BAD FAITH INSURANCE CLAIMS IN MOLD LITIGATION

1
BAD FAITH INSURANCE CLAIMS IN MOLD LITIGATION

• Cynthia J. Stephens
• Governo Law Firm, LLC
• February 11, 2003

2
Agenda

• Evaluating Coverage
• Coverage Exclusions
• Denying a Mold Claim
• Bad Faith 101
• Reasons for Concern
• Defense Strategies

3
Typical Policy Language

• We will pay for direct physical loss or damage
  to Covered Property at the premises described in
  the Declarations caused by, or resulting from,
  any Covered Loss.

4
Tenets of Coverage Analysis

• Indemnity is the basis for insurance
• Insurer bears the burden of proving no coverage
• Ambiguous coverage language is construed against
  the drafter

5
What is a Covered Loss?

• All risks coverage
• Generally, loss covered unless insured can prove
  exclusion applies
• Named peril coverage
• Loss must be caused by named peril
• Fortuitous loss
• Direct Loss
• External cause

Coverage is policy and fact specific to each claim
6
Are Mold Losses Covered?

• Homeowners or CGL policy?
• Homeowners claims account for
• the volume of claims
• CGL policies account for significantly larger at
  issue dollar values
• Trigger of coverage?
• What must take place within the policys
  effective dates for the potential of coverage to
  be triggered

7
Coverage Exclusions

• Wear and tear
• Mildew, rot, mold
• Contamination
• Pollution exclusion
• Faulty or defective planning, construction or
  maintenance

Exclusion may not apply when the damage results
from a covered loss
8
Denying a Mold Claim

• Late notice
• Failure to mitigate loss
• Failure to cooperate
• Failure to provide adequate coverage
• Not a covered loss
• Not sudden and accidental
• Anti-concurrent cause
• Expected and intended
• Damage is threatened, not actual

9
Bad Faith Claims 101

• Third-party excess verdicts
• Insurer caused insureds liability beyond the
  coverage of the policy
• Claims-handling based suits
• Improper handling of claims

10
Reasons for Concern

• Ballard v. Farmers Insurance Group
• 32.2 million
• Landmark case - first time jury
• awarded homeowner damages in mold claim
  against an insurance company
• Anderson v. Allstate
• 18.9 million
• Award to a homeowner against an insurer that
  declined coverage for mold damage

11
Whats an Insurer to do?

• Special Unit
• Implement aggressive, proactive
• and consistent claims handling
• Document everything
• Quick and decisive liability and
• coverage determination
• Contractual rights of the policyholder
• come first

Keep the policyholder informed
12
Whats an Insurer to do?

• Special Training
• Investigation
• - act promptly
• Risk assessment
• Remediation
• - preserve evidence
• - finish the job

Identify and settle legitimate claims early
13
Defense Strategies
14

• Assemble your experts
• Liability national counsel, joint defense
• firms
• Medical industrial hygienist, occupational
  health physicians
• Damages certifiable remediators
• Stay informed
• Cost-effective technology
• Keep abreast of trends in law,
• medicine and science