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Atlanta Federal District Court Upholds One-Year Suit Limitation In Mold Case

Volume 19, No. 109 January 2007

Karen K. Karabinos
kkarabinos@deflaw.com

            An Atlanta Federal District Court recently upheld the application of a one-suit limitation to claims involving an allegation of latent damage involving mold in the case of Balkcom v. USAA Casualty Ins. Co. (Civil Action File No.: 1:04-CV-2348-TCB).

            In that case, the insureds, Mr. and Mrs. Balkcom, had a covered water loss involving a washing machine leak on May 29, 1999.  USAA, their insurer, promptly responded to the claim, and honored all of their requests for the repairs except for the insureds’ request that certain carpet upstairs be replaced rather than cleaned and re-laid.  Mr. Balkcom testified that he was satisfied with the repairs.

            Following the completion of the repairs in August of 1999, the Balkcoms admitted having had no communications or contact with USAA regarding any additional damages or repairs needed until July 3, 2003, some four years later.  On that date, Plaintiffs claimed that additional damages consisting largely of mold had not been repaired from the May 29, 1999 claim.  They further alleged that Mrs. Balkcom had started exhibiting signs of illness in 2000, and mold was found by an industrial hygienist during his inspection on May 14, 2003 and reported to them on June 3, 2003.

            The Balkcoms notified USAA of the mold claim on July 3, 2003, contending that the mold was caused by the previous May 29, 1999 washing machine leak.  After an investigation,  USAA denied their claim that there were additional covered damages as a result of the May 29, 1999 loss based on the fact that any damages caused by repeated leakage or seepage, wear and tear, deterioration, rot, or other faulty workmanship, materials, or maintenance, including mold, are excluded under the Policy. 

            In their lawsuit, filed on August 12, 2004, Plaintiffs claimed that USAA knew or should have known that additional damage to the residence from the May 1999 claim was not repaired, and therefore, their current damages consisting largely of mold are part of the May 1999 claim, not a new claim.  They further contended USAA has a policy and practice of limiting repairs for damages like those allegedly sustained by Plaintiff and that such practice amounts to fraud.  Plaintiffs sought not only contractual damages, but also bad faith damages and damages for their alleged personal injuries.  The parties agreed, with the Court’s approval, to stay discovery with respect to the medical injuries pending the resolution of USAA’s Motion for Summary Judgment.

            United States District Court Judge Timothy Batten noted the validity and enforceability of an insurance policy’s suit limitation provision in Georgia, and held that the provision “starts running from the date of the incident or loss, not the date the insurer receives proof of the loss. (Cits. omitted).”   In this case, the Balkcoms admitted that the date of loss was the May 29, 1999 washing machine leak, but contended that the loss was nevertheless covered because it involved a latent defect or because USAA waived the suit limitation.

            With regard to the latent defect argument, the Balkcoms were not able to produce any authority to support their position that a latent defect tolls the policy’s suit limitation.   Judge Batton correctly noted that most courts recognize that a latent defect does not toll the suit limitation period.   Therefore, even if the Court applied the date that the Balkcoms discovered the mold, June 3, 2003, their suit still was time barred, because they did not file suit against USAA until August 12, 2004, more than one year later.

            The Balkcoms attempted to avoid the application of the suit limitation by arguing that USAA waived the provision when, on July 7, 1999, USAA sent the Balkcoms a estimate for repairs containing the following notice:

USAA will not accept supplements to the estimate unless it is for an item we have agreed is pending or damage that was hidden.  In either event, USAA must have the opportunity to reinspect prior to the supplemental work being done.

Judge Batton rejected that argument and held that the notice was nothing more than an “assurance” that the Balkcoms had a right to file a supplemental claim.  The Court agreed with USAA that by inserting such language in the estimate for repair, USAA was not enlarging or waiving the policy’s one-year suit limitation.  Further, the Court found no evidence of any other action that a reasonable jury could conclude that USAA promised or represented or some how lulled the Balkcoms into believing that the one-year suit limitation would not be enforced.

            Accordingly, Judge Batton granted summary judgment to USAA based on the one-year suit limitation.  Mike Bagley and Karen Karabinos, counsel for USAA, have been informed that the Balkcoms will not be appealing this decision to the 11^th Circuit Court of Appeals.