COA Rejects Insured's Effort To Circumvent $5,000 Cap In Insurer's Mold Endorsement And Bounces Chapter 75 Claim Based On Mold Exacerbation

Today the Court of Appeals (COA) enforced an insurer's $5,000 cap on mold damages in a case brought by a residential homeowner. The case is Burrell v. Sparkkles Reconstruction Co. Judge Wynn wrote the majority decision, joined by Judges Steelman and Geer.

The insurer's mold endorsement capped liability for mold damages at $5,000. Plaintiff, however, sought well over $200,000 for mold-related damages for complete mold remediation of her home; for new ceilings, walls, cabinets, HVAC system, ductwork, carpeting, floors, etc.; for personal property in her home (furniture and clothing); for alternate living expenses; and for medical bills for mold-related injuries and distress.

Plaintiff tried to circumvent the mold endorsement by arguing that the insurer didn't explain the endorsement to her, didn't mention it in correspondence that followed the water leak, and misrepresented the terms of her coverage. The trial court and COA didn't buy it. The COA emphasized, "As the insured party, Ms. Burrell had a responsibility to read her own policy; moreover, she was bound by the terms of the contract just as Piedmont was. We see no reason -- nor did Ms. Burrell present evidence at trial -- why the language of the mold endorsement should not control here."

The COA also affirmed a directed verdict against plaintiff on her claim for unfair and deceptive trade practices (UDTP), which was based on a theory that unfair settlement practices delayed remediation, allowing the mold problem to grow unremediated. The COA held that, "[e]ven assuming arguendo [the insurer] did, in fact, engage in these alleged unfair settlement practices, prior precedent of this Court prevents Ms. Burrell from proving that those violations caused her injury." The precedent: Nelson v. Hartford Underwriters Ins. Co., 630 S.E.2d 221 (N.C. App. 2006). In Nelson the insureds-plaintiffs argued that their insurance company had exacerbated their mold problems from water leaks by misrepresenting their coverage and delaying investigation and payment of their claim. The COA in Nelson rejected the argument on causation grounds, holding that an insurance company's slow response to mold damage is not the proximate cause of the damage itself.