A condominium complex had damage to its exterior, so the homeowners association in charge of the complex hired a construction firm, Saarman Construction, to repair the complex. Water damage was a major reason for the construction project. But about four years after the project was complete, water damage was visible at the complex, and one of the tenants sued the homeowners association and the construction firm. The homeowners association also sued Saarman Construction.
Saarman's insurance company, Ironshore Specialty Insurance, refused to defend Saarman in the case with the tenant (the lawsuit between Saarman and the homeowners association was settled out of court). Ironshore cited a mold contingency in their policy for the reason.
However, a federal court recently ruled that Ironshore's actions represented a breach in their arrangement with Saarman. The court said that because water damage was the cause of the mold, the policy would have covered Saarman even if mold wasn't present.
This is just another example of how insurance companies will do everything in their power to mitigate their liability. They will use any clause and any interpretation of provisions they can think of to try to invalidate a policy or not hold up their end of the policy.
This malfeasance and negligence is unacceptable, and the people who are victimized by these shady practices and acts of bad faith need to hold their insurers responsible. These decisions and behaviors of insurance companies are no accidents. These are intended moves to maximize their bottom line.
Source: Northern California Record, "Construction company claims insurance provider failed to protect it," Kristin Danley-Greiner, Dec. 8, 2016