And he’s one of the lucky ones. Insurance brokers estimate that 15 to 20 percent of formerly covered companies have sought to restore mold coverage via stand-alone insurance, and they aren’t sure how many have been successful so far. Companies with a history of mold problems may not be eligible for coverage at all. Any company that is covered should adopt strict measures for preventing mold, or treating it if it appears, and must communicate those measures to employees. Further, to cover specific mold-related needs, “you have to buy the right insurance, and you have to meet the triggers of the policy,” notes Julie Hespe, chief underwriting officer for AIG Environmental, a unit of American International Group and the oldest and largest writer of environmental policies.
When companies do get the coverage, the total premiums are generally pegged at between 2 and 10 percent of the coverage limit chosen. Russ Nassof, president of Phoenix-based Environomics, which handles mold-related claims for both insurers and their clients, says that while some companies have chosen to go without the coverage, others vulnerable to mold claims feel forced to try to obtain a policy. Besides AIG, those writing mold policies include Chubb, the Gulf Insurance Group unit of Travelers, Liberty Mutual Insurance, XL Capital of Bermuda, and Zurich Financial Services Group.
A Texas “Export”
“Over the past two years,” says Rachel Jakubovitz, senior resource consultant for Willis Environmental Practice, a unit of insurance broker Willis Group Holdings, “the situation has morphed to where underwriters can finally get their arms around the coverage, and can offer it.” In part, she believes that is because litigation recently “hit a plateau.”
An explosion of new claims and big losses in commercial buildings, or heavily publicized jury verdicts, could change all that. Also, estimating the cost of cleanup has continued to be problematic for insurers, since few standards now exist in that area.
Texas has been the real hotbed of most litigation so far. Claims there have been huge, running well into the billions in 2002. But Texas’s peak month was July 2002, when 24,383 claims were paid, resulting in $215.4 million in losses, according to the III. Still, the moderate decline in claims in the succeeding months, suggests Hartwig, is hardly a promising sign for insurers. Only half-jokingly, he says he sees attorneys “exporting” their mold-related litigation — especially moving to file more claims against commercial defendants in other states — now that they have worked through the Texas home-insurance market.
Hartwig says that the lawyers see corporations as “the quintessential deep pockets,” with liability limits often in the tens or even hundreds of millions of dollars. And plaintiffs suing companies can seek compensation for personal injuries and violations of federal air-quality rules, among other things, while also making workers’-compensation claims. If there’s a mold exclusion in the property/casualty policy, of course, that’s the company’s problem.
Juries and Hard Science
There’s general agreement that mold can be hazardous to health, especially for the lungs, and that it aggravates allergies. The approach many defense attorneys take in court, though, is to point out how few solid medical links tie mold to the specific diseases that plaintiffs may have contracted. A July 2002 report from the Centers for Disease Control and Prevention, for example, says that illness can result “when people are exposed to extensive mold growth indoors.” But the report also states that there is “inadequate evidence that molds caused people to become asthmatic,” adding: “we do not know whether molds cause other adverse health effects, such as pulmonary hemorrhage, memory loss, or lethargy.”