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Toxic Mold Remediation Case Study:
The importance of reading your property insurance
policy CASE STUDY Page
Here is a case study about
toxic mold remediation to better understand exclusions and insurance policy
variables.
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.
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pollution exclusion
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business risk exclusion
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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.
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