Torabi v. State Farm Fire and Casualty Company, 514 F.Supp.3d 1064

Moe and Shahla Torabi own a rental house insured by State Farm under a Rental Dwelling Policy (Oct 2017–Oct 2018).
In Dec. 2017 tenants reported water intrusion from a second‑floor bathroom; a plumber repaired a busted supply line and reported floors dry, but later standing water was found under first‑floor flooring and extensive mold was discovered after removal of laminate.
The Torabis submitted an insurance claim for the damage; State Farm denied coverage citing policy exclusions for continuous or repeated seepage/leakage (including from an AC condensation line), deterioration/rot, rust/mold/fungus, and losses caused by neglect.
The policy was endorsed (FE‑5722) to move “mold” into an item that excludes losses that “would not have occurred in the absence of” the listed events and expressly excludes fungus remediation, testing, and related costs.
The Torabis sued for breach of contract; the case was removed to federal court and consolidated with a related tree‑damage case, but the summary‑judgment motion at issue addresses only the mold/rot claim.
The court concluded the policy unambiguously excludes the claimed losses (mold, rot, deterioration) and granted State Farm summary judgment, denying the Torabis’ cross‑motion.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the policy’s mold/fungus endorsement permits coverage where mold resulted from a sudden accidental water leak	Torabi: Because a covered sudden water leak caused the mold, resulting mold losses are covered; moving mold to item 2 narrows the exclusion to losses caused by mold	State Farm: Endorsement bars losses that would not have occurred but for mold and expressly excludes fungus remediation/testing regardless of cause	Held: Exclusion unambiguous—losses that would not have occurred but for mold (including remediation/testing) are excluded even if a covered event contributed to mold formation
Whether rot/deterioration are covered under the policy’s “ensuing loss” clause when they follow a covered water loss	Torabi: Rot/deterioration are covered if they ensued from a covered sudden accidental water loss	State Farm: The ensuing‑loss clause preserves coverage for separate ensuing losses but does not make the excluded event (rot/deterioration) itself covered; if the ensuing loss is itself an excluded loss, no coverage	Held: The ensuing‑loss clause does not cover rot/deterioration themselves; on the record rot/ deterioration (and mold) are excluded, so no coverage

Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (summary judgment standard)
Haggenmiller v. ABM Parking Serv., Inc., 837 F.3d 879 (8th Cir. 2016) (summary judgment burden/inferences)
Unigard Sec. Ins. Co. v. Murphy Oil USA, Inc., 962 S.W.2d 735 (Ark. 1998) (insurance contracts interpreted by plain language)
Castaneda v. Progressive Classic Ins. Co., 166 S.W.3d 556 (Ark. 2004) (exclusions must be clear; ambiguous language construed for insured)
Aetna Cas. & Sur. Co. v. Yates, 344 F.2d 939 (5th Cir. 1965) (example of an ensuing‑loss analysis cited by plaintiffs)
McDonald v. State Farm Fire & Cas. Co., 837 P.2d 1000 (Wash. 1992) (construing an ensuing‑loss clause to exclude the uncovered event itself)