Equally Fair Interpretation Favors Insured
Barry Zalma
Dec 7, 2023
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WCPP Risk Purchasing Group, Inc. ("WCPP" ) asserted coverage claims under a Commercial General Liability Policy ("Policy" ) issued by Defendant, Lexington Insurance Company, on behalf of Village of Stoney Run, LLC ("Village of Stoney Run" ) seeking defense and indemnity from an insurer who claimed a mold exclusion defeated coverage.
In WCPP Risk Purchasing Group, Inc. v. Lexington Insurance Company, Civil Action No. CAM-L-1025-22, Superior Court of New Jersey, Law Division, Camden (November 29, 2023) the Superior Court resolved the coverage dispute.
BACKGROUND
The Underlying Action alleges negligence, breach of the warranty of habitability, and breach of contract, asserting injury and damage claims against Village of Stoney Run due to toxic fungus/mold infestation in Pratt's apartment. It is asserted that the mold caused the death of Pratt and damaged her personal property.
Plaintiff purchased the Policy on behalf of Village of Stoney Run as part of a joint purchasing group. WCPP is a risk purchasing group for primarily habitation and commercial real property locations.
The Underlying Action was initiated by Brian Pratt and Dawn Pratt ("Underlying Plaintiffs" ), the co-administrators of the Estate of Darlene Pratt ("Decedent" ) against the Village of Stoney Run, an apartment complex owned by a Bleznak Organization. As part of the action, Underlying Plaintiffs asserted claims of negligence, breach of warranty, and breach of contract arising out of allegations that Plaintiff failed to properly maintain and repair Decedent's apartment at the Village of Stoney Run, resulting in dangerous living conditions, including mold.
Suit in the underlying action was forwarded to Lexington Insurance Company. AIG Claims, Inc. issued a disclaimer of coverage on behalf of AIG Property Casualty, Inc. That policy of insurance disclaimed coverage based upon the fungus/mold exclusion contained in the insurance policy.
ANALYSIS
The court must enforce the clear and unambiguous terms of the policy of insurance. A policy of insurance is ambiguous only where reasonably intelligent persons would differ regarding its meaning. The court places the obligation on the insurance carrier to draft clear and unambiguous contracts. Where the policy language will support two interpretations, only one of which will support a finding of coverage, the court will choose the interpretation favoring the insured and find that coverage exists.
Lexington asserts that the policy of insurance contains a mold exclusion which precludes coverage for the claims in the underlying suit.
"Fungus/Mold
"Bodily injury or property damage or any other loss, cost or expense, including, but not limited to losses, costs or expenses related to, arising from or associated with clean-up, remediation, containment, removal or abatement, caused directly or indirectly, in whole or in part, by:
"Any fungus(i), molds(s), mildew or yeast; or Any spore(s) or toxins created or produced by or emanating from such fungus(i), mold(s), mildew or yeast; or Any substance, vapor, gas, or other emission or organic or inorganic body substance produced by or arising out of any fungus(i), mold(s), mildew or yeast; or Any material, product, building component, building or structure, or any concentration of moisture, water or other liquid within such material, product, building component, building or structure, that contains, harbors, nurtures or acts as a medium for any fungus(i), mold(s), mildew, yeast or spore(s) or toxins emanating therefrom; regardless of any other cause, event, material, product and/or building component that contributed concurrently or in any sequence to that bodily injury or property damage, loss, cost or expense."
The claims in this case arose from water leaks which resulted in the conditions about which plaintiffs decedent in the underlying complaint bases the cause of action. The court concluded that the interpretation of the mold exclusion by plaintiff that the loss was due to the water leaking, not mold per se, is equally reasonable to that interpretation of the defendant insurers.
Under the circumstances it is the interpretation most favorable to the insured which controls. Accordingly, the court concluded that coverage exists for the exposure to mold as a result of water leakage.
ZALMA OPINION
Courts interpret insurance contracts differently than other contracts. If a court finds an ambiguity or, as here, an interpretation of an exclusion by the insured and the insurer are equally reasonable, the interpretation of the insured will be enforced. Paraphrasing George Orwell in his novel Animal Farm, all litigants are equal, some - the insured suing an insurer - are more equal than the insurer.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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When I finished my three year enlistment in the US Army as a Special Agent of US Army Intelligence in 1967, I sought employment where I could use the investigative skills I learned in the Army. After some searching I was hired as a claims trainee by the Fireman’s Fund American Insurance Company. For five years, while attending law school at night while working full time as an insurance adjuster I became familiar with every aspect of the commercial insurance industry.
On January 2, 1972 I was admitted to the California Bar. I practiced law, specializing in insurance claims, insurance coverage and defense of claims against people insured and defense of insurance companies sued for breach of contract and breach of the implied covenant of good faith and fair dealing. After 45 years as an active lawyer, I asked that my license to practice law be declared inactive ...
