Mold damage is nothing new. It predates people, homes and the insurance policies designed to protect them. That’s one reason why it is difficult to write policies that effectively exclude all coverage resulting from mold damage. Just as you can’t exclude the smoke damage that accompanies a fire, insurance companies find it increasingly difficult to separate water damage from mold damage. As a result, they are attempting to specify the remediation efforts through testing or cap coverage limits. Although this may prove temporarily successful, in the long term it will be the customer and the court system that will best confirm the wisdom of this approach. Several coverage options that are being attempted are the following:
1. The mold exclusion
This is where the insurance company denies all mold coverage on the basis that mold results from a lack of proper maintenance and is thereby not a catastrophic event. While it may be one of the most popular options, it may be the most problematic. Although some mold claims are undeniably the result of neglect or poor maintenance, there are circumstances where the homeowner may not be aware of the damage and had no opportunity to prevent it.
2. The mold cap
There is nothing new about insurance caps. They’ve been used for water damage, fire damage and just about every other type of insurance claim that occurs. The difference in this case is that the limits are often far less than the actual costs incurred. Ranging from $1,000 to $5,000, these may cover little more than pre- and post testing reports.
3. Maintenance vs. resulting claim
Although a far more realistic option, this option requires the insurance company to constantly determine whether a mold loss was the result of neglect by the customer or whether it was the result of an otherwise covered loss. In the case of neglect, the claim would typically be denied and no claim funds would be paid. If it were determined to be resulting damage, the claim would be covered, but might be subject to a claim cap that is typically the same for water damage. In this option, the insurance company judges each claim separately. While it may be nice to allow for a custom approach, this option also breeds severe liability issues for the insurance company when the wrong judgment is rendered.
4. Total mold coverage, but no repair coverage
Realizing that mold is often the result of improper building design or other neglect that may or may not be the responsibility of the homeowner, several insurance companies are choosing to only cover the mold remediation rather than the repairs necessary to prevent it. And while it has never been the responsibility of the insurance company to cover repairs such as flashing, landscaping grading or other mold creating problems, insurance companies are becoming increasingly strict on the interpretation of their costs. In the case of a vapor barrier issue that results in mold damage, an insurance company with this approach might cover the basic remediation costs such as containment and HEPA machines, but stop short of everything else. This would leave the customer to pay for the replacement of the vapor barrier, removal and replacement of drywall, and replacement of the insulation. Their justification in this situation might be that the customer needed to make the repair anyway and would therefore need to remove the drywall, regardless of whether it was contaminated or not, in order to get to the vapor barrier.
5. Total mold coverage
Although the most expensive of all coverage options for the insurance company, it is also the most customer friendly option. Still, as a requirement, these policies will often require the homeowner to seek the advice of a certified industrial hygienist for testing and use only a qualified remediation contractor with a certified microbial remediation supervisor, an applied microbial remediation technician, or equivalent accredited personnel on staff. Regardless of which option the insurance company chooses, it is important to remember that these coverage options will continue to evolve as mold remediation changes. Additionally, by continuing to foster education and a high level of integrity, mold remediation companies can begin to show insurance companies why remediation efforts and their costs can lead to better business in the long run.
Keith E. Desserich is co-founder and president of RestorAid Restoration, with national headquarters in Cincinnati, Ohio. He has over a decade of experience in the cleaning, restoration and remodeling industry providing a wide range of restoration and consultation services. He holds certification in fire and water damage restoration and is a CMRS. For more information, please visit www.restoraid.com or e-mail him at firstname.lastname@example.org.
Reprinted with permission from the August 2003 issue of Cleaning & Restoration Association of Specialists in Cleaning & Restoration ©2003.