Cooper v. American Family Mut. Ins. Co.

• Decision Date: 25 January 2002
• Docket Number: No. 00-1097-PHX-JAT.,00-1097-PHX-JAT.
• Citation: 184 F.Supp.2d 960
• Parties: Shirley COOPER, Plaintiff, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a Wisconsin corporation; John and Jane Does I — X, ABC Corporations I-X, XYZ Partnerships I-X, Defendants.
• Court: U.S. District Court — District of Arizona

184 F.Supp.2d 960

Shirley COOPER, Plaintiff, v. AMERICAN FAMILY MUTUAL INSURANCE COMPANY, a Wisconsin corporation; John and Jane Does I — X, ABC Corporations I-X, XYZ Partnerships I-X, Defendants.

No. 00-1097-PHX-JAT.

United States District Court, D. Arizona.

January 25, 2002.

Leon Joseph Brandriet, Leon J. Brandiet PC, Douglas F. Dieker, Craig M. Voightmann, Dieker & Voightmann PC, Phoenix, AZ, for plaintiff.

Carl F. Mariano, Lynn Allen Wiysel, Christian & Mariano, Phoenix, AZ, for defendants.

ORDER

TEILBORG, District Judge.

Pending before this Court are Defendant's Motion for Summary Judgment (Doc. # 28), Plaintiff's Cross Motion for Summary Judgment Re: Coverage (Doc. # 43), Defendant's Motion to Strike Hearsay Report and Lay Opinions (Doc. # 50) and Defendant's Motion to Strike Intervener[']s Citations to the FC & S Bulletins (Doc. # 82). Plaintiff in Majdanski, et al. v. American Family Mutual Insurance Company, et al., Case No. CIV 00-420 PHX-JAT filed a motion to intervene for the limited purpose of filing a response and sur-reply to Defendant's Motion for Summary Judgment in this case. The Court granted Majdanski's ("Intervener") motion; therefore, the Court will also take into consideration Majdanski's Intervener Brief Regarding Coverage for Mold Damage and for Toxic Pollutants Produced By Mold (Doc. # 68). Also pending is Plaintiff's Motion to Continue Discovery Deadline (Doc. # 83).

Defendant American Family Mutual Insurance Company ("American Family") issued a homeowners policy which insured Plaintiff Shirley Cooper's residence. Plaintiff reported a plumbing leak on February 21, 2001, which damaged dry wall and flooring in the master bedroom and hall closet. American Family paid Plaintiff for repairs to the drywall and flooring, but denied coverage for damage caused by mold. Plaintiff sued American Family claiming that the leak also caused mold damage in her residence and sought to have American Family pay for mold remediation.

I. MOTION FOR SUMMARY JUDGMENT

A. Summary Judgement Standard

Under Fed.R.Civ.P. 56(c), the Court may grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any, show there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Judgment for the moving party must be entered "if, under the governing law, there can be but one reasonable conclusion as to the verdict." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "If reasonable minds could differ as to the import of the evidence," judgment should not be entered in favor of the moving party. Id. at 250-51, 106 S.Ct. 2505.

The moving party bears the initial burden of identifying the elements of the claim that "demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "A material issue of fact is one that affects the outcome of the litigation and requires a trial to resolve the parties' differing versions of the truth." S.E.C. v. Seaboard Corp., 677 F.2d 1301, 1306 (9th Cir.1982). The burden then shifts to the non-moving party to establish that there is a genuine issue for trial. Celotex, 477 U.S. at 324, 106 S.Ct. 2548. More than a "metaphysical doubt" is required to establish a genuine issue of material fact. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

B. Exclusion From Covered Loss

The American Family policy, Section I, "Perils Insured Against," covers "risks of accidental physical loss ... unless the loss is excluded in this policy." The policy describes the particular losses not covered:

We do not cover loss to the property described in Coverage A — Dwelling and Dwelling Extension resulting directly or indirectly from or caused by one or more of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.

* * * * * *

6. Other Causes of Loss:

* * * * * *

c. smog, rust, corrosion, frost, condensation, mold, wet or dry rot ...

However, we do cover any resulting loss to property described in Coverage A — Dwelling and Dwelling Extension from items 2 through 8 above, not excluded or excepted in this policy.

