Property damage caused by mold can be a real problem—especially here in Florida. Florida’s humid climate and often rainy weather create the perfect petri dish for the growth of toxic and damaging mold. Fortunately, most homeowner’s insurance policies provide coverage for the damage caused to your property by mold. Unfortunately, the coverage provided by most policies is extremely limited. Understanding the nuances of mold coverage in homeowners’ insurance policies is crucial for effectively managing risks and expenses associated with mold damage. Here’s a detailed look at the limitations and considerations surrounding mold coverage in homeowners’ insurance.
Up until a few years ago, damage caused by mold was covered under Coverage A of your homeowner’s insurance policy. Coverage A of your policy provides coverage to the main structure and sets forth a policy limit, which, in theory, is related to the replacement cost of your entire home. A few years ago, the insurance industry lobbied for and was allowed to alter their policies to include the following language:
Fungi, Wet or Dry Rot, Yeast or Bacteria
a. We will pay up to $10,000 for:
- The total of all loss payable under Section I – Property Coverages caused by “fungi”, wet or dry rot, yeast or bacteria;
- The cost to remove “fungi”, wet or dry rot, yeast, or bacteria from property covered under Section I – Property Coverages;
- The cost to tear out and replace any part of the building or other covered property as needed to gain access to the “fungi”, wet or dry rot, yeast or bacteria; and
- The cost of testing of air or property to confirm the absence, presence or level of “fungi”, wet or dry rot, yeast or bacteria; whether performed prior to, during or after removal, repair, restoration or replacement.
- The cost of such testing will be provided only to the extent that there is a reason to believe that there is the presence of “fungi,” wet or dry rot, yeast, or bacteria.
Now – what does all that mean? There are two kickers to this policy language. First, no matter how catastrophic your damage is or how high the cost to repair – your policy will only provide coverage for up to $10,000 for these repairs. Secondly, the insurance company can deduct from this limit the amount the insurance company spent initially investigating this loss! In other words, if mold caused $50,000 worth of damage to your home and, upon contacting the insurance company, the carrier spends $2,500 investigating the existence of the mold damage and calculating the amount of the loss, you would only be provided coverage for $7,500 to repair your home ($10,000 coverage minus $2,500 investigation expense incurred by carrier). You would then be on the hook for the remaining cost of repairing your property.
General Exclusions and Limitations
Standard Exclusions
- Explanation: Many standard homeowners’ insurance policies exclude mold damage outright. This means that any claims for mold-related issues may not be covered unless specific coverage is added.
- Common Exclusions: Policies often exclude coverage for mold resulting from long-term leaks, humidity, or maintenance issues. Mold that develops from neglected water damage may also not be covered.
Limited Coverage for Mold Damage
- Explanation: Some policies offer limited coverage for mold damage, but this coverage is typically subject to specific conditions and limitations.
- Coverage Limits: There may be a cap on the amount payable for mold remediation, which can be as low as $1,000 to $10,000, depending on the policy. This cap often includes both remediation and related expenses, such as relocation during cleanup.
Situations Where Mold May Be Covered
Sudden and Accidental Events
- Explanation: Mold damage resulting from sudden and accidental events, such as a burst pipe or a roof leak caused by a covered peril (like a storm), may be covered.
- Key Considerations: The policy may cover the mold cleanup and repair of the source of water damage if the event is covered under the policy.
Endorsements and Add-Ons
- Explanation: Homeowners can sometimes purchase additional mold coverage or endorsements to cover mold-related damages not included in the standard policy.
- Types of Coverage: These add-ons can vary significantly in terms of the extent of coverage and the situations they cover. It’s important to understand the terms and conditions of any endorsements.
Common Issues and Challenges with Mold Claims
Proving the Cause of Mold Damage
- Explanation: Insurance companies often require proof that mold resulted from a covered peril. This can be challenging, especially if the mold developed over time.
- Evidence Needed: Policyholders may need to provide evidence such as photos, expert reports, and maintenance records to support their claim.
Disputes Over Coverage and Limits
- Explanation: Disputes can arise over whether mold damage falls within the policy’s covered perils and whether the coverage limits are adequate for the remediation required.
- Negotiation and Appeals: Policyholders may need to negotiate with the insurance company or appeal a denial or insufficient payout.
- Seek Professional Help: Consult an attorney specializing in insurance disputes to explore your legal options.
Mold coverage in homeowners’ insurance policies is often more limited than many policyholders expect. While some mold damage may be covered, it typically depends on the cause and the specifics of the policy. Understanding the limitations and potential exclusions of your policy is essential for managing mold-related risks and ensuring adequate protection. Therefore, it is important to seek legal advice from an attorney with experience with water and mold claims to best protect your rights.