Mold claims are unique and spread rapidly across multiple coverage parts. A single occurrence can cause losses related to bodily injury, property damage and remediation, loss of business and rental income, professional liability, and diminution of value. The exposure varies widely between different classes of business. Medical facilities, apartments, condos, and hotels all face a unique set of challenges from this often excluded and overlooked exposure.

Hospitals, Senior Care Centers, Hospice, and Medical Facilities

The Exposure: Immunocompromised patients are more susceptible to bodily injury when they come into contact with mold. Patients and residents who remain in medical facilities for extended periods of time can face a host of health issues from prolonged exposure to mold conditions which may lead to costly bodily injury claims. 

These facilities are often built using advanced construction techniques and materials and remediation costs can pile up quickly during a prolonged construction period. There are also significant costs associated with evacuating and relocating patients during the remediation phase. 

Solutions: Comprehensive Site Pollution policies can include coverage to address bodily injury (including medical monitoring), remediation costs for the facility, and extra expense coverage to address relocation or evacuation of patients. Carriers have developed specific forms for this niche aimed at addressing the unique concerns of healthcare facilities.

Condominiums and Apartment Complexes

The Exposure: Condo owners may pick up limited mold coverage for their individual unit through a personal HO-6 policy form, but this coverage will not apply to common areas beyond the walls. Typical property and liability policies for condo associations and apartments will either exclude mold entirely or offer a minimal sublimit. The association can face significant costs for mold remediation in common areas or bodily injury to residents stemming from mold in the HVAC system or other spaces beyond the boundaries of individual units. If the association doesn’t carry mold coverage, these costs are often passed along to the residents via increased assessments. Apartment buildings face similar issues with bodily injury and remediation expenses related to mold events with the property owner responsible for covering these costs in lieu of a Site Pollution policy.

Loss of business and rental income is another significant exposure for apartment complexes and condos.  If tenants in an apartment are displaced during the remediation phase, they will not pay rent.  Many mixed-use properties have first floor retail and dining establishments. If the building is closed for remediation, the property owner or association will face a loss of rental income when these tenants are forced to shutter their commercial operations.

Solutions: The market for these risks is currently very competitive and carriers can include enhancements such as business and rental income coverage in addition to standard coverage for first party remediation and third party bodily injury claims. A typical Site Pollution form will extend coverage for condo association common areas and can also pick up any chemical storage or fuel storage tanks found on the property.

Hotels and Hospitality Risks

The Exposure: Coastal properties and hotels located in warm, humid vacation destinations provide the ideal conditions for mold growth. Hotels face concerns over third party bodily injury as well as first party remediation expenses, and business income claims can escalate quickly during peak season. Hotels are often remodeled in phases (wing by wing, floor by floor, etc.) and this is when mold conditions are most often identified across multiple rooms. Carriers have caught on to this activity and will often apply per-room deductibles or exclude conditions identified during capital improvement projects. 

Hotel ice machines can also play host to mold and other potentially harmful bacteria. Health experts advise that commercial ice machines should be professionally cleaned every six months to prevent mold growth. Pools, hot tubs, and water towers also create additional mold concerns that fall within this category.

Solutions: Loss control and identification efforts on the front end will help obtain the most competitive terms for your insured. Work with the property owner to determine if there have been any historic water events or if they have any upcoming room remodel or capital improvement projects. Review mold prevention plans with the owner to address best practices following a water event and discuss any available Environmental Site Assessments that have been conducted for the property. An experienced broker can leverage these risk management practices with underwriters to negotiate the most favorable policy terms and deductibles to avoid capital expenditure exclusions and ballooning deductibles. 

For more information on mold at habitational sites, and coverage that can help address this concern, visit us online or contact us.