (Ct. App. 1993), review denied (Dec. 1, 1993).

[39]          Id.  Cf. Pioneer Chlor Alkali Co. v. Nat’l Union Fire Ins. Co., 863 F. Supp. 1226, 1233 (D. Nev. 1994) (holding that the words “loss caused by or resulting from” do not avoid application of the efficient proximate cause doctrine).

[40]          See, e.g., Am. Concept Ins. Co. v. Jones, 935 F. Supp. 1220, 1229 (D. Utah 1996) (“We do not insure for loss to property described in Coverages A and B caused by any of the following.  However, any ensuing loss to property described in Coverages A and B not excluded or excepted in this policy is covered.”).

[41]          See, e.g., Tzung v. State Farm Fire & Cas. Co., 873 F.2d 1338, 1340 (9th Cir. 1989) (California law) (“THIS POLICY DOES NOT INSURE UNDER THIS FORM AGAINST: . . . D. LOSS CAUSED BY . . . 8. . . . FAULTY MATERIALS OR WORKMANSHIP UNLESS LOSS BY FIRE OR EXPLOSION NOT OTHERWISE EXCLUDED ENSUES . . . .”).

[42]          837 P.2d 1000 (Wash. 1992).

[43]          Id. at 1005.  See also Schloss v. Cincinnati Ins. Co., 54 F. Supp. 2d 1090, 1094 (M.D. Ala. 1999), aff’d, 211 F.3d 131 (11th Cir. 2000) (holding that, “[a]lthough ensuing loss is not defined by the policy, the ordinary meaning given to this clause is clear, and the provision is unambiguous”). But see Phillips Home Builders, Inc. v. Travelers Ins. Co., 700 A.2d 127, 130 (Del. 1997), reh’g denied (Oct. 3, 1997) (concluding ensuing loss clause is ambiguous).

[44]          McDonald, 837 P.2d at 1005.  See also Montgomery v. Safeco Ins. Co. of Am., No. A094277, 2001 WL 1452776, at *4 (Cal. Ct. App. Nov. 15, 2001), review denied (Jan. 29, 2002) (unpublished opinion) (policy excluded losses from sewer overflow, but “any ensuing loss not excluded is covered”; concluding that loss “caused by water backing up from a sewer is excluded under exclusion 9c.  It does not regain the status of a covered loss by reason of this qualifying language.”) (footnote omitted); Harrison v. U.S.A.A. Ins. Co., No. 03-00-00362-CV, 2001 WL 391539, at *2 (Tex. App., Apr. 19, 2001) (unpublished opinion) (policy covered “ensuing loss caused by . . . water damage . . . if the loss would otherwise be covered under this policy”; holding that ensuing loss provision covered water damage that resulted from, rather than caused, excluded rot).

[45]          Narob Dev. Corp. v. Ins. Co. of N. Am., 631 N.Y.S.2d 155, 156 (App. Div.), leave to appeal denied, 663 N.E.2d 919 (N.Y. 1995).  Absent a second, separate covered cause of loss, there should be no coverage.  See Holden v. Connex-Metalna, No. Civ. A. 98-3326, 2000 WL 1876338, at *7 (E.D. La. Dec. 21, 2000), reconsideration denied, 2001 WL 41002 (E.D. La. Jan. 16, 2001) (“First, the damage that falls under the exclusion and the ensuing damage must be separable events in that the damage and the ensuing loss must be different in kind, not just degree.”) (citations omitted).

[46]          Mike Kreidler, Washington Insurance Commissioner, Fact Sheet: Mold and Homeowner Insurance (Aug. 2001) available at http://www.insurance.wa.gov/factsheet/mold.asp.

[47]          That policy provides coverage for “Accidental Discharge, Leakage or Overflow of Water or Steam from within a plumbing, heating or air conditioning system or household appliance” and “ensuing loss caused by . . . water damage  . . if the loss would otherwise be covered under this policy.”  Texas Department of Insurance, Homeowners Form B.

[48]          See Texas Regulators Approve New Homeowners Policy, Best’s Insurance News, Mar. 11, 2002, 2002 WL 4524537.

