Toxic mold

Risk & Insurance, July, 2002 by Charles H. Cox

The financial impact of toxic mold on the insurance industry is already significant. While it may not cause the same financial problems that asbestos did, you can be sure that it will be long lasting and that the insurers and policyholders alike will be grappling with this dilemma for years to come.

A brief Internet search of "toxic mold" is revealing to say the least. For one thing, the symptoms associated with exposure to toxic mold include respiratory problems, nasal and sinus congestion, dry and/or hacking cough, eye irritation, light sensitivity, nose and throat irritation, shortness of breath, chronic fatigue, skin irritation, central nervous system problems, aches and pains, fever, headaches, diarrhea, and immune system suppression.

With all these symptoms potentially pointing to the existence of toxic mold, it's no wonder that attorneys are smiling and insurers are nervous. Does the fact that www.atoxicmoldattorneyforyou.com is an actual Web site concern you? It should.

Where does mold come from? Essentially, buildings can become petri dishes for mold growth as a result of roof leaks, pipe leaks, floods, leaky windows or doors and damp basements. In addition, faulty building construction or improper use of building materials can seal in moisture and leave no means for its escape, resulting in mold growth within the walls of buildings.

The chain of people and/or companies affected by toxic mold is endless. Building owners and tenants, employers and employees of businesses within buildings, contractors that build or repair the buildings, contractors that clean buildings, contractors that monitor or measure air quality, and architects that design buildings, all are affected by toxic mold.

Building owners collecting insurance proceeds for losses due to fire damage, flood, or other water damage are seeking additional payment for resulting toxic mold damage. Building owners are seeking protection under their liability insurance for lawsuits brought by tenants claiming toxic molds, left to grow because of a leaky roof, caused them bodily injury. Employees are filing workers' compensation claims in connection with toxic mold illnesses contracted while in the course of their employment. Building contractors are seeking protection under their general liability coverage when sued for damages linked to mold and moisture in their newly constructed building. Environmental contractors are looking to their E&O coverage when sued for their failure to detect unacceptable levels of moisture leading to undetected growth of toxic mold.

Determining the availability of coverage for a wide array of mold claims, as you might expect, is a road filled with blockades and detours. In the absence of an absolute mold exclusion, some coverage may actually exist. Under property policies, depending upon the actual cause of the mold growth, coverage may be available. if water damage is not excluded, resulting development of mold may be covered. Even if the typical wear-and-tear exclusion specifically references/excludes "mold," if the proximate cause of the mold growth was not excluded, coverage may still apply. In some cases, the mold growth may even constitute an ensuing loss.

Standard commercial general liability policies cover claims involving bodily injury, which includes sickness or disease, caused by an occurrence, which includes exposure to a condition over a period of time. From this perspective, third-party mold claims would seem to be covered. As you might expect, however, insurers are likely to cite the standard ISO pollution exclusion as a bar to coverage. In one such case, the court held that mold did not fit the definition of a "pollutant."

Coverage and exclusions will vary, particularly among nonstandard forms. In addition, ISO has already filed new coverage forms and exclusions to address the toxic mold exposures under property and liability policies. The safest approach to confirming the existence of coverage for a mold claim is to be sure that the policy specifically states that it is covered. If not stated clearly, policyholders will likely face an uphill baffle to enforce coverage for a claim.

Charles H. Cox is president of Aldrich & Cox Inc., an independent risk management and employee benefits consulting company in Buffalo, N.Y. He can be reached at cox@aldrichandcox.com.