Allstate wins mold judgment

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Allstate Wins Summary

by Publishing

Allstate Wins Summary Judgment on Some Claims but Not Ensuing Loss

HOUSTON - A federal judge in Texas on March 2 granted a home insurer

summary judgment on mold contamination arising from uncovered or unproven causes

but stayed a decision on the homeowners' claim for ensuing loss coverage pending

a ruling on that issue by the Texas Supreme Court in Fiess. Gordon v. Allstate

Texas Lloyd's, et al., No. H-04-1061 (S.D. Texas).

On a question certified by the Fifth Circuit U.S. Court of Appeals, the

Texas Supreme Court is considering whether a homeowner can claim coverage for

mold under an ensuing loss provision, despite a mold exclusion, if the policy

provides coverage for the underlying water damage (Fiess v. State Farm Lloyd's,

392 F.3d 802 [5th Cir. 2004]).

In this case, ph and Joyce Gordon sued after Allstate Texas Lloyd's

denied coverage for water damage and mold growth under a standard HO-B

homeowner's policy. The Gordons complained that mold was growing in their

heating and air-conditioning system and that a plumbing leak caused water damage

and mold in the master bedroom.

An Allstate investigator found no active plumbing leak, but concluded that

an improperly sealed return was responsible for the problems in the air

conditioner. Allstate denied the claim on the grounds that there were no covered

losses and that mold would be excluded in any case under a specific mold

exclusion.

An inspector retained by the Gordons found additional mold damage in a

ceiling under a bathtub, near a washing machine and in air conditioning ducts

and surrounding wallboard. The company, PE Service Environmental, also found

spore levels in the house to be significantly higher than levels outdoors.

Acting on Allstate's motion for summary judgment, U.S. District Judge Lee

H. Rosenthal agreed that there was no evidence of a covered plumbing leak that

could have caused mold growth under the bathtub or near a washing machine.

Allstate contended that any water leaking from the bathtub had spilled

from a faulty escutcheon cover, and cited testimony from the Gordons' inspector

that he did not see any active leaks or test for plumbing problems.

In ruling that there was no covered loss for the mold in the air, Judge

Rosenthal also credited evidence that inspectors reported finding aspergillus

and penicillium spores in the air, but stachybotrys by the washing machine and

alternaria, ascospores and bipolaris/dreschlera in the bedroom ceiling sheetrock

below the bathtub.

Judge Rosenthal also awarded summary judgment on the Gordons' bad faith

cause of action, based on his findings on the contractual claims.

The judge said, however, that a ruling on the Gordons' claim that mold is

an ensuing loss must await a ruling by the Texas Supreme Court in Fiess.

'Although this court has found fact issues as to whether mold damage to

the master bedroom ceiling and to the garage wall near the washing machine

resulted from covered losses, if, as Allstate argues, all mold damage is

excluded from coverage, summary judgment would be appropriate on those claims as

well,' Judge Rosenthal commented.

E. Jr. of Houston represents the Gordons.

H. Lee of Doyle Restrepo in Houston represents Allstate Texas

Lloyd's and Allstate Insurance Co.

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