Construction Industry Trends
October 2004
Mold, Insurance, and the Law
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Since the beginning of the decade, the issue of mold has dominated both the construction and insurance industries. The result has been a proliferation of mold-related insurance claims, an overwhelming number of lawsuits, and a plethora of new legislation aimed at curbing the effects of what was once considered an innocuous organism.
For the insurance industry, mold almost seemed to appear overnight. In the late 1990s, insurance companies could easily handle the handful of mold-related claims that came its way; by 2000, it was facing a deluge. According to the Insurance Information Institute, the amount paid out by insurers for mold-related claims more than doubled between 2001 and 2002, rising from $1.3 billion paid in 2001 to more than $3 billion paid the following year. It was a trend that initially caught many insurance companies by surprise.
Until the spate of mold-related claims, most homeowners’ insurance policies treated mold as an outgrowth of water-related damage. But intense media coverage and a series of high-profile cases involving large claims and payouts quickly put the spotlight on mold. And as claims involving mold rapidly climbed, insurance companies responded, either limiting or excluding coverage for mold-related claims.
Homeowners’ policies weren’t the only type of insurance to be affected. Insurance companies also placed limits on commercial property and liability policies, either excluding mold coverage entirely or offering it for an additional cost.
In addition, as fears that mold-related litigation and the costs associated with repairing mold damage were spiraling out of control, the government also stepped in, introducing new mold-related legislation. The laws being introduced varied widely from state to state. According to MoldUpdate.com, an information clearinghouse operated by The National Association of Mutual Insurance Companies, some of the most recently passed legislation includes bills in:
- Louisiana — House Bill No. 793 states that commercial and marine contractors, architects, engineers, and others licensed by the Louisiana Manufactured Housing Commission are no longer liable for “…any personal injuries, property damages or any other damages, losses, or claims whatsoever related to mold or mold damage not caused by defects in workmanship or design.” The law went into effect August 15, 2004.
- Oklahoma — The Fair Assessment and Remediation Act, which became effective July 1, 2004, forbids people who perform mold assessment work to also perform mold remediation work, and vice versa. The law also aims to provide consumers with more information by requiring mold assessment and remediation professionals to provide their customers with any education materials made available by the state.
- South Carolina — On January 1, 2005, a new law will go into effect that amends the state’s 1976 code relating to the duties of real estate brokers. A provision has been added specifically for mold-related issues. The new law states that “…no cause of action may be brought against a real estate licensee who has truthfully disclosed to a customer known material defects including, but not limited to, moisture or mold problems and conditions.”
- Virginia — The Residential Landlord and Tenant Act, which went into effect March 29, 2004, requires landlords to disclose if there’s any visible evidence of mold in a unit.
The issue of mold continues to create contentious debate among homeowners and commercial property owners, builders, and the insurance industry. To keep up to date on the newest legislation, visit www.moldupdate.com.