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HOLDING: Reversed and remanded. REASONING: According to the court, a mere breach of contract claim is not actionable under the DTPA. e distinction “between a DTPA violation and a breach of contract claim, properly lies when an alternative interpretation of the contract is asserted, and the dispute arises out of the performance of the contract.” e court stated that “in such a case the DTPA is not violated, and the legal rights of the parties are governed by traditional contract principles.”

  • e court held that Life Partners’ interpretation of the

contract was not reasonable and the language in the contract was

not ambiguous. Life Partners used two different terms, “fees” and “costs,” in the course of describing the purchaser’s financial obligations. e contract’s plain language expressly stated that the “PURCHASER will not incur costs of any type” and does not limit “costs” to fees for Life Partners’ services. e court stated that when called upon to interpret a contract, it will give plain meaning to the words used in the writing, and that language may be given a certain and definite meaning that is not ambiguous. Because the language had a plain meaning, the State’s DTPA claim was actionable.

INSURANCE

HOMEOWNER’S INSURANCE DOES NOT COVER MOLD

MITIGATION IS NOT AN AffIRMATIVE DEfENSE

Carrizales v. State Farm Lloyds, 518 F.3d 343 (5th Cir. 2008).

facts: Javier and Eva Carrizales held a standardized homeowners insurance policy (“Form B”) issued by State Farm. ey filed a claim for damages resulting from a plumbing leak in their garage. State Farm paid for the claim plus additional living expenses. e Carrizaleses later submitted three mold remediation claims which State Farm denied.

  • e Carrizaleses sued State Farm for alleged violations of

the insurance code, breach of the insurance contract, and breach of the duty of good faith and fair dealing. e court granted State Farm summary judgment, concluding that Form B did not extend coverage to a dwelling for damage caused by mold. Because of the summary judgment ruling, when the case proceeded to trial, evidence of the mold damage was excluded. e jury found for State Farm.

On appeal the Carrizaleses argued that the interaction of two provisions in Form B, the mold exclusion and the exclusion repeal provision, was such that it was ambiguous as to whether Form B covered mold damage to a dwelling caused by a plumbing leak. Carrizaleses also challenged the jury instruction arguing that their duty to mitigate damages was not a condition precedent to recovery, but an issue for the jury to consider in determining the amount of damage to award. Holding: Affirmed. Reasoning: e court agreed that Form B did not cover mold damage to a dwelling resulting from a plumbing leak. Form B specifically divided coverage into two distinct subdivisions: A and B. Coverage A insured all risks to the dwelling except those which were excluded within Section I. Damage resulting from mold was excluded from coverage in 1.f of Section I. Coverage B insured personal property against certain, enumerated perils, not excluded by Section I. Damage from plumbing leaks was listed as a covered peril in the ninth subsection of Coverage B (“Section 9”).

Section 9 also includes the exclusion repeal provision which provided that “exclusions 1.a through 1.h under [Section I] do not apply to loss caused by this peril.” According to the court, the location of the exclusion repeal provision within the text of Form B implied that the mold exclusion was only repealed

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in regard to a loss insured by Section 9 of Coverage B. Stated another way, the mold exclusion was repealed for plumbing leaks resulting in loss of personal property, not damage to a dwelling.

Additionally, the court stated that in Texas, Form B did not cover mold damage to a dwelling resulting from a plumbing leak because ruling otherwise would eviscerate the mold exclusion entirely. e court based its conclusion on an answer to a certified question that was received in a previous case, Fiess v. State Farm Lloyds, 202 S.W.3d 744 (Tex. 2006). e Texas Supreme Court had been asked in Fiess whether mold damage was covered under Form B when it occurred as a result of water damage that was otherwise covered. e Court answered that mold damage was not covered under Form B. In general, the duty to mitigate damages is an equitable doctrine, allowing for a reduction in the amount of damages, not an affirmative defense. e Fifth Circuit looked to various sources to inform itself on the duty to mitigate damages. e court found that in general, the duty to mitigate damages is an equitable doctrine, allowing for reduction in a

the amount of damages, not an affirmative defense. e Texas Rules of Civil Procedure does not list mitigation of damages as an affirmative defense that must be pled.

  • e court found that while the policy language firmly

required insureds to take certain steps as “Duties After Loss” the policy did not expressly render these “conditions” as prerequisites to recovery. Consequently, Texas courts have concluded some “Duties After Loss” are conditions precedent while others are not. e duty to provide notice has been held to be a condition precedent to recovery so long as the insurer is prejudiced by the insured’s breach of the duty.

According to the court, holding that the breach of the duty to mitigate constitutes an affirmative defense would be contrary to the Texas court decisions finding conditions precedent only when the insurer is prejudiced. e court stated that an offset to any award of damages based on failure to mitigate is more analogous to the “prejudice” bar. e court found barring all recovery for failure to mitigate would be an onerous consequence upon the insured that did not conform with the rule that ambiguous policy provisions are construed in favor of the insured.

Journal of Texas Consumer Law

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