[49]          Id.

[50]          No. C8-02-62, 2002 WL 1547673 (Minn. Ct. App. July 16, 2002), review denied (Oct. 15, 2002) (unpublished opinion).

[51]          Id. at *2.

[52]          Id.

[53]          Id. at *4.

[54]          Id.

[55]          563 N.W.2d 296 (Minn. Ct. App. 1997).

[56]          Id. at 301-02.

[57]          Myers, 2002 WL 1547673, at *6.

[58]          No. CV-01-1362-ST, 2002 WL 31495830 (D. Or. June 18, 2002), motion to vacate denied, 2002 WL 31974401 (D. Or. Nov. 4, 2002).

[59]          Id. at *10 (quoting policy language).

[60]          Id. at *19.

[61]          Id. (quoting Cooper v. Am. Family Mut. Ins. Co., 184 F. Supp. 2d 960, 964 (D. Ariz. 2002)) (citing additional cases).

[62]          Id. at *20 (footnotes omitted) (emphasis added).

[63]          Id. (quoting Def.’s Ex. 11, p.1).

[64]          Id. (quoting Cooper, 184 F. Supp. 2d at 975) (emphasis in Cooper).  See also Point Triumph Condominium Ass’n v. Am. Guar. & Liab. Ins. Co., No. 99-1504-JE, at 18-19 (D. Or. Dec. 29, 2000) (Opinion & Order) (unpublished opinion) (holding that moisture damage caused by defects in siding or by faulty construction or maintenance could not be characterized as “‘separate and independent’” of those defects and therefore ensuing loss provision did not apply).

[65]          270 Cal. Rptr. 405 (Ct. App. 1990).

[66]          Id. at 407.

[67]          Id. at 411. See also Schloss v. Cincinnati Ins. Co., 54 F. Supp. 2d 1090, 1094-96 (M.D. Ala. 1999), aff’d, 211 F.3d 131 (11th Cir. 2000) (exclusion for “wet or dry rot” or “loss caused by . . . dry or wet rot,” followed by ensuing loss clause; holding that costs to remove roof and siding not covered by policy because they were part of the cost to repair rot, not a separate ensuing loss -- “Reasonably interpreted, therefore, the ensuing loss clause means that if a specified uncovered loss occurs, here rot, then a separate loss which follows as a result of the specified, uncovered loss which would otherwise be covered remains covered.”).

[68]          No. Civ. A. 399CV1623D, 2002 WL 356756 (N.D. Tex. Mar. 5, 2002).

[69]          Id. at *2.

[70]          Id.

[71]          Id. at *3.

[72]          The insurance company’s mold expert described the process of mold reproduction by the airborne transmission of spores:

In other words, some of [the spores] are actually shot out of the organism itself, and that’s just the way they help [re]produce, and some of them just float away; they’re very powdery[.] and they’re very buoyant in the air and they float away to an area.  And if it’s a wet area, they take ground and start growing.

Id. (quoting Ron Thaman, the insurance company’s mold expert) (alterations in original).

[73]          Id.

[74]          Id. (emphasis added).

[75]          184 F. Supp. 2d 960 (D. Ariz. 2002).

[76]          Id. at 962.

[77]          Id.

[78]          Id.

[79]          Id.

[80]          Id. (citation omitted).

[81]          Id.

[82]          Id. at 963.

[83]          Id. at 964 (quoting policy language).

[84]          Id. (citing cases).

[85]          Id. at 965.

[86]          270 Cal. Rptr. 405 (Ct. App. 1990), review denied (Oct. 11, 1990).

[87]          Cooper, 184 F. Supp. 2d at 965.

[88]          No. 99-1504-JE (D. Or. Dec. 29, 2000) (Opinion & Order) (unpublished).

[89]          Opinion & Order at 8.

[90]          Opinion & Order at 17.

[91]          Opinion & Order at 17-18.

