Fiess v. State Farm Lloyds

United States Court of Appeals
Fifth Circuit
F I L E D
In the United States Court of Appeals
December 7, 2004
For the Fifth Circuit
Charles R. Fulbruge III
_________________________ Clerk

No. 03-20778

_________________________

RICHARD FIESS AND STEPHANIE FIESS,

Plaintiffs - Appellants

versus

STATE FARM LLOYDS,

Defendant - Appellee

_________________________

Appeal from the United States District Court
For the Southern District of Texas
_________________________

Before HIGGINBOTHAM, DENNIS, and CLEMENT, Circuit Judges.

PATRICK E. HIGGINBOTHAM, Circuit Judge:

Plaintiffs Richard and Stephanie Fiess brought suit against

their homeowner’s insurance carrier, State Farm Lloyds (State

Farm), seeking coverage for losses incurred as a result of mold

contamination in their house. The district court granted summary

judgment in favor of State Farm concluding that mold

contamination was expressly excluded from coverage under the

Fiesses’ insurance policy, and was not covered under the policy’s

ensuing loss provision. In addition, the district court held that

the Fiesses’ claim failed under the doctrine of concurrent

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causation because they failed to raise a fact issue regarding the

amount of mold contamination resulting from water damage

otherwise covered under the policy. We reverse the district

court’s ruling with respect to the doctrine of concurrent

causation, finding that the Fiesses presented some evidence that

would allow a finder of fact to segregate those losses

potentially covered under the policy from those that are

excluded. Furthermore, because relevant state authorities

conflict regarding the application of the ensuing loss provision

to the mold exclusion in Texas homeowner’s insurance policies,1

and because the resolution of this issue is significant to both

the insurers and homeowners in Texas, we certify the coverage

question to the Texas Supreme Court.

I

A

This case began in the aftermath of Tropical Storm Allison,

which ravaged the Texas coastline in the summer of 2001. Located

in the city of Deer Park in Harris County, the Fiesses’ house

sustained substantial flood damage. The Fiesses filed a claim

under their flood insurance policy issued by State Farm Fire and

Casualty Company, and secured an initial payment of $48,626.00

1
The specific policy at issue in this appeal is the Homeowners Form B (HO-
B) insurance policy as prescribed by the Texas Department of Insurance effective
July 8, 1992 and revised January 1, 1996. Throughout this opinion, all
references to “insurance” or “insurance policy” are references to the HO-B
policy.

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for repairs to their home and replacement of personal property

damaged by the flood.

During the days following the flood, the Fiesses began

remediation work on their home, sweeping out flood water and

removing damaged carpet. Approximately one week after the storm

had passed, the Fiesses began removing damaged sheetrock only to

discover that their home was contaminated with a voluminous

amount of black mold. Upon further inspection, black mold was

found to be growing in the walls adjoining the dining room,

kitchen, bedrooms, and hall bath. Troubled by this discovery,

the Fiesses sent samples of the mold to NOVA Labs in Conroe,

Texas. Paul Pearce, Ph.D. (“Dr. Pearce”) tested the samples and

determined that they contained hazardous stachybotrys mold which,

in his opinion, made the house dangerous to inhabit. Upon

subsequent inspection of the Fiess house, Dr. Pearce found other

types of mold, including alternaria, chaetomium, cladosporium,

aspergillus penicillium, and all of the naturally occurring

environmental molds.

Dr. Pearce attributed the mold to six areas of water

instrusion into the home: flood waters related to Allison, and

pre-flood roof leaks, plumbing leaks, heating, air conditioning

and ventilation (HVAC) leaks, exterior door leaks, and window

leaks. At his deposition, Dr. Pearce stated that 25% of the mold

present in the Fiess house at the time of his inspection was

“non-Allison” related. Later, Dr. Pearce revised his estimate on

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grounds that he had misunderstood the question. In his revised

estimate, Dr. Pearce placed the percentage of non-Allison related

mold in the Fiess house at 70%. He conceded, however, that the

Allison-related damage had been extensive, leaving mold on

virtually every wall, stud, board and baseplate of the first two

to three feet of the house.

