## Facts

- Homeowners insured their residence under an “all risk” homeowners policy covering accidental direct physical loss unless excluded.
- A 1996 fire caused fire damage and water damage from firefighting efforts; the insurer paid approximately $31,370.99 for repairs and related claims.
- Within months, the homeowners observed mold and later reported health symptoms after moving back in.
- After repairs, the roof allegedly leaked repeatedly, causing additional water intrusion; the homeowners notified the insurer, including a 1997 water-damage claim.
- Environmental assessments obtained by both sides confirmed significant mold growth, including *Stachybotrys*; remediation was recommended.
- In 1998, the homeowners sought coverage for mold contamination; the insurer denied the claim based on a policy exclusion for “loss caused by mold.”
- The homeowners sued for breach of contract, bad faith, and unfair insurance trade practices.

## Issues

1. Whether an “all risk” homeowners policy excluding “loss caused by mold” bars coverage when mold is alleged to have resulted from a covered peril (fire-related water damage).
2. Whether the mold exclusion, read in context of the policy’s coverage grant and causation concepts, is ambiguous and therefore construed in favor of coverage.
3. Whether the trial court erred in denying the insurer’s request for attorneys’ fees after granting summary judgment to the insurer.

## Decision

- The court held the policy language was ambiguous on whether mold that results from a covered event is excluded.
- The ambiguity had to be construed in favor of the insureds, making summary judgment for the insurer improper.
- Because causation of the mold (covered fire-related water versus later noncovered leaks or both) presented a genuine factual dispute, the case was remanded for further proceedings.
- The denial of attorneys’ fees to the insurer was affirmed.

## Legal Principles

- “All risk” policies broadly cover accidental direct physical loss unless the insurer shows a clear and unambiguous exclusion applies.
- Insurance policy language is interpreted from the standpoint of an average layperson; ambiguous terms, especially exclusions, are construed against the insurer and in favor of coverage.
- An exclusion for “loss caused by mold” can be ambiguous as applied to mold that is alleged to be a consequence of a covered peril; absent clear drafting, consequential mold loss may fall within coverage.
- Where the cause of the loss is disputed and material to coverage, summary judgment is inappropriate.

## Conclusion

The court reversed summary judgment because the mold exclusion did not unambiguously preclude coverage for mold alleged to have resulted from a covered fire-related water loss, leaving causation for the fact-finder, and it affirmed the denial of attorneys’ fees to the insurer.


Liristis v. Am. Fam. Mut. Ins. Co., 204 Ariz. 140 (Ct. App. 2002)