MOLD

Background

Mold and its impact on health and property recently has been the subject of significant media attention. Experts have not come to a definitive conclusion as to the health effects of certain molds, although several high-profile media stories have highlighted what are characterized as their potentially dangerous implications.

Unfortunately, too much misinformation about the health impact of mold and a selective interpretation of the facts regarding insurance coverage for mold is being disseminated to the public. This situation, created by the media and overzealous plaintiffs' attorneys, has promoted a heightened level of anxiety and misunderstanding among policyholders regarding the insurer's contractual obligations under homeowners or commercial property insurance policy. The American Insurance Association (AIA) believes it is in the consumer's best interest to eliminate any misunderstandings about mold and insurance coverage. As a result, the AIA offers this step-by-step examination of the mold issue, and an explanation of the responsibilities of the various parties involved in its remediation.

Increase in Mold Claims is a Recent Development

· Mold is an ever-present fact of life and can be found outside and inside all types of residential and commercial structures. There are literally hundreds of different strains of mold that have been growing in buildings for a long time.

· Mold has started to appear with greater frequency in residential, commercial and public buildings due, in large part, to the introduction of building techniques and materials over the last 30 years that allow structures to be built "airtight." Airtight buildings have been created primarily for the sake of energy efficiency. However, mold can and does occur in older buildings too.

· The downside of airtight buildings is that they don't allow an exchange of fresh air to the outside. This, in turn, allows moisture to build up, providing the perfect breeding ground for mold. Also, when wet, certain building materials like drywall and plywood provide a conducive environment for mold growth.

· Moisture is the enemy. Without moisture, mold has no opportunity to develop. Moisture can be caused by high humidity, a dripping pipe or leaky roof - or by a more serious event, such as water damage from firefighting or a major storm. According to the U.S. Environmental Protection Agency (EPA), mold can begin to grow quickly, often within 24 to 48 hours, and it is therefore important to dry water-damaged areas and items immediately to prevent mold growth.

Health Impact of Mold

· The science on mold toxicity and causation of ailments is unsettled. Public health experts say it could be years before research proves or disproves whether certain molds (and there are hundreds found indoors) cause the kind of severe health problems being alleged in recent litigation. In some instances the stachybotrys form of mold, one of the most threatening of the potentially so-called "toxic molds," has been blamed for a range of physical ailments.

· Unlike many other known toxins, such as lead, mercury, or cadmium, there are no standards for levels of mold toxicity and no known permissible mold exposure limits for the indoor environment. No state or federal agencies currently offer testing of mold samples.

· While indoor air quality investigations have an established protocol and guidelines, mold remediation is a new industry. There are no government-mandated guidelines for proper mold remediation, and remediation contractors are not licensed in any way

What is Covered Under a Homeowners Policy

· Insurance policies are contracts. They expressly cover losses caused by certain perils and explicitly exclude losses from other perils.

· Insurance contracts provide coverage for property damage described in the policy and not otherwise excluded from the policy. Insurance policies are designed to cover fortuitous, sudden and accidental losses. They do not create a home warranty, and do not reimburse policyholders for ordinary wear and tear, or losses that result from failure to maintain the home.

· The standard homeowners policy insures against losses to property caused by fire or lightning, windstorm or hail, smoke, etc. It expressly excludes losses due to "wear and tear" or "smog, rust or other corrosion, mold, wet or dry rot."

· While property insurance policies and coverage differ, courts have generally held that mold is covered if it is a consequence of a covered loss. Generally speaking, this means that mold caused by failure to maintain a home would not be covered, while mold caused by a covered peril would be covered. For example, if fire were a covered cause of loss, most losses that directly flow from this covered loss would be covered as well.

· An insurance policy is not intended to be a home warranty product. Just as insurance does not, and should not - as a matter of public policy - cover the costs of regular roof maintenance or plumbing maintenance, it does not and should not cover mold damage resulting from inadequate maintenance.

What to Do if Water Damage Occurs

· Time is critical in responding to water damage. Mold starts to develop quickly. Policyholders need to give insurance companies prompt notice of a loss and take steps to prevent further damage; in fact, most policies require this. Insurers also need to be able to inspect the premises in a timely manner.

· The issues of mold toxicity and remediation are scientific issues. Insurance companies are not public health experts or officials. The scientific experts themselves have not reached a consensus on many key mold-related issues. Certainly, insurers cannot and should not reasonably be expected to act as experts in this area.

· Homeowners who engage a mold remediation contractor - as well as any other providers of professional services -- should take the time to carefully review their credentials and experience. There are currently no generally accepted mold remediation standards, and no licensing or professional requirements for someone who says they can remove mold.

Insurance Coverage Under a Commercial Property Insurance Policy/Mold Prevention in Commercial Structures

· Insurance policies are contracts. They expressly cover losses caused by certain perils and explicitly exclude losses from others. While the Insurance Services Office (ISO) has developed standard commercial property forms, these kinds of policies are often negotiated between the parties, and are tailored to suit the needs of the individual policyholder. Policyholders who have questions about the coverage under their commercial property insurance policy should call their agent or broker.

· Insurance policies provide coverage for property damage caused by a loss that the policy covers, i.e., one that is described in the policy and not otherwise excluded from the policy. Insurance policies are designed to cover fortuitous, sudden and accidental losses. The insurance policy does not reimburse a policyholder for ordinary wear and tear, or losses that result from failure to maintain the building.

· As with homeowners policies, the standard ISO commercial property policy does not provide coverage for damage caused by or resulting from mold. ("We will not pay for loss or damage caused by or resulting from any of the following: (2) Rust, corrosion, fungus, �?��?�" ISO Commercial Cause of Loss form).

· However, while policies and coverages differ, courts have generally interpreted commercial property insurance policies to provide coverage for mold damage if it is a consequence of a covered loss.

· Much of the guidance for preventing mold growth in homes also applies to commercial structures. Moisture control is the key. Below are some of the suggestions from the EPA specifically for schools and commercial buildings:

o Fix leaky plumbing and leaks in the building envelope as soon as possible.
o Keep heating, ventilation, and air conditioning (HVAC) drip pans clean, flowing properly, and unobstructed.
o Vent moisture-generating appliances, such as dryers, to the outside where possible.
o Maintain low indoor humidity, below 60% relative humidity (RH), ideally 30-50%, if possible.
o Perform regular building/HVAC inspections and maintenance as scheduled.
o Clean and dry wet or damp spots within 48 hours.
o Don't let foundations stay wet. Provide drainage and slope the ground away from the foundation.

· The EPA has published a comprehensive guide entitled "Mold Remediation in Schools and Commercial Buildings" which discusses mold prevention, possible mold health effects and mold remediation procedures. The guide is available at http://www.epa.gov/iaq/molds/index.html

If you are interested in mold you may also be interested in:

· AIA's Questions & Answers for Consumers on Mold Consumer Q&A on Mold
· Checking out AIA's list of informative mold websites Top 10 Links to Mold Information Sources
· The insurance industry website www.MoldUpdate.com - where those interested in the issue of mold can come for current news, education, scientific links, litigation updates, state legislation and matters of mold as it relates to the insurance industry. Maintained by the National Association of Mutual Insurance Companies.