Mold: The Four Letter Word in Insurance

I remember my first phone call after new language concerning mold was introduced to policyholders:  “I see you cover mold now!   I was just looking at my shower and noticed some mold there!” So began my career of explaining the intricate subject of coverage for mold.

Mold, per se, is not covered, but sometimes a covered loss results in mold and then, depending on policy language, coverage might be available.   Sometimes and might are the key words here, words both policyholders and claims representatives don’t like to hear because they indicate a potential coverage issue.

When do you have mold coverage?  In many states, the requirements are that the damage is due to a covered cause of loss, is hidden within the walls (or between floors and ceilings), and is unknown to all insureds.  An example would be a slow plumbing leak behind a wall where a nail pierced a pipe.  The cause of loss, accidental escape of water from a plumbing system, is covered so you have the first requirement satisfied.  It may have leaked for quite a while inside the wall  but not have been apparent to the policyholder until someone noticed damage to the subfloor when doing work in the crawlspace of the home.  Since the policyholder was unaware of the damage and it was hidden, this satisfies the second and third requirements.

It is important to remember that even when coverage exists, as in the example above, the amount of coverage for mold is usually limited.  Often a policy will provide $10,000 for all covered, mold-related expenses in the policy period.  Mold-related expense means the portion of the loss expense related only to the mold.  If there are expenses related to water damage covered in the same loss, the repairs for the water damage will not be assessed against the mold-related limit.  I usually look at a loss like the example given and consider what we would have owed if the loss had been discovered immediately.  Then I add the expenses related to the mold. Perhaps the insured has a mold sensitivity and has to move out of the house for a week.  The additional living expenses would be assessed against the mold limit.  There might be additional costs associated with having an expert write a protocol for removing the mold.  That expert’s fee would also be considered a mold expense.

On the other hand, some states have exclusions for losses that are due to a constant or repeated leak, regardless of whether the insured is aware of the leak or whether it is hidden.  Since available coverage varies by state, everyone should read their policy and be sure to review any endorsements  which might be pertinent to their situation.  In some states, you can purchase additional coverage beyond the basic amount offered.  In others, the coverage outlined might be your only choice.   Your insurance agent or company representative can answer any questions concerning your coverage options.

Even if coverage is available it can be limited so it is especially important to make every effort to dry out the area affected by water as soon as it’s discovered.  Many people will try to do this work themselves in an effort to save money, but my advice is to stop and consider the much greater expense you’ll have should mold develop.

Have you ever had a mold problem?  How did you resolve it?

The coverages described here are in the most general terms, and are subject to the actual policy conditions and exclusions. For actual coverage wording, conditions, and exclusions, refer to the policy or contact your insurance agent.

2 Comments on “Mold: The Four Letter Word in Insurance

  1. I our case the mold was in a bathroom wall so it was hidden and we didn’t know we had a leak until mold showed up in the carpet in the next room. However the insurance company said they won’t cover it because it was lack of maintenance that caused it. The mold inspector we hired told us that we should threaten to sue them because there is no way we could’ve known there was a leak. But we heard that our insurance could be dropped from disclosing we’ve had mold and maybe another insurance company won’t cover our house. We feel backed into a corner to pay for all the remediation and damage repair ourselves and I have mold illness to I have to leave the house while it’s being done. Any advice about how to handle this would be greatly appreciated. Thank you.

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    • While many carriers use standard policy forms with very similar language, not all do, making it difficult to respond to your situation…but I can tell you that often there will be an exception to the exclusion which will provide coverage for an ensuing loss due to escape of water or steam from a plumbing system, HVAC equipment or a household appliance. I would suggest you request your carrier send specific portion of the policy they are relying upon and then check the form to see if any exceptions apply to your situation. Ask to speak with someone in a supervisory or management position if you feel your claim is wrongfully denied: most of us are more than willing to take a second look to be sure the denial is proper.

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