Opinion
CV-01-1362-ST.
June 14, 2002
OPINION AND ORDER ON DEFENDANT'S MOTION FOR RECONSIDERATION
INTRODUCTION
Plaintiff, Prudential Property Casualty Insurance Company ("Prudential"), an Arizona corporation, filed this action on September 14, 2001, against defendant, Susan Lillard-Roberts ("Lillard-Roberts"), to whom it issued a homeowner's insurance policy. Prudential seeks declaratory relief that the policy does not cover Lillard-Roberts' claim for water and mold damage to her house, garage, and personal property. In her Amended Answer, Lillard-Roberts contends that she is entitled to insurance coverage under the policy and alleges 10 affirmative defenses and six counterclaims.
This court previously granted in part and denied in part the following motions: Prudential's Motion for Summary Judgment (docket #10); Lillard-Roberts' Motion to Stay Consideration of Prudential's Summary Judgment Motion and for Leave to Conduct Destructive Testing on Defendant[s'] Residence at Prudential's Expense ("Motion to Stay") (docket #23); and Lillard-Roberts' Motion for Partial Summary Judgment (docket #50).
After an unsuccessful mediation, Lillard-Roberts has now filed a Motion for Reconsideration — Motion to Modify Order Under FRCP 60 (docket #76), seeking reconsideration of various rulings made by this court on the prior motions. For the reasons set forth below, that motion is granted in part and denied in part.
LEGAL STANDARDS
As a threshold issue, neither the Federal Rules of Civil Procedure nor this court's Local Rules expressly recognize motions for reconsideration. Instead, depending on the date of filing, such motions are treated either as a motion to alter or amend a judgment under FRCP 59(e) or motion for relief from judgment or order under FRCP 60(b). Stone v. INS, 514 U.S. 386, 402 (1995) (finding that FRCP 60(b) motion filed within 10 days of judgment tolls the running of time for appeal, as does a FRCP 59(e) motion to alter or amend judgment); Hinton v. Pacific Enter., 5 F.3d 391, 395 (9th Cir 1993) (holding that a motion for reconsideration of summary judgment is appropriately brought under either FRCP 59(e) or 60(b)); see also Straw v. Bowen, 866 F.2d 1167, 1171-72 (9th Cir 1989), citing Sierra On-Line, Inc. v. Phoenix Software, Inc., 739 F.2d 1415, 1419 (9th Cir 1984) (moving for reconsideration, without stating a particular rule, may be made under FRCP 59(e) if served within 10 days of judgment).
While FRCP 59(e) contains no standard, courts interpreting that rule have recognized four grounds which justify altering or amending a judgment or order: (1) to incorporate an intervening change in the law; (2) to reflect new evidence not previously available; (3) to correct a clear legal error; and (4) to prevent manifest injustice. EEOC v. Lockheed Martin Corp., 116 F.3d 110, 112 (4th Cir 1997).
Such a motion is not to be taken lightly or used as a second chance to correct a party's failure to present its strongest case in the first instance. Busby, Inc. v. Smoky Valley Bean, Inc., 767 F. Supp. 235, 236 (D Kan 1991). It is not appropriate to raise new arguments which could have been made earlier. Webber v. Mefford, 43 F.3d 1340, 1345 (10th Cir 1994); Frederick S. Wyle Prof'l Corp. v. Texaco, Inc., 764 F.2d 604, 609 (9th Cir 1985). Neither is it proper to submit additional evidence unless that evidence is newly discovered or unless counsel unsucessfully made diligent attempts to obtain evidence that was previously available. Webber, 43 F.3d at 1345, citing Frederick S. Wyle Prof'l Corp., 764 F.2d at 609. Parties cannot employ a motion for reconsideration as a vehicle to introduce new evidence that could have been adduced to support their original motion. Caisse Nationale de Credit Agricole v. CBI Indus., Inc., 90 F.3d 1264, 1269-70 (7th Cir 1996) (citations omitted).
DISCUSSION
With respect to the prior motions, this court concluded that the cause of the water leaks and source of the mold requires further investigation. Because Prudential's summary judgment motion was predicated on policy exclusions that required a determination as to causation, this court could have simply denied or continued that motion under FRCP 56(f). Instead, it attempted to assist the mediation process by resolving many issues raised in Prudential's summary judgment that were not dependent upon resolving the actual cause of the leaks and mold. Now that mediation was unsuccessful, Lillard-Roberts takes issue with some of those rulings.
