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Texas Supreme Court Holds that Mold Is Not 'Ensuing Loss'

AUSTIN, Texas -- Answering a question certified by the U.S. Court of Appeals for the 5th Circuit, the Texas Supreme Court ruled today that an ensuing loss provision in a standard Texas homeowners policy cannot be read to provide coverage for mold damage where the policy specifically excludes mold. Fiess v. State Farm Lloyds, No. 04-1104 (Texas Sup. Ct.).

The court's long-awaited ruling came on a 7-2 majority, with the court holding that '[a]mbiguities in the plain language must be settled in favor of consumers, but they must appear in the policy itself -- we cannot create ambiguities from previous policies, an agency's interpretation, or a 'mold crisis.''

Writing for the majority, Justice Scott Brister rejected the alternati.e interpretation adopted by the dissenting justices and the Texas Department of Insurance, which filed an amicus brief in support of policyholders Richard and Stephanie Fiess.

The department stated in its brief that the ensuing loss provision in the State Farm Lloyds policy 'can only be read to mean that despite any exclusion language, it includes coverage for certain previously excluded damage which is caused by a covered water loss.'

Justice Brister said the court need not adopt the department's interpretation, as the dissenters argued, 'as a reasonable alternative to our own.'

'It is true that courts give some deference to an agency regulation containing a reasonable interpretation of an ambiguous statute,' Justice Brister acknowledged. 'But there are several qualifiers in that statement.' 'First,' the justice explained, 'it applies to formal opinions adopted after formal proceedings, not isolated comments during a hearing or opinions in documents like the department's <.>amicus brief here. Second, the language at issue must be ambiguous; an agency's opinion cannot change plain language. Third, the agency's construction must be reasonable; alternative unreasonable constructions do not make a policy ambiguous' (emphasis original).

More on this story is available to subscribers at www.harrismartin.com today, and will be included in the September issue of COLUMNS-Mold.
 
 

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