Concern about toxic mold is increasing with heightened public awareness that exposure can cause serious health problems- and even death. However, all molds, toxic or not, should be of concern when they persist at elevated levels indoors.

Mold affects both the home and workplace environment, compromising the structural integrity of buildings and the health of those inside. Recent claim settlements have reached high into the millions, the most notorious case being a $32 Million settlement in Austin, Texas, which was later reduced to a $4 million verdict. Fear of toxic mold has created a storm of environmental damage claims with unprecedented frequency and severity.

Damages from toxic mold have created unprecedented professional errors and omissions loss exposure for insurance and risk management advisors. Toxic mold claims are much more frequent than either asbestos or superfund claims. Insurance companies have taken the lessons learned from their dismal experience with asbestos and superfund claims and have moved proactively to exclude mold claims from all property and liability policies. To completely shut the door on their exposure to toxic mold claims, the professional liability underwriters are adding mold and even new pollution “related” damage exclusions to insurance agents’ professional liability policies. With insurance available to cover environmental damages including covering mold as a pollutant on commercial accounts and the availability of buy backs for mold damages on homeowners insurance policies, the professional liability underwriters wisely did not want to become the insurers of last resort for the mold and pollution loss exposures the risk advisors were negligently leaving unaddressed in their customer base.

The new mold and environmental related damage exclusions on the risk advisor’s professional liability policies are unusually onerous. Not only do they exclude claims for current activities, they exclude everything the advisor has done in the past that leads to an uninsured claim today. The professional liability insurance policies purchased by insurance agents, brokers and consultants cover the claims made against them during the policy period for professional errors and omissions. Each new professional liability policy purchased usually provides coverage for the new errors, acts and omissions made during the policy period, plus all of the prior acts of the insured. Therefore the new professional liability exclusions will also exclude everything the advisor has ever done in the past to leave a client unprotected for environmental and mold losses. Risk advisors can avoid potentially uninsured professional liability claims by following a five-step protocol that is designed to provide a high degree of professional service to the client and eliminate errors and omission claims from the unnecessarily uninsured environmental and mold losses of the client. Implementing the five-step process today can help erase the professional liability loss exposures from the past as well.

Toxic Mold Has Insurance Companies Running For Cover

The explosive growth in toxic mold damage claims in 2001-2002 has the entire property and liability insurance industry running for cover. As tens of thousands of property owners seek insurance recoveries to pay for expensive mold remediations, mold exclusions on new homeowners and property insurance policies are destined to force the transformation of many first party insurance claims into a new wave of liability claims against potentially liable parties. These property damage and personal injury liability claims will also likely be excluded by mold exclusions in the new liability insurance policies purchased by the defendants. Ultimately a significant number of these uninsured mold claims will find their way to the insurance advisors in the form of professional errors and omissions claims for leaving their clients uninsured for mold related damages. There is specialty environmental insurance and homeowner insurance to cover mold related damages available in the insurance market place. However insurance agents, insurance brokers, risk management consultants and lawyers that advise their clients on risk management issues have largely ignored these specialty insurance products in the past. The historic apathy of risk advisors towards environmental insurance in general and mold insurance products specifically, will leave tens of thousands of future mold damage claims unnecessarily uninsured.

Environmental Claims Journal

By: David J Dybdahl, CPCU, ARM, MBA
Senior Consultant, American Risk Management Resources Network

Steven J. Lemon
Attorney at Law, Jones Lemon Graham & Clancy