Continuous Exposure to Mold Resulting in Injury Is “Occurrence” Under Builder’s Insurance Policies
May 9, 2002
On March 19, 2002, in Liberty Mutual Fire Insurance Co. v. James E. Ravannack, No. 00-1209, E.D. La., Section T [4], a Louisiana federal judge found that there was a potential for coverage under policies issued after the construction of a home. The court held that a continuous exposure to mold arising from water intrusion through improperly installed exterior insulation and finish systems (EIFS) resulted in an "occurrence" that gave rise to "bodily injury" in the homeowner.
In the underlying action, the homeowners James and Jocel Ravannack alleged that faulty workmanship by the builders resulted in water intrusion, structural damage, wood decay and mold contamination of their home, which was built in 1992. After discovering water intrusion in 1999, the Ravannacks hired an expert who found that water had penetrated the EIFS installed onto the exterior of their home causing extensive damage.
The Ravannacks brought suit in a Louisiana state court against the builders, Quigley Homes Inc. and Quigley Home Builders Inc., Matherne Plastering Inc. (Matherne), which had installed the EIFS, and the insurers of the builders and Matherne. Two weeks later, the Ravannacks' homeowners insurer, Liberty Mutual Fire Insurance Co. (Liberty Mutual), filed its suit in the U.S. District Court for the Eastern District of Louisiana, naming Matherne and others, including other insurers.
In its suit, Liberty Mutual sought a declaration from the Federal District Court that the Ravannacks were required to strictly comply with the terms of their policy, that certain exclusions should be enforced against the Ravannacks, and that it be granted subrogation rights against the other parties and their insurers if Liberty Mutual were required to indemnify the Ravannacks. Matherne's two insurers moved for summary judgment, asserting that they were not required to indemnify Matherne.
The Louisiana District Court found a potential for coverage existed under the two insurers' policies given the allegations that the faulty construction, including work done by Matherne, caused bodily injury to the Ravannacks' children and continues to harm them. Because the policies define an "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions," the Court held that the alleged exposure to mold during the policy period was an "occurrence," and the alleged injuries would qualify as "bodily injury" as defined by the policies.
For more information, contact Robert A. Whitney at 888-688-8500.