176 A.3d 196
N.H.2017Background
- Homeowners discovered mold/moisture in a 2007 custom Windham home in early 2015, vacated in March 2015, and returned May 2016. Mold resulted from alleged faulty workmanship (ventilation/insulation defects).
- Homeowners submitted a Coverage D (loss of use / Additional Living Expense) claim in October 2015; insurer denied in November 2015 relying on a faulty-workmanship exclusion and a Mold Endorsement limiting coverage for fungi to losses caused by a "Peril Insured Against."
- Homeowners sued for a declaratory judgment that their loss-of-use expenses were covered as "ensuing losses" of the faulty workmanship; both parties moved for summary judgment.
- Superior Court granted insurer's summary judgment and denied homeowners’; homeowners appealed to the New Hampshire Supreme Court.
- Policy features at issue: an all-risk Section I; an ensuing-loss clause ("any ensuing loss . . . is covered"); an anti-concurrent-causation clause in Exclusions; a Mold Endorsement that adds limited fungi coverage but conditions it on a covered peril and excludes fungi generally.
Issues
| Issue | Plaintiff's Argument (Russell) | Defendant's Argument (NGM) | Held |
|---|---|---|---|
| Whether the homeowners’ loss-of-use is covered as an "ensuing loss" of faulty workmanship | Hidden/unknown moisture accumulation and subsequent mold are distinct, independent ensuing losses from the workmanship defect and thus covered under the ensuing-loss clause | The moisture and mold are the natural, direct, and continuous results of the workmanship defect, not separate intervening perils, so the ensuing-loss clause does not apply | Held for NGM: no coverage — the losses are not separate and independent ensuing losses but directly attributable to excluded faulty workmanship |
| Whether proximate-cause analysis favors coverage (i.e., the more direct cause was moisture/mold not the remote workmanship defect) | The "more direct" proximate cause is moisture/mold (a covered peril), so coverage should apply despite the remote excluded cause | Under New Hampshire law the efficient-proximate-cause doctrine applies: if the efficient proximate cause that set events in motion is an excluded peril (faulty workmanship), coverage is barred | Held for NGM: efficient proximate cause doctrine bars coverage because the workmanship defect set the loss in motion |
| Whether the anti-concurrent-causation clause conflicts with ensuing-loss clauses, creating ambiguity to be resolved for the insured | Anti-concurrent causation would swallow ensuing-loss protection; clauses must be read to allow coverage for ensuing losses that follow excluded perils | No real conflict here because the court finds the ensuing-loss clauses do not apply on these facts; thus no ambiguity requiring contra-insurer construction | Held for NGM: no ambiguity; reasonable-expectations doctrine not triggered and clauses do not create coverage here |
Key Cases Cited
- Weeks v. Co-Operative Ins. Cos., 149 N.H. 174 (N.H. 2003) (ensuing loss must be separate and independent from the excluded peril)
- Bartlett v. Commerce Ins. Co., 167 N.H. 521 (N.H. 2015) (insurance-policy interpretation governed by plain meaning and insured’s perspective; resolve ambiguities against insurer)
- Cogswell Farm Condominium Ass’n v. Tower Group, Inc., 167 N.H. 245 (N.H. 2015) (in declaratory-judgment actions on coverage, burden of proof is on the insurer)
- Bates v. Phenix Mut. Fire Ins. Co., 156 N.H. 719 (N.H. 2008) (enforcing anti-concurrent causation clause)
- TMW Enterprises, Inc. v. Federal Ins. Co., 619 F.3d 574 (6th Cir. 2010) (holding that treating the last-in-time natural force as a covered cause would eviscerate a workmanship exclusion)