Following their discovery of the mold contamination, the

Fiesses submitted a claim under their homeowner’s insurance

policy. Their insurance carrier, State Farm, conducted an

inspection of the premises and paid the Fiesses $34,425.00 for

non-covered mold remediation in those areas of the flood damaged

house where there was evidence of small pre-flood water leaks.

The payment was made pursuant to a reservation of rights in which

State Farm maintained that it was not obligated under the policy

to honor the claim.

B

Believing the award to be insufficient to fully compensate

them for damage caused by mold attributable to pre-flood water

leaks, the Fiesses filed suit against State Farm in the 127th

Judicial District Court of Harris County, asserting claims for

violations of the Texas Deceptive Trade Practices Act (DTPA),

breach of contract, and fraud and intentional misrepresentation.

Because their homeowner’s policy explicitly excluded all damage

caused by flooding, the Fiesses’ claim encompassed only that mold

caused by the presence of pre-flood water intrusions. State Farm

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removed the case to federal court on the basis of diversity of

citizenship. The Fiesses then filed an amended complaint

alleging claims for violations of the Texas Insurance Code and

breach of warranty.

State Farm moved for summary judgment on all of the Fiesses’

claims. The district court granted the motion, pointing to

section 1(f)(2) of the policy excluding coverage for “rust, rot,

mold or other fungi”;2 the court also found that mold damage

caused by any non-flood related “water damage” was not covered

under the policy’s ensuing loss provision, thus barring the

Fiesses’ mold claims.3 In reaching this second conclusion, the

court relied upon cases holding that “ensuing loss” provisions do

not “reinsert coverage for excluded losses, but reaffirms

coverage for secondary losses ultimately caused by excluded

perils.”4 Finally, the court held that the Fiesses had failed to

offer competent evidence that would allow a finder of fact to

segregate potentially covered mold contamination from non-covered

mold contamination; that even if the Fiesses established coverage

for some of the mold contamination, State Farm was entitled to

2
Fiess v. State Farm Lloyds, No. H-02-CV-1912, 2003 WL 21659408, at *6-7
(S.D. Tex. June 4, 2003).
3
Id. at *9.
4
Id. at *9.

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summary judgment under the doctrine of concurrent causation.5

The Fiesses appeal this summary judgment, advancing three

arguments on appeal. First, as the result of an exclusion repeal

provision in their homeowner’s policy, the mold exclusion does

not apply to mold caused by water leaks from plumbing, heating or

air conditioning systems or appliances. Second, they argue that

the district court erred in rejecting the testimony of their

expert witness, Dr. Pearce, as some evidence of the percentage of

mold caused by non-flood sources, thereby precluding their mold

claims under the doctrine of concurrent causation. Third, they

contend that the district court erred in granting summary

judgment because the ensuing loss provision provides coverage for

mold contamination caused by otherwise covered water damage. We

address these contentions in sections II, III and IV,

respectively.

II

In their first issue, the Fiesses argue that coverage should

be extended to all mold contamination in their house caused by

water intrusions resulting from plumbing and HVAC leaks. We find

that, because the Fiesses failed to appeal the district court’s

ruling rejecting their contention, we lack jurisdiction to

5
Id. at *10. The district court also granted summary judgment with respect
to the Fiesses’ claims that State Farm breached its duty of good faith and fair
dealing, violated the Texas Insurance Code and Deceptive Trade Practices Act, and
committed fraud and intentional misrepresentation. The Fiesses have chosen not
to pursue these claims on appeal; therefore, we will not address them further.

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address it.

The district court entered final judgment in favor of State

Farm on all contested issues on June 3, 2003. On June 13, the

Fiesses timely filed a Rule 59(e) Motion which was denied by the

court on July 1. On July 3, they filed a reply brief in support

of their Rule 59(e) Motion which the court treated as a Motion to

Reconsider. On July 30, the Fiesses filed a Notice of Appeal

specifically referencing the June 3 final judgment and the July 1

denial of their Rule 59(e) Motion. Finally, on August 4, the

district court denied their Motion to Reconsider.

The Fiesses admit that they raised the issue of the plumbing

leaks exception for the first time in their July 3 reply. Citing

to our case law allowing issues to be raised for the first time

in post-judgment motions,6 they contend that this issue was

properly preserved for appeal. This argument misses the mark.

