Claims And Issues

Chinese Drywall: Homeowner's Insurance Coverage But For Two Exclusions.

   In a ground-breaking decision, a Federal Judge in Louisiana has held that there is Insurance Coverage for the Chinese Drywall Damages alleged, under the Insuring Agreements of at least two of the many Homeowner's Insurance Policies at issue in In re Chinese Manufactured Drywall Products Liability Litigation, Download In re Chinese Manufactured Drywall Prod. Liab. Litigation (E.D. La. MDL 2047, Order and Reasons Filed December 16, 2010) PUBLIC ACCESS, also published as 2010 WL 5288032 *8 (E.D. La. December 16, 2010)(Multi-District Litigation, Louisiana substantive law; authorized password required to access Westlaw).  Under the ASI Lloyds and Allstate Homeowner's Policies at issue there, the Chinese Drywall Damages alleged in that case constitute "covered 'accidental, sudden,' 'physical,' 'loss.'  These Plaintiffs' allegations indicate that the damage caused by the Chinese drywall was 'unexpected,' 'unknown,' and 'unusual.'  The Court must accept these allegations as true for purposes of the present issue [presented by 8 Motions to Dismiss and 2 Motions for Judgment on the Pleadings]."  In re Chinese Manufactured Drywall Products Liability Litigation, 2010 WL 5288032 at *8.  There was a big "but," however.

   The many Homeowner's Insurance Policies in that case also contained "faulty materials" Exclusions and "corrosion" Exclusions, which barred all Coverage for the Chinese Drywall Damages alleged.  Id. at *17-*21.

   On the other hand, the Federal Court held in that case that three Exclusions did not apply under Louisiana substantive law, and that the "ensuing loss" exemption (or Exclusion, depending on one's viewpoint and the wording of a particular Policy) did not apply under Louisiana substantive law, either:

1.  Not the Policies' Latent Defect Exclusions, id. at *12;

2.  Not the Policies' Pollution or Contaminant Exclusions, id. at *15;

3.  Not the Exclusion for Dampness or Temperature contained in one of the Homeowner's Insurance Policies at issue, id. at *17; and

4.  Not the "ensuing loss" provision found in the Homeowner's Insurance Policies at issue.  Id. at *24-*25.

Exclusions for similar Catastrophe Claims are addressed by Dennis J. Wall in Chapter 2 of "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (Thomson Reuters West 2010 Supplements).

The Chinese Manufactured Drywall Products Liability Mutli-District Litigation Case was posted for its Bad Faith features on Thursday, December 30, 2010 on Insurance Claims Bad Faith Law Blog.

Please Read The Disclaimer.

BP Oil Spill Catastrophe Claims Expected to Continue to Rise.

   Estimating the value of Damages Claims not yet made, but which soon could be made, is a precarious business.  Some estimate the total revenue from anticipated "lost tourism" and lost "travel spending" at $23,000,000,000.00 or as much as $23 Billion.  Steve Huettel, "Oil Spill Could Cost Gulf States $23 Billion in Lost Tourism and Travel Spending" (sptimes. com, Friday, July 23, 2010).

   The Catastrophic Claims yet to come will certainly come with at least one result:  Greater numbers of Insurance Coverage Issues and Claims than have been seen in many days in Gulf Coast States like Florida.

Dennis Wall is Co-Author of the leading book on Insurance Coverage for Catastrophe Claims, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West Publishing Company 2008; 2010 Supplement in process).  Mr. Wall will be a featured speaker on several panels which will address the BP Oil Spill Catastrophe.  On September 15, 2010, he will be a featured speaker on a panel addressing "BP Oil Spill Damages Claims:  The Coverage Predicates" at the September 15, 2010 Seminar of the Insurance Law Committee sponsored by the Orange County Bar Association in Orlando, Florida.   Mr. Wall will speak on a panel at the American Conference Institute's Bad Faith Litigation Conference in Orlando, Florida on November 30, 2010 on "Dealing With Catastrophic Disasters:  How to Properly Investigate and Handle Overwhelming Claims".

   Please Read The Disclaimer.

MOLD COVERS HOMES, HELD: INSURANCE DOES NOT COVER MOLD

                    Who Rebuilds and Repairs Where No Insurance Exists.

[THIS POST WAS ORIGINALLY PLACED ONLINE ON OCTOBER 11, 2006.  A POSTSCRIPT HAS BEEN ADDED THIS 16th DAY OF DECEMBER, 2006.]

    It is a fact that mold covers homes.  It is held under a standard Exclusion that insurance does not cover mold in Fiess v. State Farm Lloyds, 2006 WL 2505995 (Tex. Case No. 04-1104 Opinion Filed Aug. 31, 2006, answering this Question Certified by the Federal Fifth Circuit Court of Appeals) (subscription required), public access provided by Texas Supreme Court.

   The Fiess case in Texas involved a standard Exclusion used throughout the United States for "ensuing loss".  In a homeowner's policy, including the one in Fiess, water damage is ordinarily listed as a covered peril.  An Exclusion for "ensuing loss" excludes all coverage, however, for damage that ensues from an otherwise covered peril.  The modern homeowner's policy adds "mold" to the list of excluded ensuing loss.

    In Fiess, the Supreme Court held that mold damage is an excluded ensuing loss even though water damage is otherwise covered.  As a Federal Court recently held:  "After Fiess, even if the water damage is otherwise covered, resulting mold contamination is not."  Download gordon_publicly_issued_opinion_and_order_9_27_06.pdf

    The legal holding is clear.  The factual result is, well, a little more moldy and unclear.  The practical, if not legal question that remains, is:  Who will repair and replace when no insurance exists?

Postscript added Saturday, December 16, 2006:
The practical, if not legal question, that ended this post in October, 2006 still remains.  However, in the Fiess case itself, the Federal Fifth Circuit Court of Appeals affirms the District Court holding "that the Fiesses' Homeowners Form B (HO-B) policy did not cover mold contamination."   (Slipsheet at 1, Fifth Circuit Opinion Filed December 12, 2006.)  The District Court's holding and judgment of No Coverage now conforms to the Texas Supreme Court's "holding that the ensuing-loss provision did not provide coverage for mold contamination."  (Id. at 2.)

REMINDER:  THE CONTENTS OF THIS BLOG DO NOT MAKE AN ATTORNEY-CLIENT RELATIONSHIP.  ALWAYS CONSULT THE CASES AND LAWS OF EACH PARTICULAR JURISDICTION AND AN ATTORNEY IN AND FAMILIAR WITH THE PARTICULAR JURISDICTION AND ITS LAWS, WHENEVER YOU TRY TO ADDRESS OR RESOLVE ANY LEGAL QUESTION.