Section 4.43 Mold and Exterior Insulation Finishing Systems Exclusions (EIFS)

• Library: Construction Law 2016 Supp

C. (§4.43) Mold and Exterior Insulation Finishing Systems Exclusions (EIFS)

Since 2000, there has been an “awareness explosion” on the effects of moisture in buildings, whether they are homes, office buildings, schools, or manufacturing facilities. Many are considering the mold-related claims that have resulted from these conditions as the “next asbestos.” Because of this existing climate, insurers are responding to these claims by imposing mold and exterior insulation finishing systems (EIFS) exclusions on applicable liability policies.

Mold is a generic term used by many to cover many different types of living organisms. Scientists have categorized these organisms in a kingdom known as Fungi. Some experts suggest that there may be as many as 300,000 species of mold that exist naturally. Of these species, some of them are edible (e.g., mushrooms, yeast for making bread and beer, and medicines derived from fungi). There are still others that produce mycotoxins, which are carcinogenic.

In the midst of this diversity, mold affects individuals differently. Some are unaffected, while others experience a wide range of allergic reactions. Furthermore, science has lagged behind the rising awareness to mold, with an ongoing debate on whether mold is a real risk to human health. Some consider the mold frenzy to be pure hysteria, while some health professionals consider it very serious, especially in light of the air-tightness quality that has been sought in buildings over the last 30 years.

Before 1990, very few mold-related claims were made. But since then there have been an ever-increasing number of these claims. The following ingredients seem to be the recipe for this increase:

Increasing media attention

Heightened public awareness

Enactment of laws and regulations to deal with mold

Aggressive plaintiff’s bar

Construction methods to ensure building energy efficiency

Court successes

There are two cases that are representative of these mold-related claims, both negatively impacting the insurance industry’s willingness to insure these claims any longer. In May 2001, the Delaware Supreme Court upheld the $1 million verdict against an apartment owner by a tenant alleging bodily injuries because of mold exposure. New Haverford P’ship v. Stroot, 772 A.2d 792 (Del. 2001). A month later, another plaintiff’s homeowners insurer was ordered to pay $32,100,000 to cover property damage, emotional distress, punitive damages, and legal fees in Ballard v. Fire Insurance Exchang...