While an issue initially raised in a post-judgment motion may be

preserved for appeal, it cannot be considered by this court

unless the judgment or order disposing of it is properly noticed

for appeal.7

6
See Instone Travel Tech Marine & Offshore v. Int’l Shipping Partners, 334
F.3d 423, 431 n.7 (5th Cir. 2003)(issue preserved for appeal when raised in Rule
59(e) Motion for Rehearing); N.Y. Life Ins. Co. v . Brown, 84 F.3d 137, 142 n.4
(5th Cir. 1996) (issue preserved for appeal when raised in Rule 60(b) Motion to
Vacate); First Nat. Bank of Commerce v. De Lamaze, 7 F.3d 1227, 1229 n.9 (5th
Cir. 1993) (issue preserved for appeal when raised in motion to set aside jury
verdict).
7
FED. R. APP. P. 3(c)(1)(B) (“The notice of appeal must . . . designate the
judgment, order, or part thereof being appealed . . . .”).

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 The Fiesses made no mention in their Notice of Appeal of the

August 4 order denying their Motion to Reconsider for the simple

reason that the order had not yet been issued. Our court has

consistently taken a forgiving approach when construing notices

of appeal in order to avoid technical barriers to review.8 To

this end, “we have held that an appeal from a final judgment

sufficiently preserves all prior orders intertwined with the

final judgment,” even when those prior orders are not

specifically delineated in the notice of appeal.9 This rule has

served to advance our underlying policy of seeking to avoid

miscarriages of justice where the “intent to appeal an

unmentioned or mislabeled ruling is apparent and there is no

prejudice to the adverse party.”10

We can find no intent on the part of the Fiesses to

incorporate into their appeal the district court’s August 4 order

for the simple reason that their appeal was filed before the

order was issued. Furthermore, they failed to file a new or

amended notice of appeal incorporating the August 4 order after

8
N.Y. Life Ins. Co. v. Deshotel, 142 F.3d 873, 884 (5th Cir. 1998) (“While
the requirements of Rule 3(c) are jurisdictional, and ‘noncompliance is fatal to
an appeal,’ courts construe a notice of appeal liberally to avoid technical
barriers to review.”) (quoting Smith v. Barry, 502 U.S. 244, 248 (1992).
9
Trust Co. of La. v. N.N.P. Inc., 104 F.3d 1478, 1485 (5th Cir. 1997).
10
C.A. May Marine Supply Co. v. Brunswick Corp., 649 F.2d 1049, 1056 (5th
Cir. 1981)(per curiam).

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it was issued.11 Accordingly, because there was no effective

appeal of the ruling upon the effect of the plumbing leaks

exception, we lack jurisdiction to consider it.12

III

In their second issue, the Fiesses argue that the district

court erred in holding that they offered no evidence that would

allow a finder of fact to segregate potentially covered losses

from non-covered losses. Under Texas law, an insured bears the

burden of proving that a loss is covered under the terms of an

insurance policy.13 Once the insurer has established that an

exclusion applies, the insured has the burden of proving the

application of an exception to the exclusion.14 If covered and

non-covered perils combine to create a loss, the insured may only

recover the amount caused by the covered peril. This principle

is commonly known as the “doctrine of concurrent causes.”15

11
See Warfield v. Fid. & Deposit Co., 904 F.2d 322, 326 (5th Cir. 1990)
(notice of appeal filed prior to the issuance of an order clearly did not intend
to incorporate the order).
12
Id. at 325 (“Where the appellant notices the appeal of a specified
judgment only or a part thereof . . . this court has no jurisdiction to review
other judgments or issues which are not expressly referred to and which are not
impliedly intended for appeal.”) (quoting C.A. May Marine Supply Co., 649 F.2d
at 1056).
13
See Guar. Nat. Ins. Co. v. Vic Mfg. Co., 143 F.3d 192, 193 (5th Cir.
1998) (applying Texas law); Venture Encoding Serv., Inc. v. Atl. Mut. Ins. Co.,
107 S.W.3d 729, 733 (Tex. App.–Forth Worth 2003, pet. denied).
14
Guar. Nat. Ins. Co., 143 F.3d at 193; Venture Encoding Serv., Inc., 107
S.W.3d at 733.
15
Wallis v. United Servs. Auto Ass’n, 2 S.W.3d 300, 302-3 (Tex. App.–San
Antonio 1999, pet. denied) (citing Travelers Indem. Co. v. McKillip, 469 S.W.2d
160, 163 (Tex. 1971)).