I. Clerical Mistake in Order
Lillard-Roberts correctly notes that this court made a clerical mistake. Paragraph 1 of the Order should have dismissed her "Fourth Counterclaim" rather than her "Third Counterclaim" and will be amended accordingly.
II. Clarification of Motion to Stay
Lillard-Roberts also seeks clarification of this court's denial of her Motion to Stay (docket #23). She inquires whether this court intended to deny all destructive testing. This court did not. It intended only to deny the motion as presented, which was to have Prudential pay for the destructive testing. As this court clearly indicated, the source of the mold requires further investigation. The parties are free to pursue any investigation, including destructive testing, but Prudential is not required by court order to do so at its own expense. However, as this court indicated, Lillard-Roberts is free to renew this request now that mediation has failed.
III. Prudential's Second Affirmative Defense
Lillard-Roberts argues that this court should have dismissed Prudential's Second Affirmative Defense of Suit Limitations in its Reply to the Counterclaims because it ruled that Count Two of Lillard-Roberts' First Counterclaim for Misrepresentation was timely filed. This argument is rejected for two reasons. First, Prudential's Second Affirmative Defense alleges that applicable statutes of limitations bar all of Lillard-Roberts' counterclaims. This court only addressed the timeliness of Count Two of the First Counterclaim because it was the only counterclaim addressed in the parties' motions. Therefore, it is premature to dismiss Prudential's Second Affirmative Defense since it pertains to the timeliness of other counterclaims yet to be addressed by the parties.
Second, as this court previously noted, Lillard-Roberts' Motion for Partial Summary Judgment does not make any specific reference to any particular claim, affirmative defense, or counterclaim. As best as this court can ascertain, Lillard-Roberts' motion was a cross-motion on the coverage issues alleged in Prudential's Complaint, as well as a motion for summary judgment on her Third Affirmative Defense alleging promissory estoppel and her Fourth and Fifth Counterclaims alleging negligence and declaratory relief.
Despite the ambiguity of her own Motion for Partial Summary Judgment, Lillard-Roberts now unnecessarily chastises the court for failing to make certain rulings on that motion. Accordingly, this court's prior ruling granting Lillard-Roberts' motion for summary judgment on Prudential's Second Affirmative Defense remains unchanged.
IV. Extent of Damages Claimed by Lillard-Roberts
Although admitting that it is not determinative of any issue, Lillard-Roberts objects to footnote 9 of this court's April 19, 2002, Opinion and Order (docket #75), which states as follows:
Nevertheless, this court has considerable concern about whether some of the damages claimed by Lillard-Roberts are recoverable on this claim. Even if Lillard-Roberts had purchased a policy that covers the mold damage, she still would have suffered additional living expenses, loss of use, medical expenses, and other noneconomic damages. The issue is whether any of those damages would have been less had she purchased sufficient insurance coverage.
This footnote is in reference to the denial of Prudential's Motion for Summary Judgment against Count Two of the First Counterclaim. That counterclaim alleges that Prudential and its agent, defendant Stan Primozich ("Primozich"), made misrepresentations to induce Lillard-Roberts to purchase the policy. Lillard-Roberts contends that this court fails to appreciate the significance of Primozich's false promises and subsequent disregard of her health and safety when she reported the damage. If Prudential had provided the coverage as promised, then Lillard-Roberts believes that it would have conducted a more thorough investigation of the damage in preparation for remediation and would certainly have discovered the mold before Lillard-Roberts spent an additional year in her home.
If that is her claim, then she failed to clearly allege it and inartfully argued it in the prior motions. Count Two is alleged as an alternative claim to coverage under the policy: "In the event the court determines that [no coverage exists]," Lillard-Roberts, had she known of the lack of coverage, "could have purchased an insurance policy from another insurer that would have extended coverage for the kind of losses she suffered to her home and contents." Amended Answer, Counterclaim, ¶ 26. Lillard-Roberts apparently intends this allegation to encompass a claim that another insurer issuing another policy would have investigated her alleged loss at an earlier date and provided coverage. Had she obtained such a policy from another insurer, then she alleges that she would not have incurred the additional living expenses, loss of use, medical expenses, and other noneconomic damages that she suffered as a result of purchasing Prudential's policy. Although very broad, it is a permissible reading of this claim.
