Mary Ann’s 70-year-old home was insured with Allstate Insurance Co.’s “all-risk” homeowner’s policy. After a window fell out of her home, Mary Ann hired a licensed pest control inspector to determine the cause of the unexpected window accident.
The inspector thoroughly checked the house. He determined the fallen window and weak floorboards in the living room–which were “giving way”–were caused by the fungus Meruliporia Incrassata (Poria).
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Mary Ann then filed a claim with Allstate under her policy for repair of the damaged areas. But Allstate denied the claim. Allstate’s adjuster refused to pay the claim under the policy exclusion for any loss due to “…rust or other corrosion, mold, wet or dry rot.”
Because Allstate refused to pay for repairs, Mary Ann sued her insurer. She argued insured coverage exists under a conflicting “additional coverage” policy provision for collapse caused by “hidden decay.” She emphasized that Allstate wrote the insurance policy so, in the event of conflict between its two clauses, the coverage provision should prevail.
If you were the judge would you order Allstate to pay Mary Ann’s claim under her homeowner’s “all-risk” insurance policy?
The judge said yes!
When there is ambiguity in an insurance policy, since the insurer wrote the policy, the conflict should be resolved against the insurer and in favor of the insured, the judge explained.
Although this policy clearly excludes coverage for damage due to “mold, wet or dry rot,” he continued, there is a fact issue whether the fallen window and the weak floorboard damage are covered under the “hidden decay” clause.
If Mary Ann can prove there was an insured collapse due to “hidden decay,” her loss is insured under that clause, the judge emphasized. However, threat of imminent collapse is not sufficient, he noted.
For the damage to Mary Ann’s house due to Meruliporia Incrassata (Poria) to be covered by her policy, she must be able to prove it was insured under the “hidden decay” clause of her homeowner’s insurance policy, the judge concluded.
Based on the 2004 California Court of Appeal decision in Jordan v. Allstate Insurance Co., 11 Cal.Rptr.3d 169.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
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