INSURANCE EXCLUSIONS: REYNOLDS V. THE TRAVELERS INDEMNITY CO. (COA 8/17/2007)

REYNOLDS V. THE TRAVELERS INDEMNITY CO.
INSURANCE:  Homeowners exclusions to coverage
2005-CA-002246
PUBLISHED: REVERSING AND REMANDING
PANEL: COMBS PRESIDING; MOORE, NICKELL CONCUR
COUNTY: MARION
DATE RENDERED: 8/17/2007

Reynolds appeals TC’s entry of Summary Judgment for Travelers finding that exclusions contained in Appellant’s homeowner’s insurance policy with Travelers precluded coverage for substantial losses incurred at their home. At issue was whether the theft of appliances and resulting water damage (from severing of the water line to a refrigerator) and mold damage to the Appellant’s home by an employee of a contractor working on a drainage improvement project at the home was a covered loss under the policy. Specifically, Reynolds alleged error in the TC applying 3 different exclusions: 1) exclusion for losses caused by theft of home under construction 2) exclusion for losses caused by vandalism and malicious mischief; 3) exclusion for losses caused by continuous or repeated seepage or leakage of water; and 4) exclusion for loss caused by mold.

The COA held that none of the 4 exclusions applied to preclude coverage for any of the Appellant’s losses. As to exclusion 1, the COA held that the home was not "under construction" at the time of the theft (it was originally built several years prior), but rather was merely undergoing repairs. The COA ruled exclusion 2 was inapplicable since the losses stemmed from a theft rather than vandalism or malicious mischief. On exclusion 3, the COA for the phrase "period of time" ambiguous as it relates to how long the seepage must have lasted before the exclusion applies, and found both side’s interpretation reasonable under the case facts. The ambiguity thus benefited Appellants as the non-drafting party of the insurance contract. Finally, on exclusion 4 the COA felt the mold damage was a direct and proximate result of the theft of the refrigerator and not a separate loss, and thus did not apply to preclude coverage. The COA referenced the "efficient proximate cause doctrine" as adopted by a Washington state court in support of its conclusion that the mold damage was directly caused by the covered theft loss.

By Chad Kessinger
Schiller Osbourn Barnes & Maloney

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