Michelle Russell & a. v. NGM Insurance Company
176 A.3d 196 (2017)
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Rule of Law:
Under an 'all-risk' homeowners' policy, a loss is not a covered 'ensuing loss' if it is a direct, natural, and foreseeable result of an excluded peril. For an ensuing loss to be covered, it must be caused by a separate and independent peril that is not itself excluded.
Facts:
- Michelle and Robert Russell owned a custom home built in 2007.
- In early 2015, the Russells discovered significant mold and moisture in the home's attic.
- An investigation determined that the mold and moisture were the result of faulty workmanship during the original construction.
- Due to the mold contamination, the Russells were forced to vacate their home in March 2015 while the mold was eradicated.
- The Russells incurred additional living expenses during the period they could not inhabit their home, returning in May 2016.
- In October 2015, the Russells submitted a claim to their insurer, NGM Insurance Company, seeking coverage for these additional living expenses under their 'loss of use' policy provision.
Procedural Posture:
- The homeowners, Michelle and Robert Russell, filed a petition for declaratory judgment against NGM Insurance Company in the New Hampshire Superior Court (the trial court).
- Both the homeowners and the insurer filed cross-motions for summary judgment.
- The Superior Court granted summary judgment to the insurer, NGM Insurance Company, and denied the homeowners' motion.
- The homeowners' subsequent motion for reconsideration was denied by the Superior Court.
- The homeowners, as appellants, appealed the trial court's decision to the Supreme Court of New Hampshire.
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Issue:
Does a homeowners' insurance policy that excludes coverage for losses caused by faulty workmanship provide coverage for additional living expenses resulting from mold contamination, where the mold was a direct consequence of the faulty workmanship?
Opinions:
Majority - Chief Justice Dalianis
No, a homeowners' policy excluding faulty workmanship does not cover losses, such as mold contamination, that are a direct and natural consequence of that excluded peril. The homeowners' reliance on the policy's 'ensuing loss' provision is misplaced because an ensuing loss must be a 'separate and independent' peril, not merely the next step in a chain of events initiated by an excluded peril. Here, the moisture and subsequent mold were the direct, foreseeable result of faulty workmanship, not a new, independent event. To interpret the policy otherwise would render the faulty workmanship exclusion meaningless. Furthermore, under New Hampshire's 'efficient proximate cause' doctrine, when the initial cause that sets a chain of events in motion (the faulty workmanship) is an excluded peril, the entire resulting loss is excluded from coverage.
Analysis:
This decision reinforces a narrow interpretation of 'ensuing loss' provisions within New Hampshire insurance law, clarifying that such clauses do not 'resurrect' coverage for losses that are a direct and foreseeable consequence of an excluded peril. By affirming the 'efficient proximate cause' doctrine, the court solidifies that the inquiry begins and often ends with the initial cause of loss. The ruling makes it more difficult for policyholders to recover for consequential damages like mold contamination when the originating cause, such as faulty construction, is explicitly excluded by the policy, thereby strengthening the position of insurers in such disputes.
