Expert Commentary

Trigger Theories in Homeowners Insurance

There are specific events that must occur to "trigger" insurance coverage under any given type of insurance policy. The word "trigger" is used in the insurance context as a term of art meaning the event that activates coverage under one or more insurance policies.


Courts and Coverage
January 2008

The trigger of coverage problem arises in determining exactly what must take place within the policy's effective dates to trigger coverage. For example, property damage must occur during the policy period to trigger property coverage under most homeowners policies.

Trigger Theories

There are at least four trigger theories exist throughout the various jurisdictions:

  • Manifestation trigger
  • Exposure trigger
  • Continuous trigger
  • Injury-in-fact trigger

Note, however, that different trigger theories may be applied in the same jurisdiction depending on the type of insurance policy under which coverage is sought and the type of damage allegedly suffered.

The Problem of Progressive Property Damage

One of the most difficult determinations made by courts is the trigger theory applicable to continuous or progressive property damage claims. A recent decision from a Texas appellate court demonstrates the complexities of trigger issues applicable to continuous or progressive first-party property damage claims under a homeowners insurance policy. The Texas court applied the manifestation trigger theory and interpreted manifestation to require actual knowledge of the damage so that a claim is properly made and timely notice is provided upon actual knowledge of the damage and not speculation.

In Allstate Ins. Co. v. Hunter, 2007 Tex. App. LEXIS 9183 (Tex. App.—Fort Worth, 2007), the Hunters noticed a strange smell in their home in the summer of 2002. The Hunters' HO-B homeowners insurance policy with Allstate Texas Lloyd's expired on October 6, 2002, and the Hunters replaced it with an HO-A homeowners policy from Allstate, which was effective on October 7, 2002. The strange smell persisted, and in December 2002, the Hunters hired a company to conduct air sample testing in their home, which revealed no elevated mold content in the air and offered no explanation for the smell. On February 4, 2003, a general contractor, Bill Hart, inspected the home and found water damage and mold in the crawlspace under the home. The Hunters testified that this was the first time that they knew of the mold damage or that the source of the odor that they had been smelling was mold. Two days later, the Hunters notified Allstate of their claim.

The Allstate adjuster determined that the Hunters' claim should be treated as a claim under the HO-A policy and hired a plumber to inspect the Hunters' home. The plumber's report showed an ongoing water leak at the Hunters' home. Because the HO-A policy covered only "sudden and accidental" plumbing leaks, Allstate denied the Hunters' claim under the HO-A policy. The Hunters then requested that Allstate treat their claim as one under their prior HO-B policy that had expired on October 6, 2002. Allstate did so and denied coverage under the HO-B policy based on the Hunters' failure to comply with the condition of the HO-B policy requiring prompt notice of the claim, reasoning that if the claim had occurred under the prior HO-B policy that expired on October 6, 2002, then the Hunters' February 2003 notice of that claim was not timely. The Hunters sued Allstate and through the progression of tribunals, the trigger issue found its way to the appellate court.

Until now, no Texas state appellate court has specifically discussed the distinctions among the various trigger of coverage theories in the context of coverage under a standard, first-party homeowners insurance policy for a first-party claim based on continuing or progressively deteriorating damage to the insured's dwelling. However, two courts have applied the manifestation trigger to such claims:

  • State Farm Fire & Cas. Co. v. Rodriguez, 88 S.W.3d 313 (Tex. App. 2002, pet. denied) (applied manifestation trigger theory to a homeowner's claim for progressively deteriorating property damage to the insured's dwelling)
  • Flores v. Allstate Tex. Lloyd's Co., 278 F. Supp. 2d 810, 815-16 (S.D. Tex. 2003) (applied manifestation trigger theory on homeowner's claim for water damage and mold).

Other states have likewise applied the manifestation trigger of coverage theory in first-party progressive property loss situations:

  • Prudential-LMI Commercial Ins. v. Superior Court, 798 P.2d 1230, 1246 (Cal. 1990)
  • Jackson v. State Farm Fire & Cas. Co., 835 P.2d 786, 789 (Nev. 1992)
  • Winding Hills Condo. Ass'n, Inc. v. North Am. Specialty Ins. Co., 752 A.2d 837, 840 (N.J. Super. Ct. App. Div. 2000)
  • Ellis Court Apartments Ltd. P'ship v. State Farm Fire & Cas. Co., 72 P.3d 1086, 1089 (Wash. App. 2003)

But c.f. Miller v. Safeco Ins. Co. of Am., 2007 U.S. Dist. LEXIS 72250 (E.D. Wis. 2007) (Wisconsin courts employ continuous trigger theory in progressive property damage claims which determines that an injury occurs continuously from exposure until manifestation, with manifestation being when the loss become apparent).

In Allstate Ins. Co. v. Hunter, the parties themselves agreed that the manifestation trigger of coverage applies to the Hunters' homeowners insurance policy with Allstate for coverage of progressive property damage to the Hunters' dwelling. Nonetheless, the court examined the terminology and language used in the insurance contract itself and found the language supports the parties' agreement that the manifestation trigger of coverage theory applies to the Hunters' HO-B policy concerning progressive property damage to the Hunters' dwelling.

