In our last post, we began reviewing the insurance coverages involved in a $1,000,000 mold-related claim. A restoration contractor fixed a front porch and was sued a number of years later on the basis that the homeowners were suffering from mold-related illnesses.
Establishing the Date of Loss
Any time a claim is submitted, one of the first things the insurance adjuster tries to do is properly establish the date of loss. Knowing the date of loss informs them as to whether their specific policy will apply or not.
Any time a claims involves a slow and continuous exposure it can be very hard to properly determine the date of loss. For example in our specific case, the lawsuit didn't mention what the contractor specifically did to cause the growth, when it occurred, or when the occupants were actually exposed to it.
This meant that every single general liability and pollution liability policy from 2009 to when the claim was made had to get involved in the claim. Each had to determine if they needed to fund defense costs and if they were at risk for paying part of the claim.
Since the cause of loss in this scenario was mold, the general liability policy did not apply. Even though the restoration contractor did not do any mold remediation, the general liability will still exclude the claim because it had anything to do with mold. This means that the pollution liability policy would apply.
How did the insurance companies respond?
In this particular claim, the insurance companies were initially difficult to deal with. As there wasn't an exact date as to when the mold appeared, each claim adjuster wanted to exonerate his company from the claim.
Here's the reasons that were initially given for denying the claim:
The general liability insurance companies all denied the claim because mold was involved.
The pollution liability insurance company from 2010-2012 denied the claim because the work was done in 2009 and predated the retroactive date of the policy.
The policy from 2012-2014 was an occurrence form policy, and they denied the claim because there was no specific date of loss mentioned in the complaint and the work had been completed six years prior.
Ultimately it was determined the actual exposure to the mold happened after the occupants purchased the home, which meant the policy that was in place from 2012 to 2014 would be required to provide the associated defense costs for their client.
This was a perfect case example to illustrate why:
Real or perceived water intrusion related to a contractors work can lead to uninsured mold losses many years after a project was completed.
Changing insurance vendors can create coverage gaps for future claims arising from completed operations unless your agent truly understands how to properly handle such situations.
If you ever made the historical transition from claims made to occurrence-based pollution liability coverage, that transaction should be audited today to evaluate if that insurance coverage transition was done the right way. If a historical coverage flaw is detected before there is a loss, there are some prospective options available to correct the fatal coverage flaws that result from a bad transition.
When faced with a mold/bacteria/Category 3 water loss, immediately seek out expert advice on how to present that claim to your insurance companies. The way you present the claim to the adjuster can avoid a lot of headaches and lost sleep.
There are three things every contractor should do to avoid such a problem with claims adjusters on mold/bacteria/Category 3 water claims.
Verify that your pollution liability coverage has continuity of coverage for your completed operations.
Lock onto a functional liability insurance design and stay the course with your insurance vendors as long as you can. Changing insurance vendors creates unneeded complexity and coverage gaps in a claims situation that spans multiple policy periods. However, do not lock on to a fatally flawed insurance design.
If a claim is made against you seeking damages associated with mold/bacteria/Category 3 water, get expert help in reporting that loss.
If you would like to find out more, please feel free to contact our office.