[92]          Id. at 19.  See also: Herzog v. State Farm Fire & Cas. Co., No. 02-4, at 4-5 (E.D. La. Sept. 30, 2002) (reported in Mealey’s Litig. Rep.: Ins., Vol. 17, Issue 5, Dec. 2, 2002, at 19 & Section F. (insureds sought coverage under homeowners policy for damage to personal property caused by mold; noting that damage to personal property caused by “mold” was not listed as one of the losses insured against and granting summary judgment for insurer on coverage issue).  Martinez v. Allstate Tex. Lloyd’s Co., No. 02-091 (S.D. Tex. Oct. 7, 2002) (reported in Mealey’s Emerging Ins. Disputes, Vol. 7, Issue 21, Nov. 5, 2002, at 27) (holding that, under fortuity doctrine, which bars coverage for both a known loss and a loss in progress, homeowner was not entitled to insurance coverage because mold damage was a loss in progress before inception of policy); New Orleans Assets L.L.C. v. Travelers Ins. Cas. Co., No. 01-2171 (E.D. La. Sept. 12, 2002) (reported in Mealey’s Emerging Ins. Disputes, Vol. 7, Issue 20, Oct. 22, 2002, at 19 & Section G) (holding that, “[b]ecause the mold contamination manifested before the [insurance company’s] policy period commenced, the Court determines that the policy does not cover the damage”).  But see Lisa Lewis v. State Farm Lloyds, No. 02-246 (S.D. Tex. July 12, 2002) (reported in Mealey’s Emerging Ins. Disputes, Vol. 7, Issue 15, Aug. 6, 2002, at 15) (holding, in part, that mold claims were not barred by fortuity doctrine because evidence did not conclusively establish that insured knew or should have known about mold damage before policy went into effect);  Maynard v. State Farm Lloyds, No. Civ. A.3:00CV2482M, 2002 WL 1461923, at *5 (N.D. Tex. July 2, 2002) (finding plaintiffs did not present any evidence that leaks caused water damage and mold present in plaintiffs’ home and granting summary judgment in favor of insurance company).  Cf.: Liristis v. American Family Mut. Ins. Co., 61 P.3d 22 (Ariz. Ct. App. 2002).  In Liristis, plaintiffs sustained fire damage to their home as well as water damage resulting from the water used to suppress the fire.  A contractor performed repairs, and the insurance company paid plaintiffs for claims related to the fire.  Plaintiffs asserted that they noticed mold growth in their home within a month or two after the fire.  Following the fire-related repairs, plaintiffs’ roof leaked every time it rained.  The contractor’s attempts to repair the leak failed.  Plaintiffs filed a claim for water damage.  Plaintiffs subsequently filed a claim for mold.  The insurance company denied the mold claim based upon a policy exclusion for mold.  Litigation followed.  The policy at issue covered “risks of accidental direct physical loss to property,” but did not cover “loss to the property . . . resulting directly or indirectly from or caused by . . . mold.”  Id. at 24.  Plaintiffs argued that the mold damage was an “accidental direct physical loss” to their home caused by the water used to extinguish the fire, a covered loss.  Plaintiffs contended that the policy did not exclude damage from covered events (i.e., the fire) and that the mold damage was covered, as opposed to the damage “caused by” mold.  The insurance company asserted, however, that the mold was excluded under the plain language of the policy’s mold exclusion.  Although the parties agreed that mold could be “both a loss and a cause of loss,” they disagreed as to the significance of the distinction.  Id. at 25.  The court agreed that mold could be either damage or a cause of loss depending upon the circumstances.  It construed the policy language  “We do not cover loss to the property . . . resulting directly or indirectly from or caused by [mold]” not to exclude “all” mold losses.  Id. at 26 (alteration in original).  Rather, the court determined that the language excluded only those losses “resulting directly or indirectly from or caused by” mold, opining that if the insurance company “had intended to exclude not only losses caused by mold but also mold itself, it could have easily expressed that intention.”  Id.  The court further noted that the policy listed “mold” in a paragraph entitled “Other Causes of Loss,” finding that this language “again focuse[d] on ‘causes’ of loss, conveying the intention to exclude mold as a cause of loss.”  Id.  But, the court stated that mold that is the loss is not mentioned. The court opined that “[t]o express the intention to exclude all mold, the company could have chosen ‘Other Excluded Losses’ or ‘Other Losses Not Covered’ as the title of [the] paragraph.”  Id.  Although concluding that plaintiffs could be entitled to coverage for mold damage caused by the fire and the water used to extinguish the fire, including the costs to remove or repair the damage, the court found a question of fact as to “whether some or all of the mold damage was caused by the 1996 fire.”  Id. at 27.  The court remanded to the trial court for a determination as to the cause of plaintiffs’ loss.  The court held that plaintiffs could recover only if they could prove a causal connection between the fire and the mold damage, stating that, “[i]f Plaintiffs cannot prove the causal connection, then there will be no coverage.”  Id. at 27-28.

