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Click here for the full text of this decision FACTS:In 2001, the home of Richard and Stephanie Fiess sustained substantial flood damage from Tropical Storm Allison. When the Fiesses began removing drywall damaged by the flood, they discovered black mold growing throughout the house. An examiner concluded that a significant percentage of the mold had been caused by roof leaks, plumbing leaks, heating, air conditioning and ventilation leaks, exterior door leaks, and window leaks before the flood. The Fiesses submitted a claim for mold damage under their homeowner’s insurance policy, which explicitly excluded all damage caused by flooding. Believing State Farm’s payment of $34,425 to be inadequate to remediate the mold damage not caused by the flood, the Fiesses filed suit in state court. State Farm removed the case to federal court, where it obtained a summary judgment. The federal district court concluded that the policy specifically excluded mold contamination from coverage and that the ensuing-loss provision had no effect upon this exclusion. The Fiesses appealed, arguing that coverage for the mold at issue was extended under the policy’s ensuing-loss clause. Concluding that the meaning of this clause was an unresolved question of state law important to both Texas homeowners and insurers and appropriate for decision by the Texas Supreme Court, the 5th Circuit certified the question to the Texas Supreme Court. The 5th Circuit asked the court to state Texas law on the issue of whether the “ensuing loss” provision contained in the mandatory homeowner’s policy form promulgated by the Texas Department of Insurance operates to provide coverage for mold contamination caused by water damage even though the policy states it does not cover mold damage. Specifically, the policy form states, “We do not cover loss caused by mold,” but the ensuing loss provision later asserts, “We do cover ensuing loss caused by water damage.” As a result, the plaintiffs asserted, the insurance contract is ambiguous and must be construed in favor of the insured. HOLDING:The court held that the policy did not cover mold. “[I]t is hard,” the court stated, “to find any ambiguity in the ordinary meaning of”We do not cover loss caused by mold.’ While the ensuing-loss clause that follows may be difficult to parse . . . few ordinary people would imagine that it changes the meaning of the first sentence to read”We do too cover loss caused by mold.’” The court found that incremental damage by mold and other risks expressly excluded by the policy was not likely to be covered by the ensuing loss clause. Rather, the court stated that the ensuing-loss clause provides coverage when relatively common and usually minor risks lead to a relatively “uncommon and catastrophic losses for which homeowners obtain insurance, not for the common maintenance items for which they do not.” OPINION:Brister, J.; joined by Jefferson, C.J., and Hecht, Wainwright, Green, Johnson, and Willett, J.J. DISSENT:Medina, J., filed a dissent in which O’Neill, J., joined. “Because I believe that the ensuing-loss clause may also be read as an exception to the excluded perils it modifies, it is susceptible to more than one reasonable interpretation and is therefore ambiguous. As the Court acknowledges, such ambiguities must be construed in favor of the insured.”

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