According to IRMI, the growth of mold and fungi claims have been exponential, with more than 10,000 mold claims currently pending in the United States, particularly in Florida, California, Texas, and Arizona.
While mold and fungi aren’t things that we like to associate with businesses and they probably aren’t the first thing that come to mind when thinking about insurance coverage, it should certainly be a consideration and a factor. Any building can be susceptible to problems, resulting in potential health issues.
Mold and fungi exist everywhere. The spores they release as part of their reproductive process are claimed to cause illness and injury to humans and destroy property containing cellulose, such as wood, paper, and the paper coverings of drywall. Through slow rotting, mold growth can destroy even the toughest buildings that are designed to withstand major earthquakes. As a result, IRMI says that litigation claiming injury due to fungal or mold contamination is a growing industry.
Fungus Exclusions
Many commercial property insurers began adding mold exclusions to their policies several decades ago with the exclusion referring to fungus rather than mold. A fungus exclusion is found in the standard ISO commercial property policy and it applies to loss or damage caused by the presence, growth, proliferation or spread of fungus, wet or dry rot or bacteria. It’s important to note that the term “fungus” also includes mold or mildew in addition to toxins, spores, scents or by-products produced or released by fungi.
Similar to other property policies, the balance article explains that ISO policy provides limited coverage for mold losses via exceptions to the fungus exclusion. The fungus exclusion in the ISO policy contains three exceptions. The exclusion does not apply to:
- Fungus, mold, dry rot etc. that results from fire or lightning.
- A specified cause of loss that results from fungus. Specified causes of loss is a defined term in the policy. It includes perils like windstorm or hail, smoke, riot or civil commotion, vandalism, and sinkhole collapse.
- Fungus that results from a specified cause of loss other than fire or lightning. The coverage provided by this exception is called Limited Fungus Coverage.
Determining Mold Coverage
As a general rule, most insurance companies attempt to exclude coverage for mold contamination that is resulted from long-term leakage, moisture or water intrusion from a construction defect, wear and tear, deferred maintenance or poor repairs. The article goes on to explain that most insurers will acknowledge coverage for mold contamination associated with accidental discharge of a closed plumbing system–as long as the business owner take reasonable steps to protect and repair the property after you discover the damage.
Making Sure Vendors & Subcontractors Are Covered
As an organization that relies on work from vendors and subcontracts, your team should always confirm that mold coverage is included in their policies by checking their certificates of insurance. It’s also a good idea to check for a pollution policy if mold is excluded as it can help to cover some mold exposure. According to IRMI, contractors pollution liability (CPL) is a contractor-based policy, offered on a claims-made or occurrence basis, that provides third-party coverage for bodily injury, property damage, defense, and cleanup as a result of pollution conditions arising from contracting operations performed by or on behalf of the contractor.
Finally, it’s a good idea for your organization to have liability coverage for mold, too, in case a third party customer, vendor or subcontractor files a lawsuit based on mold exposure, which can result in serious health issues. You can also consult your insurance agent on such coverage to avoid costly liability and claims.
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