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Click here for the full text of this decision FACTS:The property at issue was the Gables State Thomas Ravello apartment complex in Dallas. At the time of the loss that led to a suit, Gables Residential Services Inc. owned the complex. Gables was also the builder. Gables had experience building low density, garden-style apartments. The Ravello project was a new style for Gables: a high-density, mid-rise complex. Gables began construction in March 1999; tenants began moving into the complex in May 2000. Federal Insurance provided 36.6667 percent of the top layer of excess first-party property insurance on the complex under blanket commercial inland marine insurance policies effective for two years: from Nov. 13, 1999, to Nov. 13, 2000, and from Nov. 13, 2000, to Nov. 13, 2001. In December 2000, mold damage was discovered. Because of this discovery, the on-site construction personnel decided to test a representative sample, about 10 percent, of the apartments, so they tested 33 of the 290 units and some common areas and basements for mold. Three of the units and the basements of two buildings tested positive for stachybotris mold. Gables’ management received the mold report on April 13, 2001. Gables concluded that the mold resulted from water intrusion caused by poor construction management and inexperience with the high density, mid-rise style that produced design defects, faulty materials and faulty workmanship with regard to the roofs, balconies, windows, stucco, undersized air conditioners and other defects. Gables decided to move the tenants out and repair the mold damage and construction defects. Tenants began to move out in May 2001, and the last tenant left in June 2001. In the summer of 2001, Gables hired consultants to investigate the mold problem. The consultants located mold on both the interior and exterior wallboard. Between October 2001 and January 2002, another company hired by Gables designed a remediation plan to remove all the mold. Gables hired subcontractors to implement the remediation plan, and work began in February 2002. Gables’ new construction supervisor Robert de Bruin supervised the work. Repair of the mold damage involved removing and reinstalling the exterior walls. De Bruin testified that he saw mold everywhere in the external wall system. Gables also repaired the construction defects. Tenants began moving back to the complex in spring 2003, and repairs were completed in June 2003. Gables considered the leasing process in two parts: “lease up” and “stabilized.” “Lease up” referred to leasing each apartment in a completely empty building one time. “Stabilized” referred to the number of apartments that are paying rent, and Gables considered the Ravello project stabilized at a 94 percent occupancy rate. The Ravello project had an occupancy rate of 55 percent in May 2001, when the tenants began to move out. After the mold remediation and repairs, however, Gables started over in the “lease up” process. There was evidence that the Ravello project would have stabilized in November 2001 but for the mold and that it actually stabilized at 91.75 percent in April 2004. The trial court found that: State Thomas owned the Ravello project; Federal Insurance Co. insured the Ravello project under two commercial inland marine excess policies; the policies provided that Federal Insurance would pay 36.6667 percent of losses in excess of $10 million and insured “against all risk of physical loss of or damage to property” including “rental value loss sustained by the Insured resulting directly from the necessary untenantability caused by loss, damage or destruction by any of the perils covered herein . . .”; in April 2001, State Thomas discovered the Ravello project was infested with mold; and State Thomas incurred $526,167.58 of attorneys’ fees through trial and would incur more attorneys’ fees on appeal if the matter were appealed. The trial court found that the mold discovered in April 2001 constituted “physical loss of or damage” to the Ravello project, and the cost of repairing the mold-damaged areas amounted to $9,030,802.98. The rental loss resulting directly from the necessary “untenantability” caused by the mold damage amounted to $10,811,228. Thus, the combined total loss, damage or expense caused by the peril or perils that resulted in loss or damage to the Ravello project was $19,842,030.98. The trial court made the following conclusions of law: State Thomas was an insured under the policy issued by Federal Insurance; the mold damage constituted physical loss or damage insured by the policy; the Ravello project was rendered untenantable by the mold damage; and State Thomas was entitled to a certain amount of attorneys’ fees and was also entitled to prejudgment interest from the date of judicial demand. The final judgment stated that Federal Insurance was liable for 36.667 percent of the total covered loss in excess of $10 million up to $150 million, or $3,608.747.97. The trial court awarded attorneys’ fees of $526,167.58 for trial, attorneys’ fees on appeal, and pre- and post-judgment interest. Federal Insurance appealed. HOLDING:Affirmed. In an insurance coverage dispute, the court stated, the claimant has the initial burden to establish that his claim comes within the scope of coverage provided by the policy. An intent to exclude coverage must be expressed in clear and unambiguous language. In its first issue, the court stated, Federal Insurance contended that insufficient evidence supported the trial court’s findings and conclusions that the various items of mold damage located throughout the several buildings in the apartment complex constituted a single loss occurrence sufficient to reach Federal Insurance’s layer of excess coverage. The policies, the court noted, do not define “occurrence.” State Thomas’ attorney said the Ravello project was “one contiguous project” which “is going to be important . . . when you consider the issue of how many occurrences, whether there was one or more occurrences involved in this loss.” Federal Insurance’s attorney stated there were five “separate independent buildings” and “five losses.” The court found that sufficient evidence supported the trial court’s finding that the loss constituted a single occurrence. Next, the court found sufficient evidence to support the trial court’s findings that the amount charged for each of the services performed to repair the various items of mold damage was reasonable and that each service was necessary. Federal Insurance also attacked the amount of damages the trial court found in regard to lost rentals. Federal Insurance argued that State Thomas did not present evidence showing it exercised due diligence to rebuild or repair the property such that it proved the period of business interruption was within the policies’ coverage period. The court, however, found evidence that supported an implied finding that the “exercise of due diligence” provision in the insurance policies was met. In its sixth issue, Federal Insurance contended that the trial court erred in rendering judgment in State Thomas’ favor because the limits of the underlying primary and middle layer excess insurance policies had to be completely exhausted as a condition precedent to the accrual of any obligation to provide indemnity against loss under the Federal Insurance policies, and it was undisputed that those limits were never exhausted. The trial court rejected that theory, and the court did not disturb that finding. OPINION:Wright, J.; Wright, Bridges and O’Neill, JJ.

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