After writing about mold exclusions the past two weeks, I intended to move on to a different topic. However, a discussion I had this past week with an insurance defense attorney convinced me that the mold exclusion deserved one last post.

In Fisher v. Certain Interested Underwriters at Lloyds, 930 So. 2d 756, (Fla. 4th DCA 2006), the Fishers had dwelling coverage that was “all-risk” and personal property coverage, under the same policy, that was “named peril” coverage. The insuring language of the personal property coverage provided that the homeowners were insured for “direct physical loss” to their personal property caused by various listed perils, including accidental discharge or overflow of water or steam from within a plumbing system.

After returning home from a month-long vacation, the Fishers found that a water pipe had leaked under the foundation of their home, leading to mold damage to their personal property. The insurance company denied coverage, claiming that the personal property did not have direct contact with the discharged water, so it was not a “direct physical loss.”

While the parties argued about whether or not the “all-risk” provisions carried over to the personal property coverage, the Court recognized that,

The specific provision requires that the damage be a “direct physical loss” caused by a “named peril.” In this case, the mold damage resulted from the discharge of water – a named peril. The real question we must answer is whether this damage is a “direct physical loss” or merely a consequence of the named peril.

In concluding that the damaged personal property was covered under the policy, the Court stated,

The discharge of water set into motion a sequence of events proximately resulting in mold damage to the homeowner’s personal property….We live in a day and age where mold is a damage commonly resulting from the discharge of water. It makes little sense to construe the policy so narrowly that the consequential mold damage from the discharge of water is not covered. To do so would require us to turn a blind eye to what common sense dictates.

Fortunately for the homeowners, common sense prevailed and thwarted the insurance company’s attempt to assert a mold exclusion where one didn’t exist. This case goes to show that mold, even if not specifically covered in “named peril” policies, may still be covered in some circumstances.

As always, keep in mind that this case applied Florida law, and the law varies in different jurisdictions.