The Fourth District California Court of Appeal has reinstated a $1.7 million punitive damages award against a homeowners' carrier in a mold/bad faith lawsuit (Rogers v. United Services Automobile Assoc.).

Two separate leaks occurred in the plumbing of the home: one from a plumbing leak beneath the kitchen floor and one from an angle stop leak under the sink. USAA hired a flooring company to put in a new floor, but before the flooring was installed the homeowner received his renewal policy which now contained a mold limitation.

Two weeks after the new floor's installation, the problem reoccurred. This time, high levels of mold were discovered. USAA required the homeowner to file a new claim for the new leak. State Farm told the homeowner that the new claim would be subject to the renewal policy's mold limitation. The homeowner then sued for bad faith.

According to a State Farm spokesman, the amount State Farm has paid out for water damage has more than doubled in the past five years, but the total number of claims has gone up barely 10%, Sirola said. The increase in water-damage claims is a result of the cost of home repair, modern home design and the impact of the fear of mold, but not necessarily mold itself, he said.