When the Wrong Mold Is In the Wrong Place

By Richard A. McGrath, CIC, LIA

Don’t be alarmed, but there’s mold in your home.

There’s mold in your neighbor’s home, too.  It’s also in your hospital, the pre-school where your children play and the White House.

In other words, mold is everywhere and eliminating it is impossible.  There are more than 100,000 species of mold.  But there’s mold that’s beneficial, such as the mold that led to penicillin and the mold that turns milk to cheese; mold that does little or no harm, and mold that can cause serious health issues and wreak havoc on your home.

It’s the last group that has caused insurance carriers to take notice, as mold has become a major source of claims, not only in the warm, humid breeding grounds of the southern states, but here in Massachusetts.

Some molds produce mycotoxins, which can cause allergic reactions.  Mold can also weaken a person’s immune system, leading to infections and other health issues, and the fungus Aspergillis can produce a dangerous carcinogen called Aflaxotoxin.  There have also been cases of “sick building syndrome,” in which mold spreads throughout commercial buildings through ventilations systems and causes widespread illness.

However, while mold should be taken seriously, in most cases it does not pose a major health threat.  Sometimes the danger is overstated by aggressive attorneys seeking large settlements and, in at least one case, by scientists.

Reliable research is still needed about the health impact of mold.  Some have claimed that mold can cause health issues ranging from memory loss to pulmonary hemorrhage, but there is no proof that mold is a cause of these ailments, according to the Centers for Disease Control (CDC).

Discredited Study

Scientists for the CDC studied the spread of an illness in a small group of children in Cleveland in 1995 and concluded that mold could have been the cause.  The study was widely cited by media, in health guides and in Congressional testimony, and it was frequently cited by trial lawyers involved in lawsuits based on mold damage.

Concerns were expressed about the validity of the study, so the CDC brought in two panels of experts in 1999 to review the initial group’s findings.  The panels discredited the initial study, but it was still widely used in court even after that.

The insurance industry began paying more attention after a $32 million award in 2001 resulting from Ballard v. Fire Insurance Exchange.  The jury award, which was later reduced to $4 million, resulted from mold issues in a 7,400-square-foot home purchased in a foreclosure sale for $275,000.  The insurer paid some initial claims, and the award was based not on the mold, but on “bad faith” created when an adjuster lied to plaintiff Melinda Ballard.

Regardless, many more claims followed, alleging bodily injury or property damage caused by mold.  With plaintiff’s attorneys concluding that “mold is gold,” mold-related claims increased by as much as 1,000% in some areas, according to the International Risk Management Institute (IRMI).

In addition, an entirely new industry was created.  While there were no specialized mold remediation companies as recently as the 1990s, today there are more than 10,000, according to the IRMI.

With mold-related claims rising, the Insurance Services Office (ISO) and the American Association of Insurance Services (AAIS) created standard endorsements for homeowner’s insurance that restrict or, in some cases, even eliminate coverage for mold damage.

While some insurers have responded by completely eliminating coverage for mold damage, most policies will cover remediation of mold, wet rot and other damages that result from covered causes, but not when it results from ongoing conditions.  If you neglect to fix a problem that’s causing mold, it likely will not be covered, but if mold results from a sudden leak in your plumbing, storm damage or some other cause and you address the problem quickly, it most likely will be covered.

What to Do

To avoid having to pay out of pocket for mold damage, be certain to read your homeowner’s insurance policy carefully and talk to your agent about closing any gaps.  Also, try to prevent mold damage by addressing water damage quickly.

While there are plenty of do-it-yourself testing kits for mold, don’t bother with them.  If you smell mold, you have mold.  Mold levels vary greatly from one day to another and home kits don’t distinguish between various types of mold.

Minor mold growth can be cleaned with soap and water, but use soap that does not contain ammonia.  Disinfecting the cleaned area with a mixture of a half cup to a cup of bleach per gallon of water can help keep mold from recurring.  Keep in mind that if there is moisture or humidity in the area, mold will return, so add an exhaust fan or run a dehumidifier if necessary.

If you have a more severe mold problem, hire a contractor to remediate your mold.  Be certain to hire a firm that is reputable and experienced.  Check references and make certain that the firm has mold remediation insurance.  Ask your insurance agent for advice and work with your agent to file a claim, assuming you are covered for the remediation.

Above all, don’t panic.  Mold has always been with us and always will be with us.

Richard A. McGrath, CIC, LIA is President and CEO of McGrath Insurance Group, Inc. of Sturbridge, Mass.  He can be reached at rmcgrath@mcgrathinsurance.com.

This article is written for informational purposes only and should not be construed as providing legal advice.