Mold—it’s an ugly four-letter word in more ways than one. Nobody wants to think about the fact that this fungus can be found anywhere where water leaks or drainage problems are present. Mold can cause serious damage to a co-op or condominium, like ruining drywall, and is believed to trigger numerous health problems in susceptible persons.

But when your home is contaminated by mold, and you just want it to go away, who pays for the damage and the cleanup? Is it the responsibility of the homeowner? Is it the cooperative board or condo association’s responsibility? Is it the next door neighbors’ responsibility if the water came from their unit and damaged yours? The answer to all of these questions is…it depends.

The co-op's umbrella or condo association's master policy, as well as the various governing documents, spell out what parts of the complex are covered and what parts are the shareholder or unit owner’s responsibility. Typically most insurance covers the co-op or condo building, any common property such as hallways, lobbies and shared terraces, etc., as well as liability insurance for the board and association. Whenever any kind of moisture is introduced into a building structure whether in the form of a major flooding event or just a minor leak, it brings with it the possibility of mold infiltration and all its attendant risk to property and health. Even if you have full homeowners and flood insurance, mold-related damage may not be included in your coverage.

To tackle mold from the bottom up, an ounce of prevention is worth a pound of cure, and being one step ahead of the nasty but nearly ubiquitous stuff is really the only defense against it—the longer you wait to deal with a mold issue, the more it may cost to correct it, and the less pity your insurance carrier is likely have for you.

Mold Exposure is a Problem

Whatever the root cause, mold damage can be devastating. While the data isn’t definitive, strong anecdotal evidence suggests that mold spores in a home can contribute to a broad range of health issues, including eye irritation, congestion, asthma and other respiratory distress, skin rashes, and even mood and behavior problems, particularly in young children. Getting rid of mold can be a lengthy, expensive process—and standard homeowners insurance policies don’t always foot the bill.

And the stuff can come from almost anywhere. “In the indoor environment we live in, there are lots of food sources for mold,” says Garry Alexander of Belfor USA, a nationwide disaster restoration company and property recovery services provider. “[Mold thrives on] sheet rock, paint, wall coverings and even the glue used to adhere them.”

Alexander says that when you look at things that way—and understand that a residential building, with all its various layers and crevices is basically heaven for mold—there’s really only one tactic to take: dry it out. “The only thing we can control is moisture; in that context, mold is essentially a function of water. So things like leaky windows or window air conditioning units, roof leaks, and pipe leaks are many of the common causes of mold problems.” Alexander notes that if there is prior water damage that wasn’t dealt with properly, mold can cause problems there, too.

The Insurance 411

Mike “The Mold Guy” Pugliese has been an expert witness in many lawsuits related to mold and has written several books on the subject, including “The Homeowners Guide to Mold.” “Just because your insurance company tells you that you don’t have coverage doesn’t mean you don’t,” says Pugliese. “I’ve had clients who have been denied and had the worst mold problems, but they had a mold rider and weren’t given the right answer. It happens more than once.”

He says that "most companies since 2005, they have written an exclusion into their policies for certain types of water damage; mold, rot, bacteria and fungi. So, there's very few companies that even offer a base limit like five or ten thousand. There are some throughout the United States but they are far few between. You need to get a mold rider and the minimum amount you should carry at anytime is fifty thousand. And the reason is is that one, you have the demolition that takes place when you have a mold event. And then you have to put everything back. So, if you have to rip out the walls, you got to put them back, take off the carpet, put it back. But also, mold, if you think about mold it's like dust. Wherever dust can go mold can go, except it's going to grow."

Pugliese also explains that the $10,000 limit is not enough to cover many cleanups. To make sure you receive adequate coverage for your claim, he suggests that homeowners get their own environmental assessment of the property. “If it’s a third-party liability—the neighbors have a leak and it came through onto your property—they’ll come with their own guy,” says Pugliese. “Bring in your expert, too.”

And that negligence can cause trouble for residents. Several years ago, there was a flurry of articles in the press regarding homeowner’s insurance claims for mold—and even more after Hurricane Katrina, which elevated mold damage from troublesome to disastrous. According to Alexander, state insurance departments started allowing insurers to eliminate coverage for mold as a result of countless claims flooding the industry.

“If a particular risk, like mold for example, becomes detrimental to the industry—though I don’t know how they determine that—the state insurance department will allow insurers to write it out of their policies,” says Alexander. “In some cases, you can buy back the coverage for an added fee. In states like Texas and Florida, the industry was getting hammered by mold claims so their state insurance departments allowed insurers to eliminate coverage for it, and most states have done this."

Alexander notes however, that mold on its own is rarely enough for a claim. “The only way it is covered for those companies that haven’t eliminated coverage is if it is the result of an insurable loss,” he says. “Mold, in and of itself, is not covered; it’s only covered if it occurs