The insurer filed a declaratory judgment action seeking a declaration that its policy excluded a claim for remediation of mold discovered after the insurer had paid a water damage claim. This case is Builders Mutual Insurance Company v. Glascarr Properties, Inc., 688 S.E.2d 508 (2010).
The insured, Glascarr Properties, developed a property in North Carolina and after completing construction of a house, learned that vandals had broken into the house and left water taps running. This caused extensive damage and the insured submitted a claim for $102,161.44 to the insurer, Builders Mutual. The claim was paid, but later on, the insured discovered mold in the house, caused by the water damage. The insured submitted an additional claim for $39,000 for mold remediation but the insurer denied coverage.
The insurer filed a declaratory judgment action seeking a declaration that the policy excluded coverage for the mold damage claim. The trial court ruled in favor of the insurer and this appeal followed.
The appeals court noted that the policy excluded coverage for loss caused directly or indirectly by the presence, growth, proliferation, spread or any activity of fungi, and that this exclusion applied regardless of any other cause or event that contributes concurrently or in any sequence to that loss. The court ruled that the plain language of the policy clearly excludes payment of a claim for the cost of mold remediation.
However, the insured argued that the exclusion does not exclude the cost of removing mold where the mold is caused by a covered cause of loss such as vandalism. The insured said that the exclusion applies only where mold itself caused the loss and here, mold was not the cause of the loss. The appeals court disagreed. The court said that vandalism is indeed a covered cause of loss, and the vandalism caused the water damage, and this, in turn, caused the formation of mold. However, whereas the insured said this meant the policy covered the mold claim, the appeals court declared that the insured's interpretation directly contradicts the policy's express exclusion of coverage for losses "caused directly or indirectly by mold, regardless of any other cause or event that contributes concurrently or in any sequence to the loss".
Glascarr also argued that Builders Mutual failed to use policy language that was clear, unambiguous, and easily understood to exclude coverage for any and all losses consisting of or related to mo9ld, even where the mold was caused by a covered peril. The insured said it was not clear whether the exclusion applies to losses for mold if the mold arose from a covered cause of loss. The appeals court did not find any ambiguity in the policy language.
The appeals court affirmed the ruling of the trial court. The insured was not entitled to recover for its claim for loss caused by mold.
Editor's Note: This decision employed the anti-concurrent causation language in the policy to exclude coverage for the mold remediation claim. Despite the continuing disputes between the insured and the insurer over this anti-concurrent causation language, most jurisdictions will uphold the language if it is clear and unambiguous and not in conflict with state law. This is the course followed by the Court of Appeals of North Carolina in this case.