California homeowner’s mold claim not covered
January, 2008
By
Jess B. Millikan,
Samuel H. Ruby
A Los Angeles appellate court has enforced a mold exclusion, holding that the "efficient proximate cause rule" did not invalidate the policy provision, even where the mold resulted from a covered peril. De Bruyn v. Superior Court (Farmers Group, Inc.) --- Cal. Rptr. 3d --- (2008).
Rudolf De Bruyn returned from vacation to a wet and moldy house. In his absence, a toilet had overflowed. De Bruyn's policy with Farmers covered "sudden and accidental discharge or overflow from within a plumbing . . . system," but it excluded "rust, mold, fungus, or wet or dry rot . . . however caused." Farmers paid for the direct water-related damage but not for the additional damage due to mold growth. De Bruyn sued, but a trial court sided with Farmers and dismissed his case.
On appeal, De Bruyn asserted that Farmers' policy invalidly attempted to contract out of California's "efficient proximate cause rule." The rule provides that where the dominant cause of a loss is a covered peril, an insurer may not decline coverage based on the contribution of an excluded peril. Citing Howell v. State Farm Fire & Cas. Co., 218 Cal. App. 3d 1446 (1990), De Bruyn argued that Farmers could not escape the rule by purporting to exclude mold "however caused."
However, the Court of Appeal defined the issue more narrowly. The issue presented, according to the Court of Appeal, was whether Farmers could exclude coverage for mold caused by a sudden and accidental discharge of water. Citing Julian v. Hartford Underwriters Ins. Co., 35 Cal. 4th 747 (2005), in which the California Supreme Court upheld the validity of the standard "weather conditions" exclusion, the Court of Appeal held that Farmers was free to exclude losses resulting from a combination of perils so long as it did so unambiguously. Reviewing the policy as a whole, the court found that it "plainly and precisely communicate[d]" that mold resulting from water discharge would be excluded.
The court's decision represents an important expansion of Julian and a further contraction of Howell. Also of interest was the court's rejection of an argument—advanced, surprisingly, by Farmers—that mold is not a "peril" but is rather the "damage." Insureds have made similar arguments in order to avoid mold exclusions. Although the argument has gained some traction in other jurisdictions, the decision in De Bruyn should help insurers hold the line in California.
Update: The opinion is now published as 158 Cal. App. 4th 1213, 70 Cal. Rptr. 3d 652.