In Transportation Insurance Company v. The Regency Roofing Companies, Inc., C.A. No. 05-80830 (S.D. Fla. Oct. 2, 2007), the United States District Court for the Southern District of Florida recently ruled that the “known loss” exclusion in a commercial general liability (“CGL”) policy did not preclude coverage for mold related injuries that arose from the insured’s faulty roof installation and repair.

The insured roofing company was hired to re-roof a large residence in 1999. During the next two years, the insured returned to the residence periodically to fix numerous leaks around the skylights and flashing. The insured’s employee documented the various leaks and his efforts to resolve them.

Beginning in 1999, the insurer provided primary and umbrella coverage to the insured under six policies. The insurer issued some of the policies after the homeowners repeatedly advised the insured of the roof leaks.

In January 2002, the homeowner sued the insured for alleged property damage, including injuries related to mold, arising from defective roof work. The insured submitted the claim to its CGL insurer. The insurer challenged coverage on the basis of policy exclusions, including the "known loss" exclusion. The insurer further sought a declaratory judgment of its rights and responsibilities under the policies and, specifically, whether it had to provide a defense for the insured in the homeowner’s lawsuit.

In its motion for summary judgment, the insurer argued that the insured was sufficiently aware of the roof leaks prior to the inception date of those policies to trigger the exclusion. In denying the insurer’s motion for summary judgment, the court held that, even if some damages were excluded owing to the insured’s prior knowledge or other exclusions, the resulting mold damage would not be excluded under the “known loss” exclusion. The court noted that, while the insured might have had prior knowledge of the roof leaks, the homeowner did not specifically complain of mold damage until after the first CGL policy began. Accordingly, the “known loss” exclusion was not applicable to the mold damage.

The opinion can be found here.