1. Mold A New Crisis for Insurers
The problem
Property exclusions
Why insurers are involved
Mold cases
The cost of mold claims
Why mold problems are developing
Role of the insurance adjuster
Future developments

2. The Problem Mold is everywhere 100,000 types of mold
Most mold is not harmful
Blue cheese
Penicillin
Toxic mold
Stachybotrys chartarum
Potential health effects
Internal bleeding
Skin irritation
Respiratory problems
Chronic fatigue

3. Property Exclusions Homeowners Policy
Coverage A Exclusion (pages 672-3)
We do not insure, however, for loss:
e. Any of the following:
(3) Smog, rust or other corrosion, mold, wet or dry rot
Coverage C – Named Perils
Does not include mold
Section I Exclusions (pages 674-5)
Water Damage, meaning:
(1) Flood, surface waters, etc.
(2) Water which backs up through sewers, etc.
(3)Water below the surface of the ground, etc.

4. Why Insurers are Involved
Homeowners Policy
Coverage A (Dwelling) does not exclude water damage from broken pipes
Coverage C (Personal Property) covers (page 674):
12. Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance

5. Why Insurers are Involved (2)
Water damage from frozen or broken water pipes is covered
If insurer refuses to pay for the damage caused by a covered water leak, it could be liable for subsequent damage

6. Additional Considerations
Losses must occur during the policy period
Losses must be reported promptly
Homeowners Policy
Section I Conditions (page 675)
Your Duties After Loss. In case of a loss to covered property, you must see that the following are done:
a. Give prompt notice to us or our agent

7. Mold Cases Ballard v. Farmers Insurance (Texas)
Water damage to floor of 22 room house
Farmers delayed settlement
Toxic mold developed
Family developed health problems
House eventually had to be bulldozed and rebuilt
$32 million verdict
$6 million actual damages
5 million mental anguish
12 million punitive damages
9 million legal fees
Ed McMahon lawsuit for $20 million

8. Mold Cases (2) Florida courthouse New York City apartment complex
Developed mold problems due to construction
Jury awarded over $40 million in personal injury claims
Over 200 Workers’ Compensation claims
New York City apartment complex
Tenants have filed suit for $10 billion
Erin Brockovich case
Used settlement from Pacific Gas & Electric to buy dream home in Agoura Hills
She and her daughter developed illnesses
She discovered the home was infested with toxic mold

9. The Cost of Mold Claims Farmers has paid $400 million in Texas
Allstate has paid $180 million in Texas
Insurance companies are raising rates 30-40%
Remediation and removal of mold is 10 times as expensive a regular removal and replacement
Average water leak claim in Texas in 1995 $4000
Currently $30,000-40,000

10. Why Mold Problems are Developing
New construction methods
Energy efficient homes with little air circulation
Faulty construction
New building materials
Assumed to be primarily a problem in humid climates
Increasing awareness of problem
Trial lawyers advertising
“Mold is gold”

11. Role of the Adjuster Adjuster must identify any covered damage
If mold is present, it would be covered unless adjuster can document that was present before the loss or not caused by the loss
Important to inspect water damage claims within 48 hours

12. Future Developments Insurers are trying to exclude or cap mold claims
Insurers are declining to write new policies on homes that have suffered water damage
Contractors are being sued over construction
Contractors are having problems obtaining liability coverage
Home sales could be affected