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Because the insured may only recover for damage caused by covered

perils, the insured bears the burden of presenting evidence that

will allow the trier of fact to segregate covered losses from

non-covered losses.16

It follows that even if mold contamination caused by non-

flood related water intrusions is a covered loss under the terms

of the policy, summary judgment is still appropriate in this case

unless the Fiesses raised a genuine fact issue with respect to

the amount of mold contamination attributable to such water

intrusions.17 We review the district court’s grant of summary

judgment de novo,18 and will affirm if, viewing the evidence in

the light most favorable to the nonmoving party, the record

reflects that no genuine issue of material fact exists with

respect to the amount of covered and non-covered loss.19 A

material fact is one that might affect the outcome of the suit

under the applicable law, and a dispute about a material fact is

genuine if the evidence is such that a reasonable jury could

16
Id. at 303 (citing Lyons v. Millers Cas. Ins. Co. of Tex., 866 S.W.2d
597, 601 (Tex. 1993)).
17
We will take up the issue of whether coverage exists under the policy for
mold contamination caused by non-flood related water damage in Part IV, infra.
18
Instone Travel Tech Marine & Offshore, 334 F.3d at 427.
19
Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986) (in determining if
there is a genuine fact issue, a court must review all evidence in the light most
favorable to the nonmoving party, and must not weigh evidence or make a
determination of credibility of witnesses).

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return a verdict for the nonmoving party.20

At the summary judgment hearing before the district court,

the Fiesses introduced expert testimony from Dr. Pearce that 70%

of the mold in their house was attributable to water events other

than the flood waters generated by Tropical Storm Allison. The

district court found that this testimony provided no “reasonable

basis for distinguishing mold caused by the flood from mold

caused by non-flood events.”21 The court pointed specifically to

Dr. Pearce’s “concession” that mold caused by the flood covered

every wall, stud, baseboard, and baseplate throughout the

residence as reason to dismiss his testimony as insufficient to

allow reasonable distinctions to be drawn between flood-induced

mold and mold pre-existing the flood.22

We find the district court’s reasoning unpersuasive. While

it is true that Dr. Pearce testified that Allison caused two to

three feet of flood water to invade the Fiess house, he also

testified to evidence of non-Allison related water intrusions.

In particular, he testified to evidence of water running down

studs from consistent water leaks in the roof, and evidence of

water leaks from windows. This is evidence that the house had

experienced water damage prior to Tropical Storm Allison’s

20
See Celotex Corp. v. Catrett, 477 U.S. 317, 322-324 (1986); Anderson, 477
U.S. at 248; Instone Travel Tech Marine & Offshore, 334 F.3d at 427.
21
Fiess, 2003 WL 21659408, at *10.
22
Id.

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arrival.

Furthermore, Dr. Pearce testified to long-standing water

damage resulting in significant mold growth due to portions of

the house being wet for a long period of time. For instance, Dr.

Pearce testified that one particular wall cavity in the house

contained a much more significant amount of mold growth than any

other wall cavity, and that the additional growth was

attributable to routine water intrusions. In addition, he

testified to water damage in the ceiling of the house that could

not have been caused by the flood waters generated by Allison,

and mold contamination that reached up to four feet above the

floor, well above the alleged two to three foot height of the

floodwaters. Based on this and other evidence observed by Dr.

Pearce, he testified that 70% of the mold growing in the house

was attributable to non-Allison water intrusions.

Viewing this evidence in the light most favorable to the

Fiesses, we find that they successfully raised a genuine issue of

material fact regarding the amount of mold in their home not

attributable to Allison-induced flood waters. In reaching this

conclusion, we are not unmindful of the requirement that summary

judgment evidence rise to a level exceeding mere speculation.23

While the Fiesses have not presented overwhelming evidence that

23
See Brown v. City of Houston, 337 F.3d 539, 541 (5th Cir.
2003)(“Unsubstantiated assertions, improbable inferences, and unsupported
speculation are not sufficient to defeat a motion for summary judgment.”)
(citations omitted).

