Insured contractor, Saarman Construction, was sued in a federal district court in California by condo-owners and renters, John and Stella Lee. The Lees brought a claim against Saarman Construction for damages for bodily injury and property damage as a result of mold caused by water damage that the insured was hired to prevent. The insurer denied coverage based on the mold exclusion, and the court granted a summary judgment motion for the insurer. This case is Saarman Construction, Ltd. v. Ironshore Specialty Ins. Co., No. 15-cv-03548-JST (N.D. Cal. Jan 31, 2017).

The insurer, Ironshore, issued the insured, Saarman, a commercial general liability (CGL) policy. John and Stella Lee leased a condominium to Tiffany Molock, who subsequently found mold, leaks, and water intrusion in her condo. Molock settled her claims with the Lees, who subsequently cross-claimed against Saarman construction, the general contractor responsible for conducting various repairs to the exterior of the unit. The claim alleged that work was negligently performed that resulted in water intrusion and damage to the interior, causing mold growth. Ironshore denied Saarman's request for indemnity, Saarman sued, and Ironshore filed a motion for summary judgment.

The district court granted the motion for summary judgment, explaining that the Continuous or Progressive Injury or Damage exclusion barred coverage for injury that first existed prior to the inception of the policy. The court also noted that the same paragraph stated that damage resulting from the insured's work "performed prior to policy inception will be deemed to have first existed prior to the policy inception." The court pointed out that the work on the condo had been finished several years before the policy inception date.