| The single most important article you may read this year | | John Larkin | | If you’re doing business in the water softening, water filtration, and/or water distribution industry, it is only a matter of time before you or someone you know is affected by this recent and serious phenomenon. Whether you’re a dealer, retailer, manufacturer, or supplier you are at risk.
Insurance companies are excluding coverage for pollution, and that includes mold. Many insurance policies state "This insurance does not apply to bodily injury or property damage arising out of the actual, alleged, or threatened discharge, disposal, release, or escape of pollutants at or from the premises owned, rented, or occupied by the named insured. And the insurance does not apply to any loss, cost, or expense arising out of governmental direction or request from the named insured to test for, monitor, clean-up, remove, contain, treat, detoxify, or neutralize pollutants."
Mold claims costs money… a great deal of money. A $32-million dollar judgement in Texas against an insurance company for not properly adjusting a water-damage claim, a $20 million dollar lawsuit by a well-known entertainer against his insurer, another multimillion dollar lawsuit by a famed "whistleblower". These examples are only a sample of the roughly 16,000 lawsuits already filed alleging mold damage to homes and businesses.
Homes are so well built these days that they cannot "breathe" or dry out when moisture is introduced to an area. Once wet, certain building materials can become a home for mold if not dried out properly. Under the right conditions, certain kinds of spores called mycotoxins can be released into the air, and inhaled by the inhabitants. Depending on which "expert" you talk to, everything from minor allergic reactions to pulmonary hemorrhage and memory loss can occur.
Since the presence of mold often releases spores into the internal environment, claims alleging damage and/or negligence for those who cause it are on the rise. These claims are testing the insurance industry and the court system as to just how the pollution exclusion applies to bodily injury or property damage from mold.
Courts seem hesitant to apply the standard Insurance Services Office, Inc. (ISO), pollution exclusion to such damage or injury largely on the theory that mold may not constitute the type of "pollutant" to which the exclusion is directed. Nor is indoor contamination regarded as the type of environmental dispersal or release to which the exclusion traditionally applies.
The bottom line is that water damage to a property is usually not a result of pollution, so that it is not a release, discharge, or dispersal of a pollutant. As such, the pollution exclusion in a general liability policy should not apply. Therefore, coverage for repairing the alleged building damage will come from your insurer. With the new exclusion for mold, you will not have coverage.
However, the argument for applicability of the cleanup provision of the standard pollution clause should suffer from the same weakness as the argument for applying the general provision of the exclusion: the
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Sat, Jul 31, 2010
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Water Quality Association
International Headquarters & Laboratory
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