It happens all the time – a water leak in a house or other building goes unnoticed for some period of time, and then mold appears. Insurance policies generally provide coverage to repair water damage, provided other policy conditions are met; however, most policies also contain very strongly worded exclusions for mold, fungus and the like. And these exclusions are routinely upheld by courts. Why? In most states, the courts have said that absent any state statutes to the contrary, insurance companies have the right to limit their liability and to write policies with narrow coverage. Absent any ambiguities, those policy contracts are generally enforced as written. Courts typically try to shy away from rewriting insurance policies using judicial interpretation or the use of strained language.
But, you may ask yourself, the mold was caused by the water leak, and the water leak is a covered event, so my policy will cover the mold damage, right? Unfortunately, that is probably incorrect. Most policies that contain a mold or fungus exclusion usually go even further, and specifically provide that any loss due to mold is not insured, regardless of the cause, and even if other causes (covered or not) acted concurrently to produce the loss. For example, water leaks from your roof and damages your hardwood floors. The damage to your floors is likely covered. But let's say before the water leak is discovered, the leak also causes mold to begin to grow on your walls. That mold damage will be excluded under most mold exclusions.
How about testing or cleaning mold – surely insurance policies will provide coverage for that, right? Alas, no. Remediation, testing and monitoring are almost always also excluded from coverage. The likely result is that any claim for damages caused by or consisting of mold or fungus, including remediation of mold or fungus, will be denied.
So, to the extent your insurance claim is based on mold, and to the extent your damages stem from mold, these claims and damages will likely fall outside of the insurance contract terms, and thus, are excluded. Because most insurance policies contain similar robust mold/fungus exclusions, and because courts have upheld such language, building owners should consider seeking policy endorsements that specifically provide coverage for mold, to avoid an unfortunate surprise when your water leak blossoms into something more.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.