Equally Fair Interpretation Favors Insured
WCPP Risk Purchasing Group, Inc. ("WCPP") asserted coverage claims under
a Commercial General Liability Policy ("Policy") issued by Defendant,
Lexington Insurance Company, on behalf of Village of Stoney Run, LLC
("Village of Stoney Run") seeking defense and indemnity from an insurer
who claimed a mold exclusion defeated coverage.
In WCPP Risk Purchasing Group, Inc. v. Lexington Insurance Company,
Civil Action No. CAM-L-1025-22, Superior Court of New Jersey, Law
Division, Camden (November 29, 2023) the Superior Court resolved the
coverage dispute.
BACKGROUND
The Underlying Action alleges negligence, breach of the warranty of
habitability, and breach of contract, asserting injury and damage claims
against Village of Stoney Run due to toxic fungus/mold infestation in
Pratt's apartment. It is asserted that the mold caused the death of
Pratt and damaged her personal property.
Plaintiff purchased the Policy on behalf of Village of Stoney Run as
part of a joint purchasing group. WCPP is a risk purchasing group for
primarily habitation and commercial real property locations.
The Underlying Action was initiated by Brian Pratt and Dawn Pratt
("Underlying Plaintiffs"), the co-administrators of the Estate of
Darlene Pratt ("Decedent") against the Village of Stoney Run, an
apartment complex owned by a Bleznak Organization. As part of the
action, Underlying Plaintiffs asserted claims of negligence, breach of
warranty, and breach of contract arising out of allegations that
Plaintiff failed to properly maintain and repair Decedent's apartment at
the Village of Stoney Run, resulting in dangerous living conditions,
including mold.
Suit in the underlying action was forwarded to Lexington Insurance
Company. AIG Claims, Inc. issued a disclaimer of coverage on behalf of
AIG Property Casualty, Inc. That policy of insurance disclaimed coverage
based upon the fungus/mold exclusion contained in the insurance policy.
ANALYSIS
The court must enforce the clear and unambiguous terms of the policy of
insurance. A policy of insurance is ambiguous only where reasonably
intelligent persons would differ regarding its meaning. The court places
the obligation on the insurance carrier to draft clear and unambiguous
contracts. Where the policy language will support two interpretations,
only one of which will support a finding of coverage, the court will
choose the interpretation favoring the insured and find that coverage
exists.
Lexington asserts that the policy of insurance contains a mold exclusion
which precludes coverage for the claims in the underlying suit.
The claims in this case arose from water leaks which resulted in the
conditions about which plaintiffs decedent in the underlying complaint
bases the cause of action. The court concluded that the interpretation
of the mold exclusion by plaintiff that the loss was due to the water
leaking, not mold per se, is equally reasonable to that interpretation
of the defendant insurers.
Under the circumstances it is the interpretation most favorable to the
insured which controls. Accordingly, the court concluded that coverage
exists for the exposure to mold as a result of water leakage.
ZALMA OPINION
Courts interpret insurance contracts differently than other contracts.
If a court finds an ambiguity or, as here, an interpretation of an
exclusion by the insured and the insurer are equally reasonable, the
interpretation of the insured will be enforced. Paraphrasing George
Orwell in his novel Animal Farm, all litigants are equal, some - the
insured suing an insurer - are more equal than the insurer.
(c) 2023 Barry Zalma & ClaimSchool, Inc.
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