Mold: Insurance Industry Response

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Commercial General Liability (CGL)

CGL coverage issues
The items below are the coverage issues in the Commercial General Liability / Excess Liability policies.

Trigger of coverage

Exclusions

Standard Pollution Exclusion

Total Pollution Exclusion

Specific Mold Exclusion

Pollution
Commercial General Liability CG 00 01 10 01 covers pollution, but does mold qualify as a "pollutant"?

15."Pollutants" mean any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.

f. Pollution
(1)"Bodily injury" or "property damage" arising out of the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of "pollutants":
(a)At or from any premises, site or location which is or was at any time owned or occupied by, or rented or loaned to, any insured.

The court is divided in its opinions as to the proper application of exclusion f and any of its sub-paragraphs, so there likely will be years of conflicting court cases in many jurisdictions. At this time, most lower courts are not applying the pollution exclusion to mold-related litigation. As a result of this lack of clarity, liability forms written in the non-admitting market are including mold (fungus, microbial, etc.) exclusions.

Insurance Services Office CGL endorsements
Another policy source to consider are the ISO CGL endorsements that relate to mold coverage.

Fungi or Bacteria Exclusion Endorsement (CG 21 27 04 02)

Clean-up, removing, containing, treating or detoxifying

Remediation cost

Personal injury

Applies to operations and completed operations

Limited Fungi or Bacteria Coverage Endorsement (CG 24 25 04 02)

Separate limit

Fungi or bacterial incident

Resulting in bodily injury or property damage

The following exclusion is added to Section 2. Exclusions in Section 1.A. BODILY DAMAGE AND PROPERTY DAMAGE LIABILITY.

This insurance does not apply to "bodily injury" or "property damage" that is within the definition of the "products-completed operations hazard" and that either consists of, is caused by, arises out of, or is aggravated by "moisture related deterioration." This exclusion applies even if causes other than "moisture related deterioration" add to or contribute, directly, indirectly, or in any manner or sequence to the "bodily injury" or "property damage."

Be cautious in reading the company specific endorsements. Wording may include microbial matter. This could be a problem separate from the mold issue and remove coverage for losses involving salmonella, E-coli and the like.

Sample NON ISO exclusion
Let's take a look at a sample NON ISO exclusion.

B. This exclusion does not apply if the "bodily injury" or "property damage" consists of, is caused by, or arises out of any of the following:

The "collapse" of any building or structure.

Water escaping from within leaking or bursting pipes, plumbing fixtures, appliances, or equipment located within a building or structure.

The presence or entry of liquid or frozen water into the occupied spaces of a building.

"Moisture related deterioration" means:
1. Mold, mildew, fungi, or their spores, scent or byproducts. 2. Rot, decay, corrosion, or other gradual deterioration, delamination, adhesive or cohesive failure, weakening, or deformation of wood products or other material caused by continuous and/or prolonged and/or repeated contact with water or moisture. This definition applies even if the water and/or moisture also contain chemical elements other than water.

"Collapse" means the abrupt falling-in, abrupt loss of shape, or abrupt flattening into a mass of rubble of a building or structure.

Solutions for liability coverage
One possible solution for liability coverage would be under Pollution Liability and Remediation coverage. The policy could specifically underwrite against the mold exposure by defining "pollutant" as mold or fungus. It can be written for 1st party and 3rd party loss. Coverage may available for remediation, subject to known loss deductible. AIG and Kemper are two carriers currently providing this coverage.

There are also Pollution Legal Liability (PLL) and Contractors Pollution Liability (CPL). If a policy covers both Commercial General Liability and PLL, it will exclude off CGL and any coverage would be on PLL.

"Pollution Conditions" in the PLL policy means the discharge, dispersal, release or escape of any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapors, soot, fumes, acids, alkalis, toxic chemicals, medical waste, and waste materials into or upon land, or any structure on land, the atmosphere or any watercourse or body of water, including groundwater, provided such conditions are not naturally present in the environment in the amounts and concentrations discovered.

Pollution Conditions shall include Microbial Matter in any structure on land and the atmosphere contained within that structure. "Microbial Matter" means fungi or bacterial matter that reproduces through the release of spores or the splitting of cells, including but not limited to, mold, mildew and viruses, whether or not Microbial Matter is living.

As concerns Professional Liability, non-admitted carriers are already modifying their policy to eliminate current policy response to mold. The exclusion can be found in the re-definition of "pollutant" or by separate mold exclusionary language.

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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.