Mold: Insurance Industry Response

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Informing the insured about mold

Although the CDC or EPA has not yet officially established a causal link between mold and illness, suits are still being brought to trial against insurance agencies. To complicate matters, the Civil Code of Procedures in some states allows medical testimony in civil trials, even when not supported by a recognized authority.

Property claims are arising daily. Mold occurs in any age of building in any environment. This is not just an "old building" problem; this concerns the interior of the building, not the exterior. Many carriers are changing their water intrusion loss protocols as a result. Homeowner property losses are averaging slightly over $17,000.

The insured should be made aware of the mold issue and should report all claims involving any form of water damage, leakage, or collapse, even if under deductible or possibly not covered. They could follow up with a qualified restoration specialist with training in mold remediation.

If the mold claim is current resulting from an old reported water loss, the insurer needs to determine original cause of loss, point of origin, and age of mold growth. Experts in mold growth can usually determine these facts.

Questions for coverage review
Homeowner's, Commercial Property, DIC, and Equipment Breakdown policies:

Is mold covered if it ensues from a covered loss?

Have any special endorsements been added to the policy?

Does the policy require a report of all losses, all covered losses or all claims?

Personal Liability and Commercial General Liability policies:

Any change in the pollution definition?

Any specific mold exclusions?

Contractor's policy:

Any specific mold exclusions or change in pollution definition?

Check the EFIS exclusion for applicability.

Ask insured if they have received any information from their trade association about this potential litigation.

Any "hold harmless" language recommended by their association or attorney?

Have their legal representative, not you, provide this additional information for their business contract.

Professional liability:

Discuss this potential with any insured that is involved with property management or construction.

Legal professionals should work with insured to amend business contracts as necessary.

Check the renewals for specific mold exclusions.

Since most of these types of policies are claims-made, be careful about a new retro date being imposed.

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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.