What Is Toxic Mold?
Toxic molds are living organisms whose spores emit compounds that may damage property and cause illness. One such mold, Stachybotrys chartarum, also known as black mold, has been found in all 50 states and thrives in wet environments. Leaky plumbing, leaking roofs, burst pipes, and other water-related problems can create the humid conditions conducive to the growth of mold. Even energy-efficient construction practices can contribute to mold growth--tight seals and insulation can make it difficult to get rid of moisture that is trapped in a building.
According to the Insurance Information Institute, toxic mold claims cost insurers millions of dollars each year. As a result, insurance companies have begun to offset these losses by excluding or limiting coverage, raising premiums, or even refusing to write policies in areas at high risk for mold-related claims.
Is Toxic Mold Dangerous?
Some researchers say that the presence of particular strains of toxic mold, like Stachybotrys chartarum, can cause serious medical problems, such as pulmonary hemorrhage and memory loss. However, according to the Centers for Disease Control, a causal link between toxic mold and these medical conditions has not yet been proven.
Even mold that does not contain mycotoxins (toxic substances) has been linked to respiratory ailments such as asthma and hay fever in certain sensitive individuals. And in addition to medical problems, mold can cause a condition known as "dry rot," which when left untreated can result in severe structural damage to a home or other building.
Is Mold Damage Covered By Insurance?
Standard homeowners insurance policies (HO-3) specifically exclude coverage for damage caused by mold. However, if mold grows as a result of a covered peril, such as windstorm damage to a roof, the resulting loss is covered. Under a standard policy, mold damage that results from a noncovered peril, such as a slow leak from a pipe or roof, is considered a home maintenance problem and is thus excluded from coverage. Mold testing and remediation services are also excluded from coverage. As for commercial insurers, many are following the homeowners insurance industry's lead by adding mold exclusions to their property and casualty insurance policies.
Tip: Homeowners with policies that exclude or limit coverage for mold damage may still be able to obtain additional protection by purchasing an endorsement or adding a rider onto their policy. Commercial property owners may be able to obtain mold coverage through a separate environmental policy. Care is required, however, when shopping for such an endorsement. One standard form available for use with homeowners policies, "Limited Fungi, Wet or Dry Rot or Bacteria Coverage," limits the amount recoverable for losses that are already covered by the policy instead of adding to the perils covered.
Recent Toxic Mold Developments
As a result of the recent influx of toxic mold claims, some homeowners insurance companies have begun to exclude coverage for any type of mold damage, regardless of whether it is the result of a covered peril. Others have decided to continue to cover mold damage that results from a covered peril, but only up to a certain limit (e.g., $10,000).
In addition, many companies that offer homeowners insurance have begun to raise their premiums in response to the rise in mold damage claims. In states with a significant number of toxic mold claims, such as Texas, Florida, and California, homeowners have seen a dramatic increase in their premiums, making it difficult for many to obtain affordable coverage. Some insurers have even stopped writing new policies or have refused to renew existing policies in states where mold-related claims are prevalent.
And the insurance industry is not alone in dealing with the fallout from toxic mold damage claims. Builders, contractors, property owners, and real estate agents have found themselves being held liable for ignoring and/or failing to address toxic mold problems in homes and commercial properties.
Are There Federal Regulations or Standards For Toxic Mold?
Currently, there are no federal laws or regulations that set limits or standards as to what types of mold are harmful or what levels of exposure to mold are unhealthy.
Tip: Even though there are no federal regulations or standards for toxic mold, the U.S. Environmental Protection Agency (EPA) does publish guidelines on how to deal with mold problems. Visit the EPA website for more information. Builders and commercial property owners can also consult industry trade groups and associations for information on dealing with toxic mold.
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