arguments based upon the proximate
cause of the loss and ensuing damages
not falling under the exclusion.
create mold growth in 72 hours at room
temperature, and sometimes in as little as
36 hours depending on the conditions.
lines for Professional Water Damage
water most often encountered as part
of a water loss:
∙ Category 1 — supply line water
not grossly contaminated with bacteria (gray water)
∙ Category 3 — contaminated with
bacteria; triggers fungi/bacteria exclusions (black water)
attack its host and cause death, e.g., Le-
gionnaires disease is caused by bacteria.
Insurance companies routinely exclude
Legionnaires disease losses, but routine-
both are associated with bacteria.
insurance claims than claims associ-
ated with mold remediation.
comprise the industry standard of care
for mold remediation from IICRC,
AIHA, the New York City Dept. of
Health;and;Mental;Hygiene,;the;Envi-ronmental Protection Agency, OSHA
and other organizations.
industry standard of care documents
are unilaterally deciding not to follow
the guidance of thousands of reasonable and prudent practitioners who
developed the professional standards
and guidelines. Avoidable risk is being assumed by the claims adjusters
choosing not to follow generally accepted industry standards for water
and mold remediation.
combination of a total pollution exclusion
taken out of a general liability endorsement and the anti-concurrent causation
language in the preamble to the flood exclusion that is found in the commercial
property insurance policy.
The failure to connect the dots on these
two long-standing exclusions results in
thousands of severely sublimited claims
or excluded claims involving fungi/mold/
The restoration contractors I speak
with are extremely concerned about
claims adjusters unwilling to pay for the
extra work performed in a Category 3
should be happening in the claim adjust-
should be paid under the fungi/bacteria
sublimit on the property policy or under
an environmental insurance policy that
is designed to insure fungi and bacteria
are readily available to fill the coverage
egory 3 water losses the same way flood
insurance fills the coverage gaps created
by flood exclusions. These specially craft-
ed environmental insurance policies have
been available to commercial insurance
Having technically uncovered fungi/
bacteria related claims paid under property and liability insurance policies is a
good situation for insurance consumers,
fire water damage restoration contractors and their insurance agents. But there
are several risks for the insurance companies paying these claims. Because the
provisions in fungi/bacteria exclusions
mirror long-standing exclusions for pollution and flood, claims adjusters actively
undermine the efficacy of pollution and
flood exclusions every time they pay an
uncovered loss related to mold and bacteria. Another downside for insurance
companies is paying uncovered losses as
a routine business practice in theory also
exposes stock-based insurance companies to shareholder derivative actions for
depressed earnings as a result of the practice. This would be especially true when
an insurance company has established
case law precedence in holding up fungi/
bacteria exclusions and then does not apply the precedence case law consistently
across all related claims.
All of the stakeholders would benefit
from transparency and consistency in the
operation of fungi/bacteria exclusions in
property and liability insurance policies.