The Texas Supreme Court ruled that a homeowners policy did not cover mold damage in Fiess v. State Farm Lloyds, No. 04-1104. 2006 WL 2505995 (Tex. Aug. 31, 2006).

The Texas Supreme Court was asked to answer the following certified question:

Does the ensuing loss provision contained in Section I-Exclusions, part 1(f) of the Homeowners Form B (HO-B) insurance policy as prescribed by the Texas Department of Insurance effective July 8, 1992 (Revised January 1, 1996), when read in conjunction with the remainder of the policy, provide coverage for mold contamination caused by water damage that is otherwise covered by the policy?

The court said that it was difficult to find ambiguity in the ordinary meaning of the policy language, "We do not cover loss caused by mold." The exclusion was followed by the ensuing loss language, "We do cover ensuing loss caused by water damage." The insureds argued that this language negated the exclusion for mold because mold is water damage.

The court, though, following Lambros v. Standard Fire Insurance, said that ensue means to follow or is a consequence, and thus, the water damage would need to be the consequence of the excluded causes of loss and not the cause of it. The court said that it could not "disregard how this policy provision starts…because of how it ends."

Regarding the insureds' contention that mold is water damage and cannot be excluded due to the ensuing loss language, the court said, "We do not think that a single phenomenon that is clearly an excluded risk under the policy was meant to become compensable because in a philosophical sense it can also be classified as water damage; it would not be easy to find a case of rot or dampness of atmosphere not equally subject to that label and the exclusions would become practically meaningless."

The last phrase of the ensuing loss section following the exclusions says "if the loss would otherwise be covered under the policy." The ensuing loss, in order to be covered here, must be covered in the policy. And, the court found that mold is clearly not covered.

The court concluded by stating, "If the political branches of the Texas government decide that mold should be covered in Texas insurance policies, they have tools at their disposal to do so; Texas courts must stick to what those policies say, and cannot adopt a different rule when a 'crisis' arises."

The answer to the certified question was "No."