Mold Claims in Tennessee – Policy Language Proves Important

Many insurance policies exclude damages caused by mold and fungi. Whether or not a loss caused by mold is covered under a policy will have to be made on a case-by-case basis.  The wording of the policy and the specific facts of the loss will control this determination.

Most policies generally provide coverage for direct physical loss and then specifically exclude coverage for mold.  Although the exclusion expressly mentions mold, a court could be persuaded to interpret these exclusions collectively.  In other words, if the mold is the result of an otherwise covered loss, this exclusion may not bar coverage.

Part of the “problem” in Tennessee arises out of the doctrine of “concurrent causation.”  Here, there will be coverage in a situation where a non-excluded cause is a substantial factor in producing the damage or injury, even though an excluded cause may have contributed in some form to the ultimate result and, standing alone, would have properly invoked the exclusion contained in the policy.  Davidson Hotel Company v. St. Paul Fire and Marine Insurance Company, 136 F. Supp. 2d 109 (W.D. Tenn. 2001); Allstate Insurance Company v. Watts, 811 S.W.2d 883 (Tenn. 1991). Thus, damage caused by mold and fungi may still be covered by the policy if the mold is the result of a “covered loss” such as a burst pipe.

As a result, many carriers have changed the language of their mold exclusion to preclude coverage for losses caused by mold or fungi regardless whether said loss was direct, indirect, or concurrent.  The United States District Court for the Eastern District of Tennessee examined such an exclusion in Pennsylvania Nat. Mut. Cas. Ins. Co. v. HVAC, Inc., 679 F. Supp. 2d 863 (E.D. Tenn. 2009).  It held the exclusion explicitly, unambiguously, and clearly excluded coverage for a loss due to mold.  Id. at 874-75.

Some policies provide limited coverage for mold or fungi.  For instance, in State Auto. Mut. Ins. Co. v. R.H.L., Inc., 07-1197, 2010 WL 909073 (W.D. Tenn. Mar. 12, 2010), the Court examined a policy which provided coverage where fungi was “the result of a ‘specified cause of loss’ other than fire or lightning.”  There, the only potentially applicable “specified caused” of loss was “water damage” caused by leaks in or around the property’s laundry room occurring within the policy period.  The insured could not prove “water damage” occurred within the policy period and therefore there was no coverage for the fungi.

Many policies today utilize “anti-concurrent” causation lead in language for certain exclusions to defeat the concurrent causation doctrine.  Such language typically excludes losses caused “directly or indirectly” by the excluded peril and applies whether or not any other cause “contributes concurrently or in any sequence” to cause the loss, making it clear that if the excluded peril contributes, there is no coverage.  The additional coverage for mold can be very specific and can include and limit coverage for a variety of mold related concerns, including mold testing.  Thus, it is important to specifically reference the policy language itself in evaluating coverage for a mold or fungi claim.