[93]          245 F.3d 1027 (8th Cir. 2001) (Arkansas law).

[94]          Id.

[95]          Id. at 1028.

[96]          Id. at 1029.

[97]          Id.

[98]          Id.

[99]          991 P.2d 734 (Wash. Ct. App. 2000), as amended on reconsideration (Mar. 7, 2000).

[100]        Id. at 737.

[101]        Findlay v. United Pac. Ins. Co., 895 P.2d 32, 33 (Wash. Ct. App. 1995), aff’d, 917 P.2d 116 (Wash. 1996).

[102]        Bowers, 991 P.2d at 738 (alteration in original) (citation omitted).

[103]        No. 05-97-01479-CV, 2000 WL 144115 (Tex. App. Feb. 10, 2000) (unpublished opinion).

[104]        Id. at *3.

[105]        Id. (citation omitted).

[106]        Id. at *4.

[107]        See TNT Speed & Sport Center, Inc. v. Am. States Ins. Co., 114 F.3d 731, 733 (8th Cir. 1997) (quoting policy language).

[108]        Assurance Co. of Am., Inc. v. Jay-Mar, Inc., 38 F. Supp. 2d 349, 354 (D.N.J. 1999) (finding that New Jersey would follow the majority rule and citing cases).  See also Preferred Mut. Ins. Co. v. Meggison, 53 F. Supp. 2d 139, 142 (D. Mass. 1999) (“The ‘vast majority of states’ uphold such clauses.”) (citing cases).

[109]        Toumayan v. State Farm Gen. Ins. Co., 970 S.W.2d 822, 826 (Mo. Ct. App. 1998), reh’g and/or transfer denied (July 8, 1998).

[110]        Id.

[111]        Id. at 824.

[112]        Id. at 825.

[113]        Id. at 825-26.

[114]        Id. at 824.

[115]        Id. at 826.

[116]        Id.  See also Paglarini v. Owners Ins. Co., No. C6-00-1996, 2001 WL 826862, at *3 (Minn. Ct. App. July 24, 2001) (unpublished opinion) (exclusion for loss caused “directly or indirectly by [water damage], . . . whether or not any other cause or event contributes concurrently or in any sequence to the loss”; holding that, although the clause “contains broad language, . . . the general policy clearly excludes losses caused even indirectly by water damage”) (alteration in original).  See also Preferred Mut. Ins. Co. v. Travelers Co., 127 F.3d 136, 138 (1st Cir. 1997) (Massachusetts law) (anti-concurrent clause stated: “We will not pay for loss or damage caused directly or indirectly by any of the following.  Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.”; holding that clause “unambiguously means what it says”);  Preferred Mut. Ins. Co. v. Meggison, 53 F. Supp. 2d 139 (D. Mass. 1999), in which the anti-concurrent cause provision stated:

 

We do not pay for loss if one or more of the following exclusions apply to the loss, regardless of other causes or events that contribute to or aggravate the loss, whether such causes or events act to produce the loss before, at the same time as, or after the excluded causes or events.

Id. at 142 (quoting policy language).

