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Click here for the full text of this decision FACTS:Clifton and Diane Sullivan had home insurance with Fire Insurance Exchange (FIE) when a pipe burst in the home’s attic. The policy had three distinct areas of coverage: 1. the dwelling, which was subject to a set of “Section I Exclusions”; 2. personal property, which was subject to the same exclusions, and which applied only when one of the named perils applied; and 3. additional living expenses. The Sullivans repaired the leaking pipe and removed the water from the carpet, and a month later reported the problem to their insurance agent, Dwight Moody. The Sullivans also told Moody about another leak. FIE’s adjuster, John Dunn, inspected the home, and came up with an estimate, which, after subtracting the couple’s $880 deductible, totaled $2,064. Prompted in part by a suggestion by Moody, the Sullivans got another estimate. The second estimate was for $7,290. The Sullivans had their attorney file a written claim with FIE for mold growth and water damage. Two months later, in September 2001, claiming they did not receive a satisfactory response, the Sullivans hired a contractor to investigate the house. The contractor found three additional leaks, which the Sullivans reported to FIE that month. The Sullivans vacated the home Sept. 8, 2001, due to mold contamination. Through another adjuster, Richard Norwood, FIE initiated payment of additional living expenses and requested additional testing, which was performed Jan. 3, 2002. By that time, mold was growing throughout the house. FIE issued the Sullivans a $66,734 check on March 6, and a $15,696 check on April 3. The Sullivans sued FIE for breach of contract, bad faith and violations of the Insurance Code and the Deceptive Trade Practices Act. They claimed FIE’s delay and mishandling of their claims resulted in their home’s deterioration. FIE responded that the damages were excluded from coverage and that the Sullivans did not protect their home to make necessary repairs. The jury found FIE breached the dwelling coverage portion of the policy, but not the personal property provision or the additional living expenses provision. As to the dwelling, the jury said that $22,302 should be awarded for the mold damage, and in response to another question about the dwelling, said that 10 percent of the home’s deterioration was due to leaks from the roof, 45 percent was due to dampness of atmosphere/extremes of temperature, and 45 percent was due to accidental leakage or discharge. Based on the jury’s verdict, the trial court stated that the total damage to the house and its contents was $98,565, and that FIE was entitled to a credit of $84,495 based on previous payments. The trial court said the Sullivans were entitled to $13,189 (which included subtraction of the policy deductible) for the DTPA violation and $31,450 for penalties under the former Insurance Code art. 21.55. The trial court awarded prejudgment interest of $1,798 and attorneys’ fees of $39,426. The total award was $85,864. HOLDING:Reversed and rendered. The trial court explains that only one exclusion under the accidental discharge or leakage peril provision is relevant. It includes damage caused by wear and tear; rust, rot, mold and fungus; dampness of atmosphere or temperature extremes; contamination; vermin and termites; and “ensuing loss caused by collapse of the building of any part of the building, water damage, or breakage of glass which is part of the building if the loss would otherwise be covered under this policy. The court notes that in its answers to questions related to the dwelling, the jury attributed 55 percent of the damage to causes that were excluded under the policy. The trial court’s award, then, apparently disregards the jury’s finding, and the Sullivans did not file a motion requesting the trial court to do so. The court disagrees with the Sullivans that the findings disregarded by the trial court were immaterial, or that they need not have been submitted to the jury. “The jury expressly attributed only forty-five percent of the cause of the mold damage to accidental discharge in Question 3A. Moreover, although ensuing loss was referenced to in the breach question, the jury was not asked to allocate any percentage of the mold damage to an ensuing loss. Because the ensuing loss provision is an exception to an exclusion, it was up to the Sullivans to request that element be included in the causation question.” Consequently, the court holds that, based on the jury’s findings, the trial court should have reduced the Sullivans potential recovery to 45 percent of the total. The court then addresses the jury’s findings and the trial court’s judgment on personal property coverage, which was based on a jury question that included the cost of cleaning or repairing the damaged property. To this end, the jury attributed 10 percent of the damage to deterioration of the roof, and 90 percent of the damage to dampness of atmosphere/temperature extremes. The trial court denied FIE’s request to disregard the jury’s findings, but that the trial court didn’t. The court observes that the personal property coverage is limited to damages caused by specifically named perils, so FIE’s actions could have been in breach of the dwelling portion of the policy without constituting a breach of the personal property portion. In one question, the jury said FIE did not breach the personal property section, and in another question it attributed all of the loss to excluded perils. And based on its former finding, the latter finding was immaterial. Consequently, the trial court should have disregarded the jury’s finding on the personal property policy provisions. Because the jury failed to find that FIE breached the personal property portion of the insurance policy, and failed to attribute any cause of the damage to a covered peril, the Sullivans cannot be entitled to the personal property damages under the former Article 21.55. Likewise, the jury’s affirmative findings on the Sullivans’ DTPA claims were all rooted in FIE’s handling of the Sullivans’ claims, so recovery here was improper, too. Taking the reduced amount of damage to the dwelling, excluding the damages to personal property, and offsetting the amounts tendered by FIE already, the trial court should have entered a take-nothing judgment against the Sullivans. The court next finds that the trial court erred in its prejudgment interest calculations. The trial court awarded penalty interest damages to the Sullivans based on the full amount of damages found by the jury, without any deduction for the unconditional payments made by FIE. This was error. Furthermore, the trial court should have stopped calculating penalty interest April 3, 2002, the day FIE issued the second check. Finally, the court agrees with FIE that pursuant to a stipulation among the attorneys at trial, the Sullivans’ potential recovery for attorneys’ fees under former Article 21.55 is limited to 40 percent of the amount of penalty interest damage they were entitled to recover. Based on the adjusted calculations, this totaled no more than $803. OPINION:Guzman, J.; Edelman, Seymore and Guzman, JJ.

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