|January 23, 2014|
Previously published on January 16, 2014
In recent years, insurers have begun adding insurance policy riders limiting their obligations in the event of mold. Such an issue was litigated in Moore v. Safeco Ins. Co. of America, 2013 WL 6489955 (9th Cir. 2013). In Moore, Safeco had issued a homeowners policy. In 1999, upon renewal, Safeco included what the Court called a “clear and conspicuous provision” under which fungi-related loss or costs were completely excluded. Then, in 2002, the policy was again modified with a “clear and conspicuous provision” providing an exception to the exclusion of fungi-related loss or cost - i.e. if there was a covered loss under the policy, then the insured would be paid up to $10,000 for fungi-related loss or cost.
Thereafter, the Moores discovered mold in their home. Safeco ultimately paid a total of $18,702.67 ($10,000 for the mold and $8,702.67 for the water damage that constituted the “covered claim” under the policy). The Moores sued Safeco asserting that they should be fully covered for the mold loss in the home, and not limited to $10,000. Their specific argument was that the 2002 policy modification did not limit, but to the contrary added coverage to their policy for an additional $10,000.
The district court disagreed, and found that the policy was clear and unambiguous relating to the mold limits in the policy. On appeal, the Ninth Circuit agreed, noting that the 2002 modification was clear, and that the Moores’ interpretation of additional coverage was not susceptible to a reasonable reading under the policy.
Although the holding of this case is very specific to the Moores’ policy, it highlights an important aspect of homeowner policies - mold exclusions. In recent years, mold has become a hot-button issue (especially considering the toxic mold issues related to the Chinese Drywall disasters). Insurers are protecting themselves by overtly limiting mold coverage in policies. These types of exclusions are very important for homeowners to understand, as mold remediation can be very expensive, and insurers are limiting their exposure to such loss.