Shelter Mutual Insurance Co. brought a declaratory judgment action against Tommy

Question

Shelter Mutual Insurance Co. brought a declaratory judgment action against Tommy and Bessie Maples (referred to collectively as “Maples”) in the United States District Court for the Western District of Arkansas. Shelter asked the court to declare that Shelter had no obligation to pay a claim made by Maples under a homeowner’s insurance policy issued by Shelter. The facts set forth in the following paragraph were as stipulated (i.e., as agreed to) by the parties. While residing in Saudi Arabia, Maples contracted for the construction of a single-family retirement home in Arkansas. Maples purchased homeowner’s insurance from Shelter, whose policy, issued in November 2000, was in full effect at all times relevant to the case. The two-story residence, which had a wooden frame and a basement made of concrete, was largely complete as of November 2000. Maples, who remained in Saudi Arabia, took reasonable precautions for winter weather by leaving a key with the contractor and asking him to winterize the residence. At some unknown time, a water pipe froze and burst. As a result, between four to six inches of water stood continuously in the basement until the contractor discovered the problem in April 2001. The standing water caused only minimal structural damage to the basement, but the humidity from the standing water caused mold to form on all of the interior surfaces of the residence. As a result of the mold, the residence became uninhabitable and had to be demolished. Maples reported the loss to Shelter, which instituted the declaratory judgment action referred to above. After the federal district court granted summary judgment in favor of Shelter, Maples appealed to the United States Court of Appeals for the Eighth Circuit.

Should the District Court’s grant of summary judgment in favor of Shelter be reversed?

Explanation / Answer

Following are the Facts understood from the given case

Facts

1. While Residing Overseas, maples contracted to have a home built in Arkansas and purchased home owner's insurance from shelter

2. Maples took reasonable precautions to winterise the residence, but a water pipe frose and burst, leaving several inches of standing water.

3. By the time of discovery months later, mold covered the interior surface of the residence and the house had to be demolished.

4. Maples reported the loss to shelter

Procedural history and legal reasoning

1. Shelter braught suit to deny coverage

2. District court found in favour of shelter,reasoning that the policy language clearly provided that any loss due to mold is not covered

3. Applellet Court: "Here a covered peril frozen pipes, caused an external peril, mold which resulted in the loss, we disagree with the court's reading of the policy.. the plain language of policy does not automatically preclude coverage"

Holding:

1. Distriminative question is a factual one: whether the frozen pipe or the mold was the dominant and the efficient cause of the loss..thus conclude that the material issue of fact remains and summary judgement was improper

2. Reversed and remanded

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