In Meggison, the insureds claimed that the weight of snow and ice caused damage to their house, a covered peril under the homeowners policy at issue.  The insurance company argued that the primary cause of the loss was the lack of adequate support under the front porch due to defective design, an excluded peril.  Pursuant to the insurance company’s motion for summary judgment, the insureds had the burden of presenting evidence establishing a genuine issue of material fact as to whether their loss was due to lack of adequate support.  The court concluded that, if the insureds failed to present adequate evidence on that point, “then coverage must be denied in accordance with the anticoncurrent causation clause, regardless of whether other causes, such as the weight of snow and ice, contributed to the loss.” Id. at 143.

[117]        773 P.2d 413 (Wash. 1989).

[118]        Id. at 416-17.

[119]        Id. at 417.  See also Findlay v. United Pac. Ins. Co., 917 P.2d 116 (Wash. 1996), in which the Washington Supreme Court stated:

 

            What this court will not enforce is a contract of insurance wherein coverage is excluded simply because one cause of a loss, in a chain of causation, is an excluded peril.  If the efficient proximate cause, the cause that triggers other causes to result in a loss, is a specifically named, unambiguous excluded peril in the policy, we will not mandate coverage.  We will not, under the guise of public policy, rewrite a clear contract between the parties.  The efficient proximate cause rule should be applied to enforce the reasonable expectations of the parties based on the language of the insurance contract and not to create a new contract for the parties.

Id. at 122 (citations omitted).

[120]        509 S.E.2d 1 (W. Va. 1998).

[121]        267 Cal. Rptr. 708 (Ct. App. 1990), review denied (June 21, 1990).

[122]        Id. at 15 (quoting Howell, 267 Cal. Rptr. at 728-29) (footnote omitted).

[123]        Id.  See also Pioneer Chlor Alkali Co. v. Nat’l Union Fire Ins. Co., 863 F. Supp. 1226, 1233 (D. Nev. 1994) (holding that the words “loss caused by or resulting from” do not avoid application of the efficient proximate cause doctrine).  In Murray, defendant State Farm Fire & Casualty Company’s homeowners policy contained the following “lead-in” clause:

 

We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events. We do not insure for such loss regardless of: (a) the cause of the excluded event; or (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss; or (d) whether the event occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these:  (Listed Exclusions).

Id. at 13 (quoting policy language).

            With respect to State Farm’s exclusionary language, the Murray court stated:

 

            We acknowledge that jurisdictions are in conflict over the effect of the State Farm lead-in clause in landslide cases. At least two jurisdictions hold the clause has no effect on limiting coverage: California (Howell v. State Farm Fire & Cas. Co., 218 Cal. App. 3d 1446, 267 Cal. Rptr. 708 (1 Dist. 1990)); and Georgia (Cox v. State Farm Fire & Cas. Co., 217 Ga. App. 796, 459 S.E.2d 446 (1995)). At least five jurisdictions hold that the lead-in clause is enforceable: Alaska (State Farm Fire & Cas. Co. v. Bongen, 925 P.2d 1042 (Alaska 1996)); New York (Kula v. State Farm Fire & Cas. Co., 212 A.D.2d 16, 628 N.Y.S.2d 988 (N.Y.A.D. 1995)) [reargument denied, 1995 WL 582270 (N.Y. App. Div. 1995), leave to appeal dismissed in part and denied in part, 641 N.Y.S.2d 827 (N.Y. 1996)]; Utah (Alf v. State Farm Fire & Cas. Co., 850 P.2d 1272 (Utah 1993) and Village Inn Apartments v. State Farm Fire & Cas. Co., 790 P.2d 581 (Utah App. 1990)); Nevada (Schroeder v. State Farm Fire & Cas. Co., 770 F. Supp. 558 (D. Nev. 1991)); and Arizona (Millar v. State Farm Fire & Cas. Co., 167 Ariz. 93, 804 P.2d 822 (1990) rev. denied, 811 P.2d 1081 (Ariz. 1991)).

Id. at 15 n.14.

