Categorized | Insurance

Mold, a Headache for Business Owners

“Superstorm” Sandy. Floods in the Midwest. Record-breaking rainfall in the Mid-Atlantic region. All of these events took place within the last year and all produced lots of water. While water itself can be damaging, it can create a secondary problem. Mold! Mold can cause major headaches for small business owners. It can damage your company’s property, make you sick, and generate lawsuits against your firm.


What exactly is mold? Mold is a type of fungi, organisms that are neither plant nor animal. Fungi reproduce through spores that exist in the air. Most molds are harmless, but a few can be dangerous. Mold can be very destructive. For one thing, it can grow on almost any substance including wood, carpet and paper. It can also be difficult to find. Mold can lurk behind wallpaper, under paneling or inside walls. By the time you discover it, it may have already caused substantial damage.

Say your property has gotten wet due to heavy rain or a flood. What can you do? The first step is to try to prevent mold from growing. Mold requires all of the following to reproduce: spores, moisture, the proper temperature, and a food source. Of these four factors, the easiest to control is moisture. To prevent mold from infiltrating a wet building, remove the moisture as quickly as possible. You can use ventilation, a fan, an air conditioner, a dehumidifier or a combination of these. If mold appears in spite of your efforts, you will need to remove it. Don’t start any cleanup work until you know how to protect yourself. Two good sources of information about mold and mold cleanup are the Centers for Disease Control and Prevention (CDC) and the Occupational Safety and Health Organization (OSHA).

Insurance policies were largely silent on mold until about a decade ago. After an avalanche of mold claims in the 1990s and early 2000s, insurers began adding mold exclusions to some policies. Mold is now an excluded cause of loss (peril) under most property policies. However, some policies provide a limited amount of coverage. For example, the ISO property form provides a $15, 000 limit for damage to property caused by fungus, wet or dry rot or bacteria. To be covered, the mold must result from a named peril other than fire or lightning. Mold that results from a flood is not covered unless the policy includes a flood endorsement.

Mold can be a source of lawsuits. You may be vulnerable to mold suits if you own an apartment building, a motel, an office building or other structure where people congregate. If mold is discovered in your building, your tenants or customers could sue you for bodily injury or property damage. The standard general liability policy does not exclude mold. Nevertheless, many insurers add mold exclusions to the policy. To determine whether your liability policy excludes mold, check the exclusions that apply to Bodily Injury and Property Damage Liability. If there is no mold exclusion in the policy form, one may have been added via an endorsement.

Image Courtesy of [moomsabuy] /

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