Potentiality of Coverage
Mold Litigation-Homeowners

Insureds not entitled to damages in excess of coverage.
Fire Ins. Exch. v. Sullivan
No. 14-04-00081 (Tex. App. Feb. 7, 2006)

    The Texas Court of appeals reversed a trial court's decision to sustain a jury's award for property damage in excess of the coverage in a homeowner's policy, finding that the trial court erred in failing to conform the evidence to the jury's verdict.

    Clifton and Diane Sullivan were insured under a homeowner's policy issued by Fire Insurance Exchange (FIE). Due to a leaky pipe in the Sullivan's attic and a leak in the bathroom shower, the Sullivan's made a claim for damages to their living room carpet to FIE. FIE paid $2,064.75 for an assessed repair of $2,944.75, minus an $880 deductible.

    The Sullivan's were unsatisfied with the amount paid by FIE and sent another written claim for mold growth and water damage. The Sullivans hired a contractor who found a leak in the air conditioner, the master bathroom shower and the hall bathroom. The Sullivans reported the additional findings to FIE. The contractor also advised the Sullivans that their house was contaminated with mold, and the Sullivan's relocated to a motel.

    FIE sent an insurance adjuster to the Sullivan's house where the adjuster found thee was mold growth. FIE issued two checks to the Sullivans, one for $66,734.02 and one for $15,696.55.

    The Sullivan's sued FIE for breach of contract, bad faith and violation of the Insurance Code. A jury found in the Sullivan's favor, finding the total cost of repair was $98,565.11 and subtracting the $84,495.32 already paid to the Sullivans.

    The jury found that FIE owed another $13,189.79 for breach of contract. Of the total amount, the jury found that the dwelling clause allowed recovery of 45% of the costs of repair and replacement and assessed the total cost at $22,302.81. Further, the jury found that personal property replacement cost was $23,696.55, attributing the cause to the roof leak and dampness of the atmosphere.

    The jury also awarded a penalty of $31,450.67, prejudgment interest of $1,798.28 and attorney fees of $39,426.04. FIE appealed.

    Damages award must conform to percentage of coverage. Where the jury finds that only a portion of the cost of repair and replacement is covered under the homeowner's policy, the award must correspond with the portion covered, not the entire cost amount calculated.

    Because the jury found that only 45% of the costs of repair and replacement of the Sullivans' property was covered under the dwelling clause, the court of appeals reverses the trial court's decision to sustain the jury award amounts, finding that the award for the dwellings' repairs cost should have been $10,036.25 or 45% of $22,302.81.

    Further, the court of appeals deducted the $23,696.55 personal property replacement cost from the jury's award because the jury found the cause of the damage was the leaky roof and the damp atmosphere, two causes that were excluded from coverage under the policy. Thus, the court found that the Sullivans' total covered costs was only $62,602, an amount less than what FIE already paid them.

Stafford Texas Insurance Law & Litigation Alert
April 15, 2006