Although the insurer paid for some of the mold damage at the insured's home, the Fifth Circuit eventually determined the homeowner's policy did not cover such damage. Rooters v. State Farm Lloyds, 2011 U.S. App. LEXIS 12306 (5th Cir. June 15, 2011).
The policy excluded loss caused by hail to personal property unless the direct force of wind or hail made an opening in the roof allowing rain to enter. Further, the policy excluded loss caused by mold or other fungi.
In 1999, hail and rain caused water damage to the roof and interior of the residence. State Farm paid $19,000 to repair the roof. Another $1,800 was paid for repairs to the interior of the building. In 2002, the insured noticed black mold. State Farm issued an additional check for $4,402 for mold abatement.
In 2003, the insured had an environmental assessment performed. More black mold, as well as other types of mold, were discovered. State Farm again made payments. In sum, State Farm paid a total of $93,000 for mold and other damage.
The insured eventually filed suit, claiming breach of contract and seeking coverage for additional loss caused by mold. The trial court granted summary judgment to State Farm.
On appeal, the insured argued the mold exclusion did not bar coverage. The mold was allegedly instigated by the water damage and water damage was covered by the policy. Therefore, the mold contamination should also be covered.
The court noted a similar argument was made in Fiess v. State Farm Lloyds, 202 S.W. 3d 744 (Tex. 2006). There, the Texas Supreme Court held that the policy did not cover mold damage. Because mold-related losses were explicitly barred by the mold exclusion, the "ensuing loss" for the water damage clause could not create coverage for mold stemming from roof and window leaks even though the mold damage arose in part because of water damage.
Therefore, the insured here could not argue the mold contamination was caused by water damage, a covered claim, thereby making the mold contamination a covered claim as well.