Of course, some engineers do not differentiate between mold and water damage. Typical water damage can be anything from the saturation of drywall that causes it to crumble to the delamination of plywood floor decking. Instead, water damage is far more likely to cause physical damage to the building. Water damage does not have the same stygma that mold damage possesses predominantly because it does not make people physically ill. In contrast to mold damage, water damage is much more tangible. While the presence of mold can physically weaken building materials over extremely long periods of time, the real damage of mold are the health problems caused by the presence of mold spores and toxins in the air. However, mold damage for purposes of insurance claims is the presence of biologically toxic material. It is in the air, on our food, and in our homes. Mold and water, though, are very different causes of loss with very distinct characteristics but very similar results – significant damages and coverage problems. In the case of mold, the damage is usually discovered when mold spores are smelled by the homeowner. In the case of water damage, the first discovery of the damage can be weeks or months after it began long after the damage has spread throughout the property. The first recognition that a mold or water claim exists is often the secondary effects of the loss. Mold and water claims are difficult to address because the damage supporting the claim is often hidden. The Terrible Causes of Loss: Mold and WaterĪs homeowner’s claims go, there are two causes of loss that cause a great deal of trouble. Specifically, this paper will discuss the current homeowner’s ISO form containing the “ensuing loss” provision as it relates to mold and water damage, explore the broad background of “ensuing loss” case law, and note the latest court decisions addressing these issues. For this reason, this paper will focus on these two different exclusions. While an “ensuing loss” could find its way into the typical homeowners insurance claim, it most often arises in mold and water damage claims. Given the manner in which the “ensuing loss” concept evolved, this paper will discuss the “ensuing loss” concept in the historical commercial context and address how its is applied in homeowner’s insurance. In particular, much of the homeowner’s litigation to date has focused on mold damage. In recent years, a greater percentage of the “ensuing loss” jurisprudence has involved homeowner’s policies. Much of the case law dealing with “ensuing loss” flows out of commercial policies. So what the heck is an ensuing loss? It is either a loss to separate property or a loss caused by a separate cause of loss. In essence, the academic question is whether we look at the cause of the loss or the resulting property damage that ensues in order to determine the existence of coverage for the “ensuing loss.” Fortunately for those less prone to such academic discussions, the Courts ignore the separate nature of the above schools of thought and apply both concepts interchangeably, often as a matter of convenience. The second school of thought holds that the “ensuing loss” must be caused by a separate covered cause of loss. In the first school of thought, an “ensuing loss” is a loss that results in damage to separate and distinct property from the initial excluded loss. Instead, two different schools of thought have developed to grapple with this esoteric issue. Of course, the case law utilizes neither of these rather straightforward approaches. If the latter portion of the definition is used, however, the “ensuing loss” is covered only if happens as a direct result of the excluded loss. If the first portion of the definition is how we must define an “ensuing loss,” then all that is required is that the covered ensuing loss come later in time than the excluded loss. The dictionary teaches us that “ensuing” means “to take place afterward or as a result.” Yet, this very definition contains two parts that, in the context of first party property insurance, gives two very different results depending on whether one uses the first portion of the definition or the latter portion. Up until now, conveniently, we have used the word ensuing to define “ensuing loss”. When another loss ensues from the first excluded cause of loss, the intent of “ensuing loss” is to allow coverage for such ensuing damage. In first party property insurance contracts, the “ensuing loss” concept comes into play when the initial loss is excluded, such as in the case of mold, water damage, or when a defective design causes the loss. It is a loss that ensues from an earlier loss. The idea of “ensuing loss” sounds so simple.
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