Texas Supreme Court Says “No Coverage”

            In yet another blow for homeowners, the Texas Supreme Court has ruled that a mold exclusion found in Texas homeowners’ insurance policies means that the homeowners may not recover for damage caused by mold, even if the mold is caused by something that is covered under the policy, such as water damage.
            Because of a rise in the number of mold claims, the insurance industry convinced the Texas Department of Insurance to allow insurance companies to issue homeowners’ insurance policies that do not cover mold damage. In deciding whether the policy at issue covered mold damage when the mold was caused by water damage, the court found that it did not. The court made this decision based on its finding that, for mold to grow, water had to be present, and, if the water damage provision allowed for coverage where the mold was caused by water intrusion, it would make the exclusion of coverage for mold meaningless.
            The decision is too new to be certain of its impact, but it is potentially far‑reaching. It is possible for an insurer to read the decision to mean that the presence of mold = no coverage, in which case such a reading will lead to an increase in the denial of claims. These denials will lead to expensive litigation or will result in insureds’ either paying for losses on their own or losing their homes to the slow decay of rot and mold.

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