Mold-related claims can be one of the hardest types of claims to deal with. They are usually discovered years later, are probably excluded or limited in coverage by insurance companies, and they are very expensive to deal with.
The following example comes from a real case involving a restoration contractor. Over the next two posts, we are going to share the details of the claim, the type of insurance involved, and some advice to help your restoration company in the future.
In 2009, a restoration contractor repaired a tree-damaged porch roof. The work was finished without incident and the contractor didn't work on the home itself. The home then sold in 2013 to a family that 12 months later claimed was infested with mold, uninhabitable, and were sick as a result of it.
The family then sought to recover their loss by suing:
The lender who provided financing on the home for not preforming a proper evaluation.
The home inspector for missing the mold during his inspection.
The restoration contractor who repaired the roof.
In their lawsuit they sought more than $1 million in damages from the property damages, bodily injury and pain and suffering caused by the mold.
A general liability insurance policy covers restoration contractors from property damage and bodily inflicted upon others due to negligence. There are essentially two coverage triggers in a general liability policy. The coverage trigger determines which insurance policy applies to a loss. We will only cover the two main coverage triggers here, but just know that when a policy is actually triggered has been debated over many, many court cases.
Occurrence Form: An occurrence policy pays for losses for incidents that happen during the policy period, including continuous and repeated exposure to the same accident. Most general liability policies are written on this type of policy form.
Claims-Made Form: A claims-made policy will pay for losses where the incident is discovered and reported during the current policy period and occurred after the retroactive date stated within the policy. Specialty policies like pollution liability will sometime be written on this type of policy form.
The difference in these types of policies is very important for restoration contractors, especially if you decide to move one of your coverages from a claims-made policy to an occurrence form. Done improperly and you risk losing any insurance coverage you had for claims from incidents that occurred prior to purchasing the occurrence form policy. (This is where working with a specialty agent is extremely valuable.)
In our specific case here, the agent handled the transition between policies properly. The problem, as we will see, was determining which policy should pay for the damages.