Nonetheless, this court still fails to comprehend how this claim encompasses the theory that Prudential breached its duty to investigate, as Lillard-Roberts appears to now argue. If Prudential's policy does not provide coverage, as this claim assumes, then it makes no difference whether Prudential complied with its duty to investigate. Had Prudential investigated earlier, it simply would have concluded earlier that the policy provides no coverage and Lillard-Roberts still would have been damaged. Until Lillard-Roberts better explains the thrust of Count Two of the First Counterclaim, this court's footnote is appropriate and will remain in the Opinion and Order.
V. Lillard-Roberts' Third Affirmative Defense and Count Two of First Counterclaim
This affirmative defense and counterclaim apply only if it is determined that no coverage exists under the policy.
A. Coverage by Estoppel Defense
Lillard-Roberts objects to the court's dismissal of her Third Affirmative Defense alleging coverage by estoppel for two reasons: (1) estoppel is a factually charged issue; and (2) the same facts that surround fraud logically support coverage by estoppel or a claim under Oregon's Unlawful Trade Practices Act.
How this case pertains to Oregon's Unlawful Trade Practices Act is unclear since none of the pleadings contain such a claim.
In particular, Lillard-Roberts contends that the court's conclusion that the promises giving rise to the estoppel defense were too "vague" is contrary to the evidence. She asked Primozich for the "best insurance [she] could possibly buy," for coverage "against any losses that might typically happen to a home and its contents[,]" and in particular for "protection from water damages to [her] home and contents, in whatever form it might come — rain, snow or flood." Affidavit of Lillard-Roberts, ¶¶ 2-3. Primozich responded that Prudential was issuing her a policy that covered her "fully, and included replacement cost coverage for [her] belongings." Id. She contends that in spite of this promise, water damage caused the mold growth for which Prudential is now declining coverage.
Apparently Lillard-Roberts claims that the she entered into an implied insurance agreement by relying on Primozich's promise that Prudential would furnish coverage for any loss that she may suffer, including personal injury, from the growth of toxic mold caused by water entering her house, regardless of how or why the water entered her house. Prudential's policy contains various exclusions upon which Prudential has relied to deny coverage. Lillard-Roberts seeks to avoid those exclusions by relying on Primozich's very broad oral representations. Although this court correctly rejected that theory, its explanation was perfunctory and deserves further refinement.
The scope of coverage by estoppel was thoroughly addressed by the Oregon Supreme Court in DeJonge v. Mutual of Enumclaw, 315 Or. 237, 843 P.2d 914 (1992). In that case, plaintiffs requested an insurance agent to provide "full" or "complete" coverage for their small grocery store. Id, 315 Or at 239, 843 P.2d at 915. Although the insurance agent knew plaintiffs sold alcoholic beverages at the store, he never specifically discussed coverage for liquor liability. The policy issued to the plaintiffs excluded coverage for liquor liability. Plaintiffs did not read the policy and were unaware of the exclusion until three years later when they were named as defendants in a wrongful death action. After a judgment was entered against them, plaintiffs sought declaratory judgment on coverage for their wrongful death liability despite the clear exclusion of such coverage.
Relying on its prior decision in ABCD . . . Vision v. Firemans' Fund Ins. Co., 304 Or. 301, 306, 744 P.2d 998, 1001-02 (1987), the Oregon Supreme Court reaffirmed the general rule that estoppel cannot be used to negate an express exclusion in an insurance policy:
The ABCD . . . Vision court distinguished between using estoppel affirmatively, to create a right to coverage not contained in the insuring clauses of the policy, and using it defensively, to preserve a right to ccoverage already acquired by preventing its forfeiture. The court held that estoppel is not available in the former situation to negate an express exclusion in the written contract but is available in the latter situation to avoid a condition of forfeiture of coverage.
DeJonge, 315 Or at 241, 843 P.2d at 916 (citation omitted) (emphasis in original).