(emphasis added)

Plaintiff claims that because water damage is a covered loss, under the "efficient proximate cause" rule, the resulting mold from the introduction of water is also covered. As such, Plaintiff contends American Family is liable for the mold remediation as well as the damage to personal property due to the mold growth and additional living expenses incurred during the mold remediation period. To the contrary, American Family contends that Plaintiff's alleged damages were caused by mold, and because the policy excludes coverage for mold regardless of the cause, Plaintiff's claim was properly denied.

Courts that have applied the "efficient proximate cause" rule conclude that coverage exists when the insured can identify an insured peril as the proximate cause of the loss even if subsequent or concurrent events are specifically excluded from coverage. See, e.g., Bowers v. Farmers Ins. Exch., 99 Wash.App. 41, 47-48, 991 P.2d 734, 738 (Wash.Ct.App.2000). However, Arizona has not adopted the "efficient proximate cause" rule and as such, an insurer is permitted to limit its liability with a concurrent causation lead-in clause similar to that found in the American Family policy. See Millar v. State Farm Fire & Cas. Co., 167 Ariz. 93, 97, 804 P.2d 822, 826 (Ariz.Ct.App.1990). Accordingly, there is no coverage for losses caused by mold, even though a covered water event may have also contributed to the loss.

Arguing a variation of Plaintiff's theory, Intervener asserts that the mold is not a separate cause of loss, but instead is resulting loss caused by the plumbing leak, a covered event. Intervener contends that because Plaintiff filed a claim for loss resulting from a covered accidental event, all ensuing loss, including mold, should be covered under the resulting loss provision.

In support of the cause of loss and resulting loss distinction, Intervener suggests that the "Other Causes of Loss" exclusion enumerates nonfortuitous causes of loss which are not covered, but when loss such as mold is the result of a fortuitous cause such as a plumbing leak, the resulting damage is covered. To demonstrate, Intervener argues that if, as American Family contends, the other listed causes of loss such as "marring," "scratching," "deterioration," "cracking" and "bulging" are also excluded regardless of the event causing such loss, then the damage normally associated with a catastrophic fire, for example, would not be covered. To avoid the obliteration of protection for covered fortuitous events, Intervener urges this Court to interpret the "Other Causes of Loss" exclusion to preclude coverage only when the loss occurs independent from a covered fortuitous event.

However, Intervener seeks to interject a distinction into the policy that does not exist. Nowhere in the policy does American Family distinguish between fortuitous and nonfortuitous causes of loss.¹ While American Family excludes loss from "wear and tear" and other damage that may occur over time, the policy does not restrict the mold exclusion to mold resulting from nonfortuitous causes. Indeed, the policy expressly excludes coverage for loss caused by mold without limitation.

An insurer may limit its liability by imposing conditions and restrictions as long as those restrictions are not contrary to public policy. Id. at 95-96, 804 P.2d at 824-25. Thus, American Family is entitled to limit its coverage to exclude loss caused by mold without restricting the exclusion to only fortuitous loss. The cases cited by Intervener rely on the finding of a proximate covered cause which entitles the insured to coverage over the entire loss; however, as stated above, Arizona has not adopted the "efficient proximate cause" rule.

Moreover, Intervener offers no plausible reason for the existence of the concurrent causation provision if not to underscore the very result which American Family seeks in this case. Indeed, the position that Intervener advocates requires this Court not only to adopt the "efficient proximate cause" rule but also to ignore the concurrent causation provision in American Family's policy. This would be a breathtaking undertaking even for a court more inclined than this one to rewrite the contract between the parties.

Even in the absence of the concurrent causation clause, it is clear — and should be to a layman — that loss caused by mold is excluded. Unlike some coverage issues, where analysis and rhetoric move one from a state of complexity to a state of simplicity and clarity, the reverse is true with the mold exclusion in this policy. The policy says loss caused by mold is excluded. Enforcing the policy as written, this Court concludes loss caused by mold is excluded.

C. The "Resulting Loss" Clause

Plaintiff argues that the so-called "resulting loss" clause contradicts the exclusionary clause relied upon by American Family. She points out that the basic insurance coverage provides:

We cover risks of accidental direct physical loss to property described in Coverage A — Dwelling and Dwelling Extension, unless the loss is excluded in this policy.

The policy then lists "losses not covered" as exclusions to 2 through 8, including 6.c. which excludes mold. Following the exclusions, is the so-called "resulting loss" provision which provides:

However, we do cover any resulting loss to property described in Coverage A — Dwelling and Dwelling Extension from items 2 through 8 above not excluded or excepted in the policy.

The Plaintiff argues that the resulting loss clause contradicts the exclusions. The Court disagrees. By its very...