March 23, 2009

TO ALL INTERESTED COMPANIES

COURT OF APPEALS AGAIN RULES THAT HOMEOWNER’S INSURER
IS NOT LIABLE FOR FRAUDULENT MISREPRESENTATION OR
NEGLIGENCE DURING THE CLAIM HANDLING PROCESS

In Taylor v. Fire Insurance Exchange, ___ S.W. 3d ___ (Mo. App. S.D. 2009) the Missouri Court of Appeals held that a lawsuit alleging fraud and negligence against Fire Insurance Exchange (FIE) was properly dismissed.

In 2001 the Taylor’s home was damaged by a tornado which allowed water intrusion into the home.  FIE obtained an environmental report from Apex Environmental (also a defendant) which report identified mold in the home.  The basis of Taylor’s lawsuit was that neither FIE or Apex warned or notified the Taylors of the presence of mold until after the Taylors had been exposed.  They sued for personal injuries from mold exposure alleging fraud and negligence. 

The Court of Appeals held that as to FIE, the fraud and negligence claims were properly dismissed.  The court relied on the Missouri Supreme Court decision of Overcast v. Billings Mutual Ins. Co., 11 S.W. 3d 62 (Mo. Banc 2000), which case held that tort claims which arise out of the basic claim handling process are not recognized in Missouri as separate causes of action.  As concerns the claims against Apex Environmental, the court held that since Apex contracted with FIE and not the insureds (Taylors) it had no duty to persons it did not contract with. 

The court also heard another case arising out of the same occurrence, Haney v. Fire Insurance Exchange, ___ S.W. 3d ___ (Mo. App. S.D. 2009).  Haney was a contractor hired by the Taylors to repair the house and alleged personal injuries due to mold exposure.  The Haneys alleged fraud and negligence on the part of FIE and its adjuster in failing to warn them of the mold.  The same allegations were made against Apex.  As the insureds (Taylors) were not involved in this case, the court did not rely on the holding of the Taylor case (above) that claims arising from alleged fraud or negligence cannot be brought against a homeowner’s insurer.  Rather, the court based its ruling, in favor of the defendants, on the following legal principles:

1. The court determined this case to be a premises liability case and as such, liability is limited only to those who own or control the property.  Here, neither FIE, its adjuster or Apex had any interest in or control over the property. 

2. The court found that in order for a duty to exist there must be some right or obligation on the part of the defendant to control the activity which presents the danger of injury.  Here, the court held that neither FIE, its adjuster, nor Apex had any control over the activities of the contractor and therefore there was no legal duty to warn the contractor of the presence of mold.  Also, the court again held, as concerns the claims against Apex, that since Apex only entered into a contract with FIE, it had no duty to Haney, the contractor, to report or warn of mold. 

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SCHMITT MANZ SWANSON & MULHERN
Stephen D. Manz
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Kansas City, MO  64106
Phone: 816/472-5310, Ext. 305
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