BROADCASTS.com

Biological Damage Cover Must Overcome Mold Exclusion\n\nIn Clay Buchholz; Lindsay Buchholz v. Crestbrook Insurance Company, \ndoing business as Nationwide Private Client, No. 22-50265, United States\n Court of Appeals, Fifth Circuit (April 18, 2023) Clay and Lindsay \nBuchholz sued their insurer after recovering $745,778 for damage to \ntheir ten-thousand-square-foot house in Austin, Texas.\n\nThe Buchhholz' insured their home with Crestbrook Insurance Company. \nTheir policy included "Biological Deterioration or Damage Clean Up and \nRemoval" coverage ("mold coverage"). The Buchholz family discovered a \nwidespread mold infestation in their home. Although Crestbrook covered \nmany of their losses, it denied a generalized claim for mold growing in \nthe Buchholzes' walls and heating, ventilation, and air conditioning \nsystem.\xa0 A magistrate judge issued a report and recommendation in favor \nof Crestbrook, and the district court adopted the magistrate judge's \nconclusions.\n\nFACTS\n\nCrestbrook asserted that the sixth claim for general mold growth and \nmold in the HVAC system was excluded. The Buchholz family retained MLAW \nForensics, Inc., to investigate the cause of their mold infestation. \nBased on MLAW's causation report Crestbrook denied Appellants' mold \nclaim. \n\nANALYSIS\n\nUnder Texas law, when deciding a dispute regarding insurance coverage, \nthe court first looks to the language of the policy because it presumes \nparties intend what the words of their contract say. The court must give\n the policy's words their ordinary and generally accepted meaning unless\n the policy shows the words were meant in a technical or different \nsense. A disagreement between the parties regarding the meaning of \npolicy terms or interaction between terms does not create ambiguity.\n\nThe Insured's Burden\n\nIn a coverage dispute, the insured has the burden first to prove that \ntheir loss falls within the terms of the contract. Once the insured \ndemonstrates this, the burden shifts to the insurer, who, to avoid \nliability, must show that the loss falls into an exclusion to the \npolicy's coverage.\n\nThe Fifth Circuit Conclusion\n\nThe Fifth Circuit concluded that the magistrate judge correctly laid out\n the Texas insurance dispute burden-shifting framework in her report and\n recommendation.\n\nIn its motion for summary judgment, Crestbrook argued that mold \ninfestation is an excluded peril under the policy. Applying the Texas \ninsurance burden-shifting framework, the Fifth Circuit agreed with \nCrestbrook that the mold exclusion bars coverage for the Buchholz \nfamily's claim. Under the Texas insurance dispute framework, the \nBuchholzes must first show a direct physical loss as required under \ntheir all-risk policy. Then Crestbrook can identify any exclusions to \ncoverage of that loss.\n\nThe policy excluded coverage for "loss to any property resulting \ndirectly or indirectly from any of the following . . . Biological \nDeterioration or Damage, except as provided by [the mold coverage]."\n\nThe Buchholzes showed they suffered a mold infestation, nothing more.\n\nTheir theory is that water intrusion causes mold. But water intrusion as\n such is not a loss covered by the policy when its only manifested harm \nto covered property is fungal growth. Consequently, the Buchholzes did \nnot show that their mold coverage serves as an exception to the mold \nexclusion. So, their generalized mold claim is excluded by the terms of \ntheir policy.\n\nZALMA OPINION\n\nThe Fifth Circuit concluded that it was required to interpret the \ninsurance policy as it was written and that the generalized mold claim \nwas clearly and unambiguously excluded. Nothing more need be said. The \nBuchholzes should not have sued their insurer they should have sued the \ncontractor, designer or manufacturer of the defective HVAC system. In \nfact they should join with their insurer in seeking damages from those \nwho were responsible for the defects that caused the mold infestation.\n\n(c) 2023 Barry Zalma & ClaimSchool, Inc.