August 19, 2002

Clearwater, FL - Insurance companies seem to be running for cover over mold coverage.  Erin Brockovich, the legal crusader whose life story was made into a movie starring Julia Roberts, had filed a mold lawsuit against the builder of her California mansion.  Ed McMahon is seeking $20 million after mold allegedly took over their home and killing their family dog, Muffin. 

A year ago, Farmers Insurance Group settled a $32 million lawsuit filed by a Texas family that alleging that toxic mold had caused severe health problems. In this case the jury found that the insurer failed to pay for timely repairs needed for a water leak, which allowed mold to grow like a culture plate, making the house uninhabitable.

Since then, mold-related insurance claims in Texas have jumped about 600 percent, and homeowners' premiums have risen 20 percent.

Mold has grown abundantly not only in dilapidated public housing projects but also in plush housing such as the Residences at the Ritz-Carlton, occupied by the likes of Michael Jordan and Mia Hamm, where multimillion dollar condominiums have been attacked by an aggressive black mold that has made some residents sick. 

The problems insurance companies face in today's environment where mold has become a problem of pandemic proportion are multiple.  They are:

     *The lack of knowledgeable and professional building diagnostics organizations with extensive experience in identification of mold and bacteria and their proliferation and lack of ability for these firms to draft effective mold remediation specifications,

     *The lack of knowledgeable, educated and proficient environmental laboratories

     *The lack of effective mold and HVAC remediation contractors that are familiar with mold remediation techniques and/or protocols. 

     *The lack of industry guidelines for mold, bacteria, endotoxins and other indoor allergens.

     *The lack of medical sciences knowledge on the human affects of abundant mold

Remediation by PACS professionals

In a mold related claim the insurance carrier will typically contact their local resident engineering firm, geologist, industrial hygienist, or asbestos consultant to find out what they need to do to identify and fix the mold related problem in their clients home.  Many of these organizations have limited to no experience in this area.  Their are very few organizations that truly know what they are doing when it comes to identification and remediation of mold contaminated structures. 

Pure Air Control Services, a leading national provider of  indoor environmental services with experience in over 350 million square feet of building environments has been an expert witnesses in many mold claims.  "Greater than 80% of firms in the IAQ industry are clueless when it comes to mold investigation, identification and remediation" said Alan Wozniak, president of Pure Air Control Services.

Most insurance companies will exclude mold because it's a ubiquitous in nature. It's everywhere. An example of ubiquitous fungal propagules is the fungus and mildew growing in your homes bathroom shower curtain.  The organism can actually cause a disease called "Shower Curtain Disease."  Obviously, this is a homeowner housekeeping or maintenance issue and not a insurable claim.

Many insurance companies will cover mold as a result of water damage incidents e.g. a tree falls on your roof causing flooding and subsequent mold growth after the incident.

Another example, if you're on vacation and a plumbing line broke in your house pouring 1,000's of gallons in your home causing significant damage. The repair and replacement for the water line break is not a big deal if it's remediated quickly.  If the water is not effectively cleaned up within 24-48 hours after the incident the home has the potential to become a huge culture plate.  

"The resulting water damage on wetted drywall could include organisms such as Stachbotrys chartarum, a mycotoxin producing fungi or Pseudomonas sp. an aerobic, oxidase-positive, gram-negative bacillus that can create endotoxin production which is associated with many respiratory ailments and diseases related to water damaged indoor environments" said Dr. Rajiv Sahay, Laboratory Director at Pure Air Control Services

Insurance companies don't want to cover mold damage today due to the run on mold.  They're claiming that they lose money with these mold incidents and they want to limit the mold side of the equation. In fact, recently we have many seen insurance carriers exclude mold from their policy in its entirety.

If you read the fine print in your insurance policy you may find out that you are not be covered for mold damage resulting from a water incident. They may cover the water damage incident and resulting loss, but if mold has grown as a result of the incident you may not be covered. 

"In the worse case scenario, if mold and bacteria has taken over your home due to the lack of timeliness of the insurance agent, carrier and/or the restoration cleanup company the cost to fix a home environmentally will be 10 to 100 fold over conventional cleanup methods.  These mold remediation projects require full containment of the areas affected, require trained personnel in OSHA compliance procedures and a regimented remediation protocol in order to successfully remove the contamination" said Mr. Wozniak.

"In addition, performing a limited baseline test before and after remediation is essential to the projects successful completion.  If a baseline test is not performed the consumer will never know if the mold was effectively removed.  By then it may be too late", Mr. Wozniak said.

A restoration firm will blow dry water damaged carpets, dry the interstitial wall spaces with blowers, dehumidify the localized area or even rip out water damaged drywall, but if this is not done in a timely fashion this water nutrient for mold will allow these microorganisms to proliferate beyond the restoration firms ability and the insured pocketbook.  These once dormant microorganisms will now have the ability to thrive allowing once-insurable water related claim to grow into a  mold claim and a health-related claim. This is one for the attorneys to decide.

In this worse case scenario, if the insured doesn't cover the mold damaged home the client may need to vacate their home due to potential adverse health affects caused by the water damage incident.  Who's to pay?  The insured or the insurer?

This is a big problem. The industry lacks the professional building diagnostic personnel, environmental laboratories and building/mold remediation contractors to effectively assist the insurance companies dilemma.  At present, the industry is being regulated by the Insurance companies, Lenders and Lawyers (ILL).  That alone is enough to make one ILL. Until then, you will continue to see insurance companies running for cover, running from coverage and increasing premiums. 

For more information contact: 

Vik Ahuja @ 1-800-422-7873 ext 802