To avoid application of that rule, plaintiffs argued that it is limited only to an insurer's conduct after the loss, not conduct before the loss. Based on its prior decisions and on ORS § 742.016(1), the Oregon Supreme Court rejected any distinction by that rule between pre-loss and post-loss conduct:
The often-expressed principle that estoppel cannot be invoked to negate an express exclusion in a written insurance policy applies even when the alleged representation occurred before the loss, at least where, as here, the exclusion on which the insurer relies is unambiguous and the insurer did not dissuade the insured from reading or understanding the exclusion. The parties' insurance policy excluded coverage for liability related to the sale of liquor to a minor, and defendant was not estopped to deny such coverage.
Id, 315 Or at 245-46, 843 P.2d at 919 (footnotes omitted).
Lillard-Roberts' claim is indistinguishable from DeJonge. Just as the plaintiffs in DeJonge sought to create coverage, Lillard-Roberts seeks to create coverage based on pre-loss statements by an agent regarding the scope of coverage where, according to Prudential, no coverage exists under the policy. Lillard-Roberts does not argue that Prudential dissuaded her from reading or understanding the exclusions. Nor does she present other evidence warranting special consideration.
The only conceivable distinction from DeJonge is that the policy here has exclusions that do not clearly and unambiguously exclude all types of losses claimed by Lillard-Roberts. By requiring "direct" and "physical" loss, the policy unambiguously excludes a loss in value to the dwelling and other structures. However, this court was required to decide to what extent the policy covers a loss due to physical damage as a result of mold. Despite this ambiguity in the policy exclusions, the estoppel theory remains inapplicable.
The type of ambiguity which gives rise to an estoppel theory is described in Farley v. United Pac. Ins. Co, 269 Or. 549, 525 P.2d 1003 (1974). There the insurance agent read over the telephone to the insured the provision that would be included in the policy and told the insured that he was covered under that wording. The agent was wrong because the wording excluded the risk for which the insured later sought coverage. As explained by DeJonge:
It was the agent's construction of the policy provision that this court found pivotal: "It seems entirely reasonable to us that [the insured] should not appreciate the fact that the language of the policy would not cover him when considered in the face of the agent's assurance that he was covered. . . . [T]he insurance company is estopped to assert the actual meaning of the provisions of its policy because the insured is entitled to rely upon a contrary interpretation of those provisions by the company's general agent."
DeJonge, 315 Or at 246, n6, 843 P.2d at 919, n6, quoting Farley, 269 Or at 558-59, 525 P.2d at 1007-008.
An estoppel theory permits Lillard-Roberts to rely upon Primozich's contrary interpretation of ambiguous policy provisions. Thus, an estoppel theory would be appropriate if Lillard-Roberts had expressed a concern about mold damage and Primozich had told Lillard-Roberts that contrary to the policy, she was insured for all losses that might result specifically from mold damage. However, Primozich did not posit an erroneous interpretation of any ambiguous policy provision. Instead, in response to Lillard-Roberts' request for the "best insurance that [she] could possibly buy" to provide coverage "against any losses that might typically happen to a home and its contents," he told her that Prudential was issuing her a policy that covered her "fully" and provided replacement cost coverage for her personal property. Lillard-Roberts' vague request and Primozich's vague assurances do not interpret, much less contradict, any policy provision. Absent Primozich's erroneous construction of a pivotal policy provision, an estoppel theory is not appropriate to expand the scope of coverage under the policy.
Lillard-Roberts also contends that this case is similar to Kabban v. Mackin, 104 Or. App. 422, 801 P.2d 883 (1990), which affirmed a jury verdict based on coverage by estoppel. The insurance agent knew that the building was unoccupied, but failed to disclose that an unoccupied building was not covered under the policy. The court stated, without further explanation, that the principle stated in ABCD . . . Vision did not apply "because plaintiff based his claim on conduct of the insurer that occurred before the loss" and "[i]n addition, the policy provision at issue is a condition of forfeiture which is always subject to estoppel." Id, 104 Or App. at 428-29, 801 P.2d at 888. Kabban has limited precedential value since it was decided before the Oregon Supreme Court clarified in DeJonge that ABCD . . . Vision applies to the insurer's conduct before a loss occurs. In any event, Kabban is distinguishable on its facts. Unlike the condition of forfeiture at issue in Kabban, Lillard-Roberts contests the scope of available coverage, as in DeJonge. Therefore, Lillard-Roberts' Third Affirmative Defense is dismissed.