The pertinent provision of the Hunters' HO-B policy that addresses when Section I coverage for damage to the Hunters' dwelling is triggered provides:

This policy applies only to loss in Section I or bodily injury or property damage in Section II which occurs during the policy period stated on the declarations page.

The court contrasted this insuring language with that found in most occurrence-based liability policies that defines "occurrence" as "an accident, including exposure to conditions, which result[s] in bodily injury or property damage during the policy period," which is language commonly associated with an exposure trigger of coverage theory and not found in Section I coverage under the homeowners policy for damage to the dwelling.

The question submitted to the jury asked:

Do you find from a preponderance of the evidence that on or before October 6, 2002, there was rot, mold, or other fungi which was capable of being perceived, recognized and understood?

Allstate argued that the trial court erred by submitting the manifestation trigger of coverage theory question without inserting the word "easily" before the phrase "perceived, recognized, and understood." Allstate further argued that the manifestation theory submitted by the trial court is unworkable because it means that mold manifests for purposes of triggering coverage under a homeowners policy when it is theoretically "capable" of perception through some type of exotic testing that was not actually performed. Under such a theory of manifestation, the homeowner could not possibly comply with the policy's notice provision because a homeowner cannot provide notice of a mold claim to an insurer until the homeowner possesses actual knowledge of the mold, i.e., not at some earlier date when the mold could have been perceived through testing or by someone crawling in the crawlspace.

Finally, Allstate pointed out that the Hunters utilized two different theories or dates of manifestation at trial. They obtained an affirmative answer to question number one by proving that the rot, mold, or fungi in their dwelling was theoretically capable of being perceived, recognized, and understood by some unidentifiable person on or before October 6, 2002. But then, in order to obtain a jury finding in their favor on the question of whether they provided timely notice to Allstate, the Hunters proved that they provided notice 2 days after they actually learned of the mold—not after the mold was capable of being perceived—which was more than 4 months after the HO-B policy expired.

Therefore, Allstate argued that the Hunters claimed the mold was "manifest" for purposes of triggering coverage when it was theoretically capable of being perceived by some unidentified person, but it was not "manifest" for purposes of triggering their duty to give notice to Allstate until it was actually discovered.

The Hunter Ruling

The court agreed with Allstate that the manifestation question propounded to the jury should have contained the word "easily" prior to the phrase "capable of being perceived, recognized, and understood" and that the Hunters cannot utilize two different manifestation theories or dates, one to trigger coverage under the HO-B policy—when the rot, mold, or fungi was theoretically capable of perception—and one to determine when the Hunters' duty to give notice arose—when the Hunters actually learned of the mold. The evidence indicated that the Hunters first smelled mold in 2002, though it was not actually discovered until February 2003, at which time the Hunters made claim with Allstate.

The court held, however, that using the proper case law definition of "manifest"—that is, when the damage was “capable of being easily perceived, recognized, and understood”—there was no evidence that the damage manifested prior to that date. In fact, the evidence established that despite searches by Mrs. Hunter and air-testing by experts, the damage to the Hunters' home did not "manifest" until February 4, 2003, when Bill Hart found it in the crawlspace under the Hunters' home. The Hunters argued that damage manifests when it is capable of being perceived by one's senses and that, consequently, the mold manifested prior to October 6, 2003, because the Hunters smelled it prior to that date.

The court held that the problem with this argument is that if the damage manifested itself on the date that the Hunters smelled it, then that is the date on which the Hunters' duty to notify Allstate of this claim was triggered. The Hunters did not notify Allstate of the mold smell until February 6, 2003. Furthermore, the court held that if the Hunters had filed a claim with Allstate in the spring of 2002 when they smelled what turned out to be mold, there is no question that their HO-B policy with Allstate would have covered the claim. However, the evidence established that the Hunters did not contact Allstate when they smelled the odor in their home. The court found no support for the Hunters' argument that their action of telling Allstate in February 2003 that they had been smelling an odor for 10 months triggered coverage in the absence of the filing of a claim with Allstate or of notifying Allstate during that 10-month period.

Conclusion

Clearly, Allstate Ins. Co. v. Hunter evidences the complexities of determining the application of trigger theories in progressive or continuous property damage claims. The Texas appellate court made the logical conclusion that the manifestation trigger requires that the damage be “capable of being easily perceived, recognized, and understood” for the insured to have the requisite knowledge of the damage to provide notice of claim to the homeowners insurer. According to the court, speculation of damage based on smell or other senses may not be enough to trigger coverage.


Dana Harbin is an attorney in the Dallas office of Cooper & Scully, P.C. where she specializes in insurance coverage and bad faith involving all types of insurance policies, both first and third party. Ms. Harbin earned her BA degree from the University of Texas in Arlington and her JD degree from the University of Texas at Austin. She can be reached at


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