It was only a few years ago that “mold” was expected to be the next “asbestos.” There were a few claims involving mold that received a fair amount of publicity. In litigation circles, attorneys used the phrase “mold is gold,” referring to the potential windfall awards of class action suits.

As a result, many insurance companies responded by going out of their way to ex­clude the mold exposure for any coverage. This was due to the perceived danger of lofty bodily injury lawsuits. In those days, the word “toxic” was even used to describe just about any form of mold.

In reality, there is little scientific evidence linking mild mold exposures to fatal ail­ments. In addition, litigation results for plaintiffs alleging “mold poisoning” were not as successful as the previous predictions for the “mold is gold” hysteria.

So with these developments, certain in­surance companies – specifically those that provide environmental insurance – have en­tertained adding mold liability back into their policies. For these companies, the cov­erage is now part of their pollution policies and can either be written into the policy form or added as an endorsement.

Mold Exposures

Wherever water or moisture exists, there is the potential for mold. Among the most common places to find mold are spots that develop condensation. This can including pre-construction prevention as well as construction and post-construction management practices;

• The evaluation of higher risk areas or projects.

In addition, mold plans also need to include the evaluation of hired contractors and requirements of their mold endorsed pollution policies. A professional plan, one that will be received well by in­surance underwriters, can be developed by hired consultants or specialists. However, some environmental insurance companies can assist an insured in developing and implementing such a plan. This is a service that is incorporated in the premium paid.

Mold Exposure Insurance

As mentioned previously, the mold coverage can be made part of a pollution policy. (There are no mold-only policies.) For fa­cilities (hotels, manufacturing facilities, warehouses, schools, office/apartment buildings – anything with an address), the pollution coverage is usually called a Pollution Legal Liability (PLL) or an Environmental Impairment Liability (EIL) policy. For contrac­tors and consultants doing work at other locations, the coverage is a Contractor’s Pollution Liability (CPL) policy.

Under most pollution policies, coverage is afforded for prop­erty damage, bodily injury, clean up costs (first and third party) and defense cost for virtually every type of risk. It is imperative that coverage be negotiated with these four coverage parts in mind. Furthermore, be sure such coverage is not reduced by any subsequent exclusionary endorsements.

Ideally, an insured should avoid these coverage restrictions:

• The application of sub limits to the mold coverage;

• The application of Self Insured Retentions v. Deductibles;

• May exclude Bodily Injury;

• Exterior Insulation Finishing Systems exclusions;

• Habitational exclusions;

• May apply Property Damage exclusions to work performed (for contractors);

• May exclude construction defect (for contractors);

• May exclude improper or inadequate maintenance.

The evaluation by an underwriter will determine if the mold coverage is added to the pollution policy and, if so, how much coverage – the limit of liability – will be offered. The evaluation typically includes a review of the following:

a) General Liability loss history – if there has been no previous pollution policy, water-related claims would normally appear in the general liability information; b) Water Intrusion Management Plan or a ‘mold plan,’ as described above; c) The completion of a supplemental ‘Mold’ application.

The limit of insurance for mold liability is normally a part of the limits of liability for the pollution policy. Usually, the limits for these policies are $1,000,000 to $5,000,000 and can occasionally reach $25,000,000 or even higher.

However, the good news is that with a little work by the in­sured, the prevalent exposure of mold can indeed be insured at fairly reasonable terms and rates. ❑

Tim Farrell is vice-president of New Day Underwriting Man­agers in Bordentown, NJ, a specialty intermediary for insurance agents and brokers with expertise in environmental insurance, en­vironmental risk management and construction related profes­sional liability. He can be reached at 609.298.3516 ext 103 or tim.farrell@newdayunderwriting.com. Learn more about envi­ronmental and construction-related professional liability at www.newdayunderwriting.com.