For other jurisdictions holding State Farm’s lead-in clause enforceable, see Rhoden v. State Farm Fire & Cas. Co., 32 F. Supp. 2d 907, 912-13 (S.D. Miss. 1998), aff’d, 200 F.3d 815 (5th Cir. 1999); State Farm Fire & Cas. Co. v. Slade, 747 So. 2d 293, 314 (Ala. 1999); Chase v. State Farm Fire & Cas. Co., 780 A.2d 1123, 1130 (D.C. Cir. 2001) (holding that lead-in clause “is clearly intended to supplant the efficient proximate cause doctrine”).

[124]        ISO Commercial General Liability Coverage Form CG 00 02 10 01, at 1.  CGL policies typically define “bodily injury” to mean “bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.”  ISO Commercial General Liability Coverage Form CG 00 02 10 01, at 13.  “Property damage” may be defined to include “[p]hysical injury to tangible property” and “[l]oss of use of tangible property that is not physically injured.”  Id. at 16.

[125]        Note that current CGL policies may cover losses arising from “bodily injury” or “property damage” only if “[t]he ‘bodily injury’ or ‘property damage’ did not occur before the Retroactive Date, if any, shown in the Declarations or after the end of the policy period.”  See, e.g., ISO Commercial General Liability Coverage Form 00 02 10 01, at 1(b)(2).

[126]        923 P.2d 1200 (Or. 1996).

[127]        Id. at 1210 (quoting policy language).

[128]        Id. at 1210-11.

[129]        ISO Commercial General Liability Coverage Form CG 00 02 10 01, at 1.

[130]        No. 01-15975, 2002 WL 31748606 (9th Cir. Dec. 6, 2002) (not selected for publication in the Federal Reporter).

[131]        Id. at *2.

[132]        Id. (quoting policy language).

[133]        Id.

[134]        Id.

[135]        Id.

[136]        See Gary S. Mogel, Mold Is Weak Contender for Commercial Lines Crisis Crown, Nat’l Underwriter, Vol. 107, No. 7, Feb. 17, 2003, at 11 (citing Charles Gfeller, insurance defense attorney, Edwards & Angell, LLP, Hartford, Conn.).

[137]        ISO Commercial General Liability Coverage Form CG 00 02 10 01, at 2.

[138]        See, e.g., Larsen Oil Co. v. Federated Serv. Ins. Co., 859 F. Supp. 434, 437 (D. Or. 1994) (Oregon law), aff’d, 70 F.3d 1279 (9th Cir. 1995) (policies contained “absolute” pollution exclusions; holding that “[t]he exclusions at issue are not ambiguous.  Similar pollution exclusions have been interpreted to unambiguously preclude indemnification for property damage arising out of pollution.”) (citing cases).

[139]        ISO Issues “Fungi or Bacteria” Exception to CGL Policy, ISO Exclusion, CG 21 67 04 02 (cited in Ins. Litig. Rep., Vol. 24, No. 6, Apr. 10, 2002, at 221).

[140]        Id. (quoting policy language).

[141]        Andrew LePage, Environmental Activist Explains Dangers of Toxic Mold in California, The Sacramento Bee, Mar. 8, 2001, 2001 WL 15016168.

[142]        Seema Mehta, Mold Quickly Spreads as Health and Legal Issue Environment: A Lawsuit Brought by Two Sickened Newport Beach Apartment Dwellers Reflects a Problem that Experts Are Taking Much More Seriously, L.A. Times, at B2, Feb. 5, 2001, 2001 WL 2458451.

[143]        Erik Robinson, Family Sues City, Claims Flooding Caused Toxic Mold, The Columbian, at C1, Jan. 4, 2001, 2001 WL 6276464.

[144]        American College of Occupational and Environmental Medicine, Adverse Human Health Effects Associated with Molds in the Indoor Environment (Oct. 27, 2002) available at http://www.acoem.org/guidelines/article.asp?ID=52

[145]        State of the Science on Molds and Human Health, Hearing Before the Subcomm. on the Oversight & Investigations & Cmty. & Opportunity, Comm. On Fin. Servs. (2002) (Statement of Stephen C. Redd, M.D., Chief, Air Pollution and Respiratory Health Branch, National Center for Environmental Health, Centers for Disease Control and Prevention, U.S. Department of Health and Human Services) (hereinafter CDC Statement), at 9 available at http://www.cdc.gov/nceh/airpollution/images/moldsci.pdf.

