Mould has existed for millions of years. However, it is now attracting considerable attention in the US because of several high-profile lawsuits, including multi-million dollar awards for insurers' failure to handle toxic mould claims properly.
There are several types of mould, but all of them are living organisms classified as fungi. Mould thrives in the same general conditions as we live in – moist air, low light or darkness, 68-86 degrees Fahrenheit, and little or no air movement. The construction of airtight buildings which trap moisture, has added to the problems of mould growth.
Mould breaks down organic matter. Since its food sources include wood, paper, drywall, panelling, and other materials found in places humans occupy, it can cause extensive property damage. Mould also produces mycotoxins, which may cause health problems in humans.
Not all moulds are harmful, and some are used for beneficial purposes such as the manufacture of drugs. Indeed, there is disagreement in the medical and scientific community about the health threat posed by mould. However, some people do appear to be sensitive to certain moulds such as Stachybotrys and Aspergillis, and may develop allergic symptoms when in contact with them. People with weak or vulnerable immune systems may face an increased degree of risk.
In the US, insurers have attempted to exclude or limit mould coverage under homeowners property and general liability policies. This issue is being handled on a state-by-state basis and is far from being resolved, as some state insurance agencies have objected to insurers' efforts to exclude mould. Insurance agencies and legislatures in several states have begun to address the issue.
The state of Texas has perhaps been the most active in dealing with insurance industry matters relating to mould. Here, insurers petitioned for complete removal of mould and some water coverage, due to an unprecedented rise in mould claims. In late 2001, the Texas insurance commissioner changed the cover provided by the state's residential property policies. The changes are intended to give homeowners basic protection against mould and the ability to buy additional levels of cover, while addressing procedures that drive up insurance policy premiums, such as mould testing and containment. These changes also allow claims to be denied if a policyholder continuously ignores obvious water problems.
In comments that accompanied his order to change the state's policies, the Texas insurance commissioner noted that the order sought to find a common sense, middle ground which protected homeowners, while addressing major cost drivers for insurers. The commissioner also said he would appoint a task force to develop recommended handling procedures for mould claims.
While the Texas Department of Insurance has been one state agency at the forefront of dealing with mould, many other states are just beginning to tackle the subject. It is too early to say how mould will ultimately affect insurers and policyholders in the US.
Implications
There are unique aspects to the mould problem in the US. Several regions of the country have hot and humid climates, which contribute to mould growth. Public awareness has been heightened by media coverage of high-profile mould cases. And an entire industry has sprung up with lawyers and mould specialists who are eager for business.
As a first step, European risk managers should educate themselves about mould and the potential for claims and litigation. In addition, companies should develop a process to handle any mould claims that may arise. Experts needed to handle claims may include, but are not limited to, remediation and restoration contractors, industrial hygienists, testing laboratories, engineers, and lawyers and accountants experienced in mould-related claims and litigation.
Disasters such as flooding may increase the likelihood of subsequent mould claims. Prudent risk managers will be aware of this and take action to dry out buildings that are affected by flooding or other conditions that may lead to moisture in buildings.
Risk managers of global companies should also be aware of any local, jurisdictional differences that may affect the outcome of mould claims. Knowledge of any past claims or lawsuits is helpful. If a potential claim arises, it helps to discuss it with professionals who can give provide in-depth analysis of its basis and merits.
The overall message is to be prepared. Mould claims may not become the issue in the UK and the rest of Europe that they are in the US, but risk managers should have the knowledge and resources to handle any such claims that come their way.
Karl Nann is US director - property services, Crawford & Company, Tel: 404-705-6465, E-mail: karl_nann@us.crawco.com
