Mold: Insurance Industry Response

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Mold coverage in property policies

Present property forms may respond if there is a covered water damage claim and then mold appears as a result.

Most insurers are adding a limited coverage endorsement.

Claim must be submitted in a timely manner.

The insured must do everything to contain the water damage loss.

Taking a look at Homeowners HO 00 03 10 00 (Coverages A & B), we find the following wording about mold.
2. We do not insure, however, for loss:
c. Caused by:
(5) Mold, fungus or wet rot. However, we do insure for loss caused by mold, fungus or wet rot that is hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure if such loss results from the accidental discharge or overflow of water or steam from within:
(a) A plumbing, heating, air conditioning or automatic fire protective sprinkler system, or a household appliance, on the "residence premises"; or
(b) A storm drain, or water, steam or sewer pipes, off the "residence premises".

So we see that Homeowners does not cover loss from mold in and of itself, only from mold resulting from water damage or some circumstance out of the owner's control. Let's see what other property policies might cover mold-related damage.

Property policies that might provide mold coverage
Flood:
NFIP Dwelling Form covers mold if ensuing from covered "flood" and insured takes proper mitigation steps.

Earthquake:
Earthquakes can cause broken water pipes and other water damage that might result in mold growth. The Cause of Loss earthquake form (CP 10 40) form does not have a mold exclusion.

Commercial property:
Reading the following section from the Causes of Loss - Special Form for commercial property, you might come to the conclusion that fungus (and mold) is not a covered cause of loss.

2. We will not pay for loss or damage caused by or resulting from any of the following:
d. (2) Rust, corrosion, fungus, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself

However, mold might still be covered if it is not the direct result of any of the items in 2.d (2). For example, if mold occurs as a result of a broken water pipe and subsequent water damage, which might be a covered cause of loss, then the mold damage might be covered, as well.

Special Businessowner's policy:
The peril exclusion reads the same as Causes of Loss - Special Form (CP 10 30) as respects loss caused by or resulting from fungus. Many insurance companies have filed their own forms. The forms may be more restrictive than the Insurance Services Office Business Owners Policy (ISO BOP), which is used for smaller commercial accounts.

Boiler & Machinery:
There must be an "accident" to trigger this kind of coverage. Policies do not yet contain an ensuing mold exclusion.

Difference In Conditions (DIC):
Difference in Conditions policies are used to cover a variety of losses where the commercial property policy does not provide coverage. The most common coverages provided are earthquake and flood losses. The majority of these forms have separate exclusions now removing mold or fungus from the policy.

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Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and Insurance Skills Center, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.