Many insurance policies include exclusions that are modified by endorsement. An analysis of the specific language in both the exclusionary provision and the modifying endorsement are critical in determining whether a peril is excluded by the policy.
Evonthe Hayes v. Southern Fidelity Insurance Company, 2014 U.S. Dist. LEXIS 14692 (E.D. La. October 15, 2014) involved a Hurricane Isaac claim for damages to a home in Louisiana. The insured claimed wind, rain and mold damage. The insurer’s expert opined that the mold damage was due to overflow of the air conditioner’s condensate drain pan. The insured argued that mold was a result of the storm. The policy contained a “fungi” exclusion with an endorsement for limited fungi coverage with a limit of $10,000. The insurer moved for partial summary judgment claiming that the insured’s claim for mold damage should be limited to $10,000. The court denied the insurer’s motion based on its reading of Orleans Parish Sch. Bd. v. Lexington Ins. Co., 123 So.3d 787 (La. Ct. App. 2013).
The fungi exclusion (which included an anti-concurrent causation preamble) stated, in relevant part, that
We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing or in any sequence to the loss.
. . .
11. “Fungi” . . . meaning, the presence, growth, proliferation, spread or any activity of “fungi” . . .
This exclusion does not apply: . . . To the extent coverage is provided for in Other Coverages, “Fungi”, Wet Or Dry Rot, or Bacteria with respect to loss caused by a Peril Insured Against . . .
(emphasis added). In “Other Coverages,” the policy provided, in relevant part, that coverage was limited to $10,000
for “[t]he total of all loss payable under Property Coverages caused by “fungi” . . .
(emphasis added). The district court held that the mold exclusion only applied to damage that is attributed to mold itself, not the initially covered peril, and that the “Other Coverages” provision “reinstates” coverage if the loss was first “caused by” a peril insured against, “and then coverage is limited in the endorsement only to the extent that the ‘fungi’ . . . causes an increase in the loss.” The court denied the insurer’s motion for partial summary judgment, stating that the insurer “will have to prove that any damage it seeks to exclude would not have occurred but for the presence of mold.”
The Hayes case also includes some interesting analysis on Louisiana’s bad faith statute and coinsurance issues. But this case represents an example of the sometimes complex interplay between an excluded loss and give back provisions.