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would allow a jury to flawlessly segregate covered mold

contamination from non-covered mold contamination, the evidence

they have presented constitutes a reasonable basis upon which a

jury could reasonably allocate damages. A jury could deduce that

the excess mold damage in walls affected by continuous water

intrusions is attributable to a covered loss. In addition, the

jury could conclude that the mold contamination located above the

maximum height reached by the flood waters is attributable to a

covered loss. This is all that the doctrine of concurrent

causation requires.24 Therefore, we find that, based on the

evidence adduced by the Fiesses at trial, a reasonable jury could

return a verdict in their favor.

IV

We now turn to the Fiesses’ argument that their mold claims

are covered under the ensuing loss provision contained in their

homeowner’s insurance policy.25 This claim implicates a question

24
Texas courts have never required a plaintiff to establish the amount of
covered loss with absolute mathematical precision. See State Farm Fire & Cas.
Co., 88 S.W.3d at 321. Rather, the only requirement that has been propounded
with any regularity is that of setting forth some reasonable basis for allocating
damage between covered and non-covered events. See, e.g., Wallis, 2 S.W.3d at
304 (“[T]here must be some reasonable basis upon which the jury’s finding
rests.”); Lyons, 866 S.W.2d at 601 (“When covered and excluded perils combine to
cause an injury, the insured must present some evidence affording the jury a
reasonable basis on which to allocate the damage.”) (citing Paulson v. Fire Ins.
Exch., 393 S.W.2d 316, 319 (Tex. 1965)).
25
The ensuing loss provision contained in the Fiesses’ policy is a standard
provision contained in a significant number of current HO-B policies. The
provision at issue is located in the portion of the policy marked “Section
I–Exclusions.” Exclusion 1(f) states in pertinent part: “We do not cover loss
caused by: . . . rust, rot, mold or other fungi . . . . We do cover ensuing loss
caused by collapse of building or any part of the building, water damage . . .
if the loss would otherwise be covered under this policy.” (emphasis added).

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of state law important to both Texas homeowners and insurers. We

are persuaded that the question is best answered by the court

with jurisdiction to find state law. We will therefore certify

this question to the Supreme Court of Texas.

The Supreme Court of Texas is empowered to answer “questions

of law certified to it by any federal appellate court if the

certifying court is presented with determinative questions of

Texas law having no controlling Supreme Court precedent.”26 We

have disposed of all other issues on appeal, leaving only the

question of whether the Fiesses’ non-flood related mold

contamination claim is covered under the ensuing loss provision

of the policy. If there is coverage, we must reverse the

district court’s grant of summary judgment and remand this case

for trial. If there is no coverage, however, the district

court’s ruling must be affirmed. The Texas Supreme Court’s

decision on this question will therefore determine the outcome of

this appeal.

We can identify no binding Texas Supreme Court case law

addressing the question of whether the ensuing loss provision at

issue in this case provides coverage for mold contamination

resulting from otherwise covered water damage.27 The cases that

26
TEX. R. APP. P. 58.1.
27
We are urged by State Farm and its amici to accept Lambros v. Standard
Fire Insurance Co. as binding authority on this issue based on its “writ refused”
desigation. See Lambros v. Standard Fire Ins. Co., 530 S.W.2d 138 (Tex. App.–San
Antonio 1975, writ ref’d). We recognize that cases decided by Texas intermediate

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have addressed the issue of the proper interpretation of the

