Facts: Homeowner had water damage to their home this resulted in the growth of mold in the property.
The home-owner's made a first party claim against their home owners insurance policy for the cost of removing the mold (mold remediation) and repairing the property.
The insurance company denied coverage for this damage under the general pollution exclusion.
Issue: Can the insurance company be held responsible for payment to repair/remove mold damage?
Discussion: The litigation involving mold remediation is similar to asbestos litigation. The insurance industries response to mold remediation is to place exclusions in insurance policies to eliminate or reduce coverage for mold damage. Mold remediation claims involve the penetration of water infiltration or humidity in enclosed areas. Thus, several exclusions may apply.
- pollution exclusion
- business risk exclusion
- work product exclusions
The Pollution Exclusion: Mold remediation claims appear to be similar to environmental claims. However, courts have held that mold remediation is not the type of discharge, dispersal, or release of pollutants intended to be excluded under a pollution exclusion originally developed in response to widespread industrial environmental contamination.
The Business Risk Exclusion: "Business risk" and "work product" exclusions deal with the hesitancy of insurers to cover the business risks or defective work or products of their insureds. That is, if your own work caused the problem, you may not be covered.
In many states, there is a right to make a claim under your homeowner’s policy for coverage even for defective workmanship or products incorporated into the structure.
Insurance Industry Response: Due to the uncertainties as to the applicability of the pollution exclusion and "business risk" exclusions to these types of claims, the insurance industry is adding endorsements to liability policies to absolutely exclude, or to severely reduce the coverage available for mold remediation claims to commercial insureds.
Conclusion: Endorsements or revisions to liability policies may eliminate coverage for mold remediation or similarly sick building exposures. As the “insured”, you should be on the lookout for such endorsements to you policy at the time of renewal. While coverage may be available, the amount and premium may increase.