B. Count Two of Lillard-Roberts' First Counterclaim
Because the facts supporting her coverage by estoppel defense and Count Two of her First Counterclaim alleging misrepresentation to induce the purchase of the policy are the same, Lillard-Roberts also argues that denying summary judgment on Count Two of her First Counterclaim is inconsistent with granting summary judgment against her coverage by estoppel defense. This court agrees, and for the following reasons, amends its Opinion and Order to grant Prudential summary judgment on Count Two of Lillard-Roberts' First Counterclaim.
Both the estoppel and misrepresentation claims require reasonable, detrimental reliance by Lillard-Roberts on Primozich's oral representations concerning the scope of coverage that is contrary to the policy. According to DeJonge, a plaintiff's claim under these circumstances, if any, is in the form of a claim against the agent for negligent failure to procure insurance, not against the insurer under the policy that was procured. DeJonge, 315 Or at 246, n8, 843 P.2d at 919, n8.
As Justice Unis points out in his dissent, an insured may have no tort remedy at all; the "harshness of the majority's rule" which applies contract principles in a tort context, combined with Onita Pac. Corp. v. Trustees of Bronson, 315 Or. 149, 160-63, 843 P.2d 890, 896-98 (1992), which limits the scope of negligent misrepresentation, "jeopardizes the possibility that the facts of this case . . . may be actionable in tort." Id, 315 Or at 257, 843 P.2d at 925.
Since estoppel does not apply in this case, Lillard-Roberts is also foreclosed from pursuing a fraud claim against Prudential based on Primozich's pre-loss representations. Instead, her claims against Prudential must be based upon the provisions of the policy. If the policy does not provide the coverage she thought she was buying based on Primozich's representations concerning the scope of coverage, then her proper claim is against Primozich for negligent failure to procure the insurance that she requested. Accordingly, Count Two of the First Counterclaim is dismissed.
VI. View of Evidence in the Light Most Favorable to Lillard-Roberts
Lillard-Roberts complains generally that instead of construing the facts in the light most favorable to her, the court instead approached her tort claims "with an overly critical eye and inverted the summary judgment standard" and improperly cut off discovery on her tort claims. Defendant's Memorandum in Support for Motion for Reconsideration and Motion to Modify Order Under FRCP 60, p. 8.
Lillard-Roberts, however, fails to identify any particular fact that she believes this court has overlooked or misconstrued. Accordingly, this argument is rejected and this court will not alter the concise statement of facts based on this objection.
VII. Usurping the Jury's Role
Lillard-Roberts also complains that this court usurped the jury's role in determining the factual issue of whether Prudential's conduct was outrageous. In particular, Lillard-Roberts urges this court to follow case law outside this jurisdiction and to consider facts outside the record concerning Prudential's secret and allegedly retaliatory cancellation of her automobile insurance. This court declines that invitation and stands by its earlier conclusion that the facts alleged in this case do not rise to the level of a claim for outrageous conduct.
VIII. Ensuing Loss Clause
Lillard-Roberts also disagrees with this court's interpretation of the "ensuing loss" clause in connection with the Fifth Counterclaim. She asserts that the faulty workmanship exclusion for damage to the building and other structures does not apply because the mold damage is covered as an "ensuing loss to property described in Coverages A and B not excluded or excepted in this policy." Policy, Section I, Exclusions, p. 16.
Lillard-Roberts correctly notes that this court erred by referring to the language "caused directly or indirectly" in Section I, Exclusion 2, as the "introductory language to the exclusion section." However, that error when corrected makes no difference to the ultimate analysis. Section I, Exclusion 2, refers simply to a "loss." All losses are ipso facto caused either directly or indirectly. The use of those two adverbs is mere surplusage. In fact, this court is hard-pressed to conclude what constitutes an indirect loss. Instead, the concept of proximate cause ordinarily determines if a loss is "direct." See, eg, Fred Meyer, Inc. v. Mutual Ins. Co., 235 F. Supp. 540 (D Or 1964) (finding food spoilage caused by failure of refrigeration when windstorm destroyed electric power lines is a "direct loss by windstorm"); see also 7 COUCH ON INSURANCE § 101:53 (3rd ed 1997).