ensuing loss provision can be grouped into two categories: those

that would extend coverage for mold resulting or ensuing from

covered water damage,28 and those that would not.29

appellate courts designated “writ refused” carry the precedential value of a
Supreme Court decision. TEX. R. APP. PROC. 56.1(c); see also Baker v. Mallios, 971
S.W.2d 581, 583 (Tex. App.–Dallas 1998) aff’d by 11 S.W.3d 157 (Tex. 2000)
(designation of “writ refused” assigns a case the same precedential value as an
opinion of the Texas Supreme Court). However, we decline to render judgment
based solely upon Lambros for several reasons. First, Lambros was decided nearly
30 years ago. Second, the court in Lambros interpreted a homeowner’s policy that
has since undergone numerous changes. Finally, a number of state and federal
courts, as well as the Texas Department of Insurance, have interpreted the
ensuing loss provision at issue in this case in a manner inconsistent with
Lambros.
28
See Flores v. Allstate Tex. Lloyd’s Co., 278 F.Supp.2d 810, 814 n.3 (S.D.
Tex. 2003)(“[T]his court construes the mold exclusion as precluding coverage for
mold occurring naturally or resulting from a non-covered event, but not for mold
‘ensuing’ from a covered water damage event.”); Salinas v. Allstate Tex. Lloyd’s
Co., 278 F.Supp.2d 820, 824 (S.D. Tex. 2003)(finding that the HO-B policy covers
“mold claims to the extent that the claimed mold damage ensues from an otherwise
covered water damage event”); Home Ins. Co. v. Dennis, No. 05-97-1479-CV, Feb.
10, 2000 WL 144115 (Tex. App.–Dallas 2000)(not designated for
publication)(holding that mold contamination resulting or ensuing from otherwise
covered water damage is not excluded from coverage by virtue of the ensuing loss
provision); see also Aetna Cas. & Sur. Co. v. Yates, 344 F.2d 939, 941 (5th Cir.
1965)(“A likely case for the application of the [ensuing loss] clause would be
if water . . . coming from a burst pipe flooded the house and in turn caused rust
or rot; loss from rust or rot so caused would be a loss ensuing on water
damage.”); Allstate Ins. Co. v. Smith, 450 S.W.2d 957 (Tex.Civ.App.–Waco 1970,
no writ)(construing the ensuing loss provision as providing coverage for wood
rot, an excluded loss, that was caused by otherwise covered water damage);
Employers Cas. Co. v. Holm, 393 S.W.2d 363 (Tex.Civ.App.–Houston 1965, no
writ)(same).
29
See, e.g., Fiess, 2003 WL 21659408, at *7 (“For coverage to be restored
via the ensuing loss clause, an otherwise covered loss must result or ensue from
the excluded loss.”); Harrison v. U.S.A.A. Ins. Co., No. 03-00-362-CV, 2001 WL
391539, at *2 (Tex. App.–Austin April 19, 2001)(“To qualify for the exception
[under the ensuing loss clause], ensuing loss must follow from one of the types
of damage enumerated in exclusion (f). In other words, the ensuing loss
provision covers water damage that results from, rather than causes, rotting.”)
(citations omitted); Daniell v. Fire Ins. Exch., No. 04-94-824-CV, 1995 WL
612405, at *2 (Tex. App.–San Antonio Oct. 18, 1995)(not designated for
publication)(“[W]hile an ensuing loss provision will cover water damage caused
by an excluded event, it will not cover the excluded event even if it is caused
by water damage.”); Lambros, 530 S.W.2d at 141 (holding that “an ensuing loss
caused by water damage is a loss caused by water damage where the water damage

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 Cases that would extend coverage for mold contamination

“ensuing” from covered water damage interpret the ensuing loss

provision as an exception to the exclusion for “rust, rot, mold

or other fungi.” Under this interpretation, mold contamination

that results or ensues from a covered water damage event (i.e. a

bursting pipe releasing water into a house) is covered under the

policy notwithstanding the exclusionary language specifically

denying coverage for mold. However, if mold contamination

results from a water event that is not covered under the policy

(i.e. naturally occurring water condensation accumulating in an

inadequately vented crawl space under a house), coverage must be

denied under the general mold exclusion. In this sense, the

characterization of the ensuing loss provision as an “exception”

to the mold exclusion is accurate and appropriate.

Cases that would deny coverage for mold contamination caused

by a covered water event interpret the ensuing loss provision not

as an exception to the mold exclusion, but rather as a type of

“savings clause” intended to safeguard otherwise covered losses

from an overly expansive construction of the policy exclusions.

These cases read the “ensuing loss” provision as requiring, in

essence, a preceding cause, a proximate cause, and an ensuing

loss. The preceding cause must be one of the types of damage

itself is the result of a preceding cause” that is excluded from coverage under
the policy); see also Zeidan v. State Farm Fire & Cas. Co., 960 S.W.2d 663, 666
(Tex. App.–El Paso 1997, no writ)(interpreting an ensuing loss provision in
conformity with Lambros).

