3 Ways Liability Insurers Avoid Covering Mold Claims

3/4/2022 (Permalink)

Insurance companies continue to create new ways to avoid CGL coverage for mold insurance claims.

Liability Insurers Avoid Covering Mold Claims In Three Ways.

Mold has been receiving a lot of media attention lately, and an unprecedented number of mold-related lawsuits have been filed in recent years. Insurance companies have responded to the sudden increase in mold insurance claims by finding new ways to exclude mold coverage from commercial general liability policies.

1. Exclude Mold Claims Under Existing Policy Exclusions

When mold claim numbers first started to spike, liability insurers attempted to deny coverage for mold-exposure claims under two exclusions that were standard at the time: the Pollution exclusion and the Business Risk exclusion. Denials under these exclusions were questionable at best and did not hold up well on appeal: Mold infestations don’t quite fit within the commonly understood framework of either type of exclusion.

2. Add Specific Exclusions for Mold Claims to Policy Terms

It soon became clear that the Pollution and Business Risk exclusions were not reliable grounds for denying mold insurance claims. Consequently, insurance companies began adding new endorsements to CGL policies that did specifically exclude mold coverage. A common example is the “Fungi or Bacteria Exclusion,” which specifically excludes coverage for mold remediation costs and mold exposure claims. Another example is the “Limited Fungi or Bacteria Coverage” endorsement, which specifies a separate, often very small, coverage limit for mold-related claims.

3. Offer Mold Coverage as a Separate Policy Type

In addition to adding mold-specific exclusions to their CGL policies, some insurance companies began offering pollution legal liability policies, which specifically include mold within the definition of “pollutant.” Companies that offer both PLL and CGL policies usually have policy language stating that any claim that could be covered under the PLL policies is completely excluded from coverage under the CGL policies.

Insurance companies continue to create new ways to avoid CGL coverage for mold insurance claims. Erie, CO, contractors and business owners should carefully review all policy changes and discuss any concerns with their insurance providers.