by Rick Vohden, Marsh 
The presence of certain strains of mold in campus buildings - residence halls, laboratories, gymnasiums, etc. - is creating significant financial risk for an increasing number of U.S. educational institutions. Over the past decade, the frequency of mold litigation has skyrocketed along with the damages sought by plaintiffs. Obtaining coverage from general liability and property insurers for mold-related problems is tenuous and becoming more so, with most insurers relying on pollution exclusions and newly added mold exclusions to deny coverage. As a result, exposed institutions are turning to specialized pollution insurers; however, these insurers' policies do not provide "off-the-shelf" solutions. Insurers are wary of underwriting mold exposures and have resorted to including sublimits or restrictions in their policy wording to ensure that mold claims are not made as a result of poor maintenance or construction defects.
Approximately 9,000 to 10,000 new cases alleging mold exposures, illness and/or property damage have been made over the past few years in the United States and Canada. Before 1990, most mold-related claims involving universities were brought in California; however, that's changed. Recent media coverage has raised awareness of the issue triggering more suits and giving rise to another litigation cycle.
Successful claims have been made against universities, property managers, architects, engineers, construction contractors, and subcontractors. Allegations generally include negligence for failing to take steps to ensure that a property is safe for human habitation. The seriousness of the issue is illustrated by the situation where three deaths in a housing complex in New York City have been attributed to health problems related to mold in apartments. A wrongful death suit has been filed against the owners of the complex for allegedly refusing to take steps to remedy the mold problem.
Several suits have led to awards or settlements in the $10 to $50 million range, and one suit brought by 125 families against an apartment owner in New York City sought $8 billion in damages. Mold-related claims involve complex issues that are difficult to communicate to juries and often require the use of expert testimony. A building inspection, frequently needed in these cases, can cost $1 million or more. Further, mold remediation can cost up to $150 per square foot - more than 10 times the cost to remove and replace the construction materials. High investigation costs, multiple claimants and punitive damages are just some of the factors that conspire to drive awards upwards.
WHAT IS MOLD?
Molds exist when moisture, including high humidity, is present in temperatures exceeding 70 degrees Fahrenheit; and when there is a nutrient source such as wood, carpeting, and cellulose-based materials such as ceiling panels and drywall. While there are more than 100,000 species of mold, most are harmless. When moisture is removed, molds stop growing and die. But when molds dry, the spore release becomes most vigorous, presumably causing or exacerbating health problems.
When people have adverse reactions to apparent mold exposures, typical symptoms include headaches, rashes, and respiratory tract and eye irritations. Many people, however, blame mold for more serious health issues, including immune system failure, cognitive memory loss, brain damage, and sometimes death.
PROTECTING YOUR INSTITUTION
The severity of mold claims can cause significant financial hardships to educational institutions and require institutions to take steps to protect themselves. Universities should evaluate and, where possible, mitigate their potential exposures by reviewing their efforts in each of the following areas:
Prevention-Pre-plan and review plans of construction projects.
-Develop a prevention-oriented building maintenance plan.
-Educate staff and faculty
Prevention of mold claims is key to protecting an institution's well being. Prevention starts with quality construction practices and continues with proper building maintenance procedures. Marsh can help in both these areas. We can provide construction pre-planning and plan review and help assess current building maintenance practices and guide improvement.
Additionally, Marsh has technical information and materials to help clients become better educated about issues related to mold.
Existing Insurance Coverages - Identify if there is existing coverage
While insurance can reduce the financial impact of a potential mold problem, colleges and universities need to examine their policies carefully to make sure they are protected against this risk. "General liability policies may provide some coverage for mold-related claims, depending on how a claim is brought, in what jurisdiction a claim is made, and the policy language," says Kevin Shane, Senior Vice President of Marsh. Marsh can help identify possible coverage for mold claims from current or prior policies.
Claims Preparation- Determine a value for the claim
- Prepare claim submission
- Identify the exposure
- Seek referral for coverage counsel
Accurate valuation of the claim is imperative to receiving an adequate settlement. Marsh's CAPS (Claims Accounting and Preparation Services) group uses forensic accounting practices to thoroughly quantify the full cost of a claim.
Marsh can help prepare and "package" the claim to take advantage of the most beneficial interpretation of the policy language. We can identify and prepare claims under the sections of the policy most likely to provide coverage.
Marsh can help identify the type of exposure. For instance, we can help determine if a first party or third party claim should be brought or if the claim is a workers' compensation or liability claim. If the claim reaches litigation, Marsh can help identify and select coverage counsel.
Remediation- Develop criteria for selection of a remediation contractor
- Obtain referrals for remediation contractor, hygienist and certified labs
In the event that remedial action is needed to mitigate a problem, Marsh can help develop selection criteria and guidelines to choose a remediation contractor. In addition, we can assist with referrals to pre-qualified remediation contractors.
Risk Transfer Mechanisms- Develop a manuscript policy to include new coverage
- Identify alternative coverages and risk transfer solutions
Marsh's expertise as an insurance broker may also provide protection for a college or university. "There are no standard policy forms that respond to a mold exposure," says Ursula Knowles, Vice President in Marsh's Environmental Practice. "Insureds must make certain that the necessary modifications have been made to ensure that they have adequate coverage." Marsh's extensive experience in manuscripting and placing policies can prove invaluable to our clients in transferring the risks associated with mold exposures.
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