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enumerated in exclusion 1(f), including, inter alia, “rust, rot,

mold or other fungi.” The proximate cause, in turn, must be one

of the forms of damage listed in the ensuing loss provision,

including, inter alia, otherwise covered water damage. Finally,

a loss must occur as a result of the proximate cause.30

These two interpretations of the ensuing loss provision are

irreconcilable. We could make an Erie-guess as to how the Texas

Supreme Court would resolve this conflict. We think the better

approach, given the significance of the issue, is to certify the

question to the only court that can settle this uncertainty with

finality.

V

We REVERSE the judgment of the district court in part,

finding that the Fiesses presented sufficient evidence to raise a

fact issue regarding the amount of damage caused by non-flood

related water damage. We CERTIFY one question to the Supreme

Court of Texas.

CERTIFICATION FROM THE UNITED STATES COURT OF APPEALS FOR THE

30
An example of the practical application of this “preceding
cause–proximate cause–ensuing loss” formulation is as follows: Rust, an excluded
form of damage, causes a pipe to burst. The damage to the pipe is clearly
excluded under the policy exclusion for rust. However, any damage resulting or
ensuing from the water that escapes as a result of the rust will be covered under
the ensuing loss provision. Plugging these facts into the formulation results
in the following: the rust eating through the pipe constitutes the preceding
cause; the water escaping from the pipe constitutes the proximate cause; and the
damage caused by the escaping water constitutes the ensuing loss.

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FIFTH CIRCUIT TO THE SUPREME COURT, PURSUANT TO THE TEXAS

CONSTITUTION ART. 5, § 3-C AND RULE 58 OF THE TEXAS RULES OF

APPELLATE PROCEDURE TO THE SUPREME COURT OF TEXAS AND HONORABLE

JUSTICES THEREOF:

I. STYLE OF THE CASE

The style of the case in which certification is made is

Richard Fiess and Stephanie Fiess, Plaintiffs-Appellants v. State

Farm Lloyds, Defendant-Appellee, Case No. 03-20778, in the United

States Court of Appeals for the Fifth Circuit, on appeal from the

United States District Court for the Southern District of Texas,

Houston Division. Federal jurisdiction is based on diversity of

citizenship.

II. STATEMENT OF THE CASE

In the summer of 2001, Tropical Storm Allison washed ashore

in the Houston area forcing flood waters into the home of Richard

and Stephanie Fiess. One week after the flood, the Fiesses

removed sheetrock from their house and discovered large amounts

of black mold growing in the walls. They promptly filed a claim

for mold contamination with State Farm, their homeowner’s

insurance carrier. State Farm sent the Fiesses a reservation of

rights notifying them that the contamination may not be covered

under the terms of their policy. Ultimately, State Farm paid

$34,425.00 on the claim, reserving its contention that the claim

was not covered under the policy. The Fiesses filed suit

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claiming that State Farm failed to compensate them for all damage

caused by mold attributable to pre-existing water leaks.

State Farm filed a motion for summary judgment, arguing that

the Fiesses’ claims failed to come within the coverage terms of

the policy. The district court granted State Farm’s motion,

finding that the ensuing loss provision of the Fiesses’

homeowner’s insurance policy did not cover mold contamination

caused by water damage that was otherwise covered under the

policy. The Fiesses have appealed this ruling.

III. QUESTION CERTIFIED

Does the ensuing loss provision contained in Section I-

Exclusions, part 1(f) of the Homeowners Form B (HO-B) insurance

policy as prescribed by the Texas Department of Insurance

effective July 8, 1992 (Revised January 1, 1996), when read in

conjunction with the remainder of the policy, provide coverage

for mold contamination caused by water damage that is otherwise

covered under the policy?

We disclaim any intention or desire that the Supreme Court

of Texas confine its reply to the precise form or scope of the

question certified. The answer provided by the Supreme Court of

Texas will determine this issue on appeal in this case. The

record of this case, together with copies of the parties’ briefs,

is transmitted herewith.

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