The New Jersey Appeals Court recently addressed the interplay of a mold exclusion in a homeowners insurance policy with a Mold Endorsement that allowed limited coverage for mold damage caused by “fortuitous direct physical damage or destruction.”
In Kavesh v. Franklin Mutual Insurance, the Court examined the language of the mold exclusion of the policy, as well as the Endorsement providing limited coverage and found the provisions to be unambiguous. Based on the facts of the claim and the mold damage to the insureds’ home, the court held that Plaintiffs failed to prove that the mold growth was a result of fortuitous loss, found in favor of the insurer, and dismissed Plaintiffs’ Complaint with prejudice.
The facts of this case are relatively simple. The insureds had their roof replaced in October of 2011. By June of 2013, the insureds noted mold growth on the interior of the attic’s plywood surfaces and submitted a claim to their insurer.
The insurer inspected the home and determined that the mold growth was caused by high humidity that resulted in condensation on the plywood sheathing, which led to the development of the mold. The insurer found no evidence of a roof leak or other water intrusion in the attic.
The insurer denied the insureds’ claim and the insureds filed a complaint with the New Jersey Department of Banking and Insurance.
In response to the complaint, the insurer retained an engineer to inspect the attic. He confirmed the earlier conclusion that the mold growth was a result of high humidity and noted that an absence of ventilation combined with the installation of an ice shield and a fan created a condition of high humidity. The engineer also confirmed that water was not entering the roof through any holes or leaks in the roof or pipes. The insurer reaffirmed its denial and Plaintiffs filed suit.
In construing the policy, the Appellate Court agreed with the trial court that the policy distinguishes between mold, which is excluded, and mold growth as a result of a covered loss, which is covered by the Mold Endorsement. Under the plain words of the policy, some fortuitous direct damage must occur to the home’s structure – such as a falling object creating a hole that causes water to enter and result in mold growth.
In this case, the insureds disputed that the mold damage was a result of condensation, but offered no other explanation for the presence of the mold. Since Plaintiffs could not prove that the mold growth was caused by a fortuitous, direct physical loss, the court determined that no coverage existed for the mold damage.