[146]        Id.

[147]        Id. at 10 (emphasis added).

[148]        Adverse Human Health Effects Associated with Molds in the Indoor Environment (Oct. 27, 2002), available at http://www.acoem.org/guidelines/article.asp?ID=52.

[149]        Id.

[150]        Id.

[151]        Id.

[152]        Id. (emphasis added).

[153]        Id.

[154]        Id.

[155]        509 U.S. 579 (1993).

[156]        293 F. 1013, 1014 (D.C. Cir. 1923).

[157]        See Daubert, 509 U.S. at 593-94.

[158]        Id. at 594 (quoting United States v. Downing, 753 F.2d 1224, 1238 (3d Cir. 1985)).

[159]        No. 99-05252 (Tex.Dist.Ct., Travis County, June 1, 2001) (cited in Jury Awards $32 Million to Texas Homeowner in Mold Coverage Action, Mealey’s Emerging Ins. Disputes, Vol. 6, Issue 12, June 20, 2001, at 11).

[160]        Carrier Moves to Exclude Expert Testimony in Texas Ballard Case, Mealey’s Emerging Ins. Disputes, Vol. 6, Issue 5, Mar. 6, 2001, at 18.

[161]        Ballard Order (May 9, 2001) (reported in Mealey’s Litig. Rep.: Ins., Vol. 15, Issue 30, June 12, 2001, at Section H).

[162]        953 S.W.2d 706 (Tex. 1997), cert. denied, 523 U.S. 1119 (1998).  See Jury Awards $32 Million to Texas Homeowner in Mold Coverage Action, Mealey’s Emerging Ins. Disputes, Vol. 6, Issue 12, June 20, 2001, at 11-12.

[163]        Havner, 953 S.W.2d 715 (citation omitted).

[164]        See Jury Awards $32 Million to Texas Homeowner in Mold Coverage Action, Mealey’s Emerging Ins. Disputes, Vol. 6, Issue 12, June 20, 2001, at 11-12.

[165]        See Allison v. Fire Ins. Exch., 98 S.W.3d 227, 234 (Tex. App. 2002).

[166]        See Rehearing Denied in Ballard Coverage Suit, Mealey’s Litig. Rep.: Ins., Vol. 17, Issue 19, Mar. 18, 2003, at 17.

[167]        191 F.3d 858, 863 (8th Cir. 1999).

[168]        See also Davis v. Henry Phipps Plaza South & Phipps Housing Servs., Inc., No. 116331/98 (N.Y. Sup. Ct. Oct. 11, 2001) (refusing to admit plaintiff’s proffered expert testimony that mold caused plaintiff’s brain injury under Frye standard, finding that scientific community had not generally accepted link between mold exposure and cognitive impairment).  See Susan M. Hickman & Jason G. Wehrle, Ballard: Where We Are Now and What We Have Learned, Mealey’s Emerging Ins. Disputes, Vol. 8, Issue 5, Mar. 2003, at 28, 30 (discussing Davis).

[169]        631 N.W.2d 846, opinion modified on denial of reh’g, 641 N.W.2d 624 (Neb. 2001).

[170]        Id. at 856. See also Centex-Rooney Const. Co. v. Martin County, 706 So. 2d 20, 26 (Fla. Dist. Ct. App. 1997), review denied, 718 So. 2d 1233 (Fla. 1998) (occupants of county courthouse had signs and symptoms consistent with work-related asthma; under Frye, holding admissible expert testimony linking exposure to toxic mold in buildings with health risks -- “Dr. Morey and Dr. Hodgson each testified about numerous publications accepted in the scientific community recognizing the link between exposure to the highly unusual toxigenic molds and adverse health effects.”).

[171]        772 A.2d 792 (Del. 2001).

[172]        Id. at 800.

[173]        Id.

[174]        See John Payne et al., Latest Developments in Mold Exposure Litigation, 17 Nat. Resources & Env’t 132, 134 (Fall 2002), WL 17-FALL NATRE 132.