Mold issues have been in and out of court for over a century. Consider Baker v. Manufacturer’s Insurance Company in 1851. Baker shipped fine French goods from Le Havre to Boston. The journey across the Atlantic was long and stormy. The goods arrived in Boston intact, but were ruined from extensive mold colonization. Manufacturer’s Insurance Company refused to pay Baker the replacement cost of the goods, so Baker filed suit. The Supreme Court of Massachusetts, Suffolk handled that case. They found that the insurance company was not liable. The court considered ordinary dampness of the ship’s hold as a peril of the sea, which was not a covered peril by the insurance contract. Perils of the sea included water intake from storms and extended voyages because of sea currents and weather. In other words “acts of nature”. The court did, however, stress that “they (referring to Manufacturer’s Insurance Company) might have been held liable for injuries occasioned to the goods from extraordinary formation of steam or gases, arising from an extraordinary access of sea water into the hold by reasons of perils of the sea”. Unfortunately, there was no such evidence that steam, gases, or any other peril generated by the ship or the ships operations was responsible for the mold growth. If Baker could have proved that extensive seawater intake during the storm caused equipment in the ship to malfunction and that malfunction contributed directly to the mold colonization of the French goods, the court would have sided with the plaintiff.
Proximate cause, also known as efficient proximate cause is the backbone of insurance coverage. It is the unbroken chain of events without which the end results would not have happened. Only when the proximate cause is a covered peril is indemnity or payment owed to the policy holder.