Deborah Little

Monday, 30 September 2002 09:31

Breaking the mold

Mold is one of the biggest worries businesses today face, with recent multimillion dollar verdicts causing insurance premiums to skyrocket and businesses to reassess their insurance coverage.

The case that shocked the insurance industry was Ballard v. Fire Insurance Co., in which a Texas family was awarded $32 million on a bad faith claim. The largest personal injury verdict to date is a $2.7 million award to a family in Sacramento.

Although debate rages as to whether studies have effectively established a cause and effect relationship between exposure to mold and human illness, this uncertainty has not impeded a flood of lawsuits. Virtually anyone with a connection to a building is at risk of becoming a defendant if the building becomes contaminated with mold. And because mold can be caused by simple things like a leaky roof or pipe, any building that is not properly maintained is at risk.

A primary concern for businesses has become whether they have insurance coverage for mold claims. Insurers are relying on a number of common exclusions in policies to deny coverage for mold claims, including:

* The pollution exclusion, which typically excludes coverage for bodily injury or property damage arising out of the release of pollutants. Insurers have begun to add mold to the list of defined pollutants.

* The mold exclusion, which excludes from coverage damage caused by mold. However, if mold is part of an ensuing loss caused by water, it may be covered.

Large verdicts like Ballard hurt businesses because insurers are responding by raising premiums and restricting coverage. However, the specter of bad faith verdicts may be the main weapon left to force insurers to provide coverage.

Of course, the well-being of its employees and tenants is any good business's primary concern. To assure their well-being, as well as the business's:

* Stop mold before it starts by aggressively responding to water or moisture problems when they arise.

* Examine your insurance policies to determine if you have adequate protection.

* Be prepared with mold audits and a mold response plan in order to attempt to negotiate additional coverage, if necessary, at affordable rates. Deborah A. Little is a shareholder with the law firm of Buchanan Ingersoll and is co-chair of the firm's Toxic Mold Response Team. Reach her at