As support, she reminds the court of factually similar cases that she previously cited and submits recently discovered new evidence consisting of an article published by the American Association of Insurance Services ("AAIS"), an association of property and casualty insurers of which Prudential is a member. Def's Ex 17. She also submits a recent letter from another insurance company denying coverage for mold damage caused by a leaky pipe because "[m]old is an ensuing loss not covered under the policy." Id, Ex 19, p. 1. Based on this new evidence, Lillard-Roberts argues that the insurance industry as a whole views mold as an ensuing loss and the ensuing loss clause as an "exception" to the exclusion, thus providing coverage. Lillard-Roberts misinterprets her new evidence and misapprehends the nature of the ensuing loss clause.
This article is at http://www.aaisonline.com/communications/mold.htm. Lillard-Roberts' expert first discovered this article on April 21, 2002, after this court issued its Opinion and Order.
The ensuing loss clause "does not reinsert coverage for excluded losses, but reaffirms coverage for secondary losses ultimately caused by excluded perils." Cooper v. American Family Mut. Ins. Co., 184 F. Supp.2d 960, 964 (D Az 2002), citing Schloss v. Cinncinnati Ins. Co., 54 F. Supp.2d 1090, 1094-95 (M.D. Ala 1999), aff'd without opinion, 211 F.3d 131 (11th Cir 2000); McDonald v. State Farm Fire Cas. Co, 119 Wn.2d 724, 734, 837 P.2d 1000, 1005 (1992); Ames Privilege Assoc. v. Utica Mut. Ins. Co., 742 F. Supp. 704, 708 (D Mass. 1990); Brodkin v. State Farm Fire Cas. Co., 217 Cal App.3d 210, 218, 265 Cal.Rptr. 710, 714 (1989). In other words, "an ensuing loss provision does not cover loss caused by the excluded peril, but rather covers loss caused to other property wholly separate from the defective property itself." Swire Pac. Holdings, Inc. v. Zurich Ins. Co., 139 F. Supp.2d 1374, 1380 (S.D. Fla 2001).
An example of an ensuing loss is a water leak that causes an electrical short which starts a fire. Roberts v. State Farm Fire Cas. Co., 146 Ariz. 284, 286, 705 P.2d 1335, 1337 (1985), citing The Aetna Ins. Co. v. Getchell Steel Treating Co., 395 F.2d 12 (8th Cir 1968). The damage caused by the fire is a covered ensuing loss because it is an unforeseeable event occurring "wholly separate from the defective property itself," Swire Pac. Holdings, Inc., 139 F. Supp.2d at 1380, and, but for the excluded peril, would otherwise be a covered loss. The issue here is whether mold damage caused by a water leak falls under the same ensuing loss category as fire damage caused by a water leak.
Though not inevitable, mold is a natural event that often manifests after and as a direct result of the entry of water caused by some other peril, such as a roof opened by a hailstorm, a leaky pipe or defectively installed roof flashing. Because mold cannot exist or sustain itself without some moisture source, such as water intrusion, it may be a covered "direct" and "physical" loss if the initial event that causes a water intrusion event is covered. The policy in this case does not specifically exclude mold damage because the mold exclusion contained in the policy violates ORS § 742.246(2). Therefore, if the policy covers certain types of water damage, then it will also cover mold damage which results from that covered peril. On the other hand, because the policy excludes certain types of water damage, such as a flood under Section I, Exclusion 1(c), then any resulting loss due to the mold caused by a flood is also excluded. Similarly, because faulty workmanship that results in a water leak is an excluded peril under Section I, Exclusion 2(c), any resulting loss due to mold caused by that leak is also excluded unless it is an "ensuing loss . . . not excluded or excepted in this policy." However, simply because mold spores may proliferate in a wall damaged by water does not mean that it is an ensuing loss and thus covered. When water intrudes into a residence, mold, unlike fire, is not a surprise, particularly in the damp northwestern United States. Because mold is a natural and foreseeable result of water damage, it cannot be an ensuing loss. An ensuing loss requires an unexpected loss due to an intervening or contributing cause other than the mere passage of time. Mold does not occur separately and independently from a source of moisture.
Such sources are not limited to water leaks and apparently mold may result from animal feces or bird droppings. See Pltf's Ex U, p. 3.
"(2) Any provision restricting or abridging the rights of the insured under the policy must be preceded by a sufficiently explanatory title printed or written in type not smaller than eight-point capital letters." ORS § 742.246(2).
Of course, mold can take on a life of its own and rise to toxic levels. If toxicity from mold is not foreseeable, then perhaps that toxicity could be the hook on which Lillard-Roberts is trying to hang her hat to claim an ensuing loss. However, after careful consideration, this court concludes that toxic levels of mold are not an ensuing loss. "Molds . . . are ubiquitous on our planet." Def's Ex 11, p. 1. Molds release spores and mycotoxins into the air which are deemed toxic when they exceed certain levels. Id, Ex 1, p. 4 (noting that "[t]he general recommendation [is] that indoor mold concentrations be lower than outdoor concentrations and that no elevated `indicator/marker' organisms . . . be present in the indoor air in greater concentrations than outdoors"). Thus, it is foreseeable that illness may result when an added moisture source, such as water intrusion, causes mold spores to proliferate in a residence, thereby increasing the mold quantities to a toxic level. However, "removal of the mold would presumably also remove the mycotoxins. As such, the mycotoxins do not constitute a separate and independent loss resulting from mold." Cooper, 184 F. Supp.2d at 965 (emphasis in original).
Even though Lillard-Roberts continues to rely on Employers Cas. v. Holm, 393 S.W.2d 363 (Tex App. 1965) and Allstate Ins. Co. v. Smith, 450 S.W.2d 957 (Tex 1970), these cases are dated and contain no thorough analysis. Also unlike these cases, the source of the mold in Lillard-Roberts' home remains unknown. Moreover, despite Lillard-Roberts' contention that McDonald v. State Farm Fire Cas. Co., 119 Wn.2d 724, 837 P.2d 1000 (1992), is a bizarre and aberrational decision, this court finds persuasive its well-reasoned analysis of the ensuing loss clause. Thus, this court rejects Lillard-Roberts' suggestion that it follow the cases she cites.
This court also rejects the argument that the AAIS article should change the outcome. That article is of little help to this court since it merely sets forth various sources of mold damage with a correlating potential basis for coverage and potential exclusions or limitations of coverage. It also admits that "many claims will fall in a `gray area.'" Def's Ex 17, p. 2. It does not state, as Lillard-Roberts contends, that mold is always a covered ensuing loss. It states only that a potential coverage for mold arising from the excluded peril of faulty workmanship is the exception providing "coverage for ensuing losses that are otherwise covered." Id at 3 (emphasis in original). It also states that potential "losses that arise directly from deficiencies in . . . workmanship" may be excluded. Id. That is precisely this court's view of the ensuing loss provision. Mold damage is a loss that arises directly from water damage; if that water damage is caused by faulty workmanship and excluded, then so is the mold damage.
Finally, the letter from another insurance company does not demonstrate, as Lillard-Roberts contends, that the insurance industry as a whole views mold as an ensuing loss. In fact, it denies coverage for mold, although it states that mold is an ensuing loss. Moreover, it cites no policy provisions and contains no analysis or background information that would be helpful to this court.
In conclusion, unless and until the Oregon appellate courts speak on this issue, this court will not reconsider its prior decision concerning the ensuing loss clause. Thus, depending on the source, Lillard-Roberts' loss due to mold may be covered, but not under the ensuing loss clause.
IX. Special Relationship
Lillard-Roberts also argues that, in connection with Count One of her First Counterclaim for post-claim misrepresentation, this court erroneously concluded that there is no special relationship between her and Prudential despite the specific promises by Primozich that created expectations later dashed by Prudential. Citing cases from other jurisdictions, she contends that the Oregon courts have lost sight of the special relationship between an insurer and an insured that may give rise to tort liability based on a breach of good faith and fair dealing or breach of a fiduciary relationship.
This court is obligated to follow Oregon law. That law was expressed in Strader v. Grange Mut. Ins. Co, 179 Or. App. 329, 39 P.3d 903 (2002). Pursuant to Strader, a special responsibility may be created only under exceptional circumstances. Those circumstances are not present here. Therefore, this court declines to reconsider its decision in this regard.
ORDER
For the reasons set forth above, defendants' Motion for Reconsideration (docket #76) is GRANTED in part and DENIED in part. Accordingly, the prior Opinion and Order (docket #75) is hereby vacated and an Amended Opinion and Order will be issued.