These expansive exclusions for a very
common cause of loss were slammed into
virtually all property and liability insur-
ance policies without instruction manu-
als on what was being excluded. That left
insurance producers and claims adjust-
ers in the dark on the material changes
in coverage created by the exclusions. In
practice, most producers and claims ad-
justers missed that anything changed in
the insurance policies they worked with
on a daily basis. That led to big surprises
for insurance buyers when the exclusions
were used to deny coverage for losses as-
sociated with fungi and bacteria.
To move towards transparency and
consistency in the application of fungi/
bacteria exclusions, there are some import facts that every claims adjuster
should keep in mind.
• Many commercial “mold exclusions”
were drafted to apply to both fungi
and bacteria because in virtually every
place mold grows, bacteria is found
using mold as a food source. To avoid
covering mold claims as bacteria con-
tamination losses, ISO excluded claims
related to both contaminants.
states where bacteria as a contaminant
already falls within the standard ISO
definition of a pollutant in pollution
exclusions. Therefore, a loss involving
bacteria may trigger at least two exclusions in property and liability insurance policies, the fungi/bacteria exclusion and the pollution exclusion.
any species or amount of these contaminants. Because the exclusions are
silent on type or amount, a speck of either technically triggers the full effect
of the exclusion.
•;On;commercial;general;liability;poli-cies, most fungi/bacteria exclusions
have two parts:
∙ Part (A) applies to losses starting with
the threatened existence of fungi or
bacteria in a building. It also excludes
bodily injury and property damage
from the actual exposure to fungi or
bacteria. This part of the exclusion
has an anti-concurrent causation
clause taken straight out of the ISO
flood/war exclusion section in a commercial property insurance policy.
∙ Part (B) applies to any insured in the
business of cleaning up or assessing
fungi or bacteria. This part of the exclusion is a job site exclusion for anyone performing this work. It applies
to plumbers, carpet cleaners and janitors, not just to mold remediators.
•;Anti-concurrent;causation;clauses;ap-ply the exclusion to the entire loss if the
excluded cause of loss happens before,
during or after an otherwise covered
cause of loss.
of an anti-concurrent causation clause
in an exclusion is to eliminate coverage
In response to an explosion of “toxic;mold”;claims;at;the;turn;of the century, universal exclusions for mold, fungi and bacteria related losses were introduced faster and on a wider scale than
any exclusion in the history of the insurance business. The exclusions
for fungi and bacteria are by far the most onerous total pollution
exclusions ever conceived.
What Every Adjuster Should Know
About Fungi/Bacteria Exclusions