Three years after Katrina, Tulane University continues to be mired in litigation seeking coverage under its property policies for damage inflicted by the hurricane.  In Ace American Ins. Co. v. Administrators of the Tulane Educational Fund, 2008 U.S. Dist. LEXIS 66299 (E.D. La. Aug. 29, 2008), the court decided several coverage issues, some in favor of Tulane, some in favor of its insurer.

     Prior to Katrina, Tulane had four layers of coverage providing $450 million in coverage limits. Ace American’s all risk policy was the final layer of excess coverage which applied in excess of the $350 million limits provided by the other layers.  Tulane recovered from all insurers below Ace American.  Tulane sued Ace American, claiming it has sustained damages in excess of $350 million. 

     On its motion for summary judgment, Ace American argued Tulane had failed to allocate its losses between covered wind losses and excluded flood and mold-related losses.  Although this was Tulane’s burden, it was still in the process of investigating in order to segregate its damages.  Accordingly, the court found Ace American’s motion on the grounds of Tulane’s failure to allocate was premature. 

     Next, the court considered whether the policy flood exclusion included damage caused by water which backed up through sewers or drains.  Although Ace American’s policy did not exclude water backed up through sewers or drains in its definition of flood, Ace American’s policy incorporated the terms of the underlying policies.  One of those policies did exclude damage caused by water including water backed up from a sewer or drain.  Thus, the Ace American policy excluded these damages.

     Finally, the court considered the mold exclusion.  Although the policy excluded damage caused by mold, Tulane argued elsewhere in the policy contaminants or pollutants driven by wind were covered.  The policy defined the terms "contaminants" and "pollutants" to include "fungi", which Tulane argued included damage caused by mold.  The court disagreed, however.  The fact that mold damage may not be excluded under one particular exclusion did not mean that it could not be excluded under a separate exclusion. The exclusion addressing mold meant the policy excluded damage caused by mold, even if it was caused by a windstorm.