Toxic mold coverage tightens.

• Author: Morris, Barbara A.
• Position: Insurance

You've no doubt heard about "sick building syndrome." There's another, related worry these days for companies--toxic mold. More than 10,000 new cases have been reported in the U.S. and Canada in the past few years.

Escalating and often unpredictable costs of testing for and remediating toxic mold conditions, as well as the potential liability associated with their presence, represent financial exposures the insurance industry is becoming unwilling to assume. And while financial executives might think their company has no mold exposure, attorney David Anderson advises them to think again. While most mold claims are leveled against designers, contractors and others whose allegedly poor workmanship contributed to the damp conditions that promote mold, others have been targeted.

Anderson, senior counsel at Risk International Services, a Houston-based risk management consulting firm, cautions that building owners and even tenants could face mold claims if it is alleged that their negligence contributed to mold conditions, or that they knew about a problem and failed to adequately address it.

"Mold exposure is something large corporate clients have to consider in the overall scope of their risk management planning," says Alan Bressler, senior vice president in the environmental practice at the Atlanta office of Marsh Inc. High-profile and high-dollar mold claim awards have prompted insurers to act. The result, he says, is that available coverage is limited.

Bressler reports that many commercial property forms contain exclusionary language that precludes coverage for loss or damage caused by, or resulting from, a variety of culprits, including "fungus." Another, more recently seen exclusion precludes coverage if mold damage is the result of continuous or repeated seepage or leaking of water occurring over 14 days or more. Such exclusions have enabled commercial property insurers to rein in their exposure even further, Bressler points out.

Likewise, commercial general liability (CGL) insurers are moving to limit their potential exposure, reports Bill Wilson, director of the Big "I" Virtual University, an online education facility operated by the Alexandria, Va.-based Independent Insurance Agents & Brokers of America. While many CGL insurers had previously been silent on the mold issue, relying on the policy's pollution exclusion, this rationale has often proven faulty, notes Wilson; courts have frequently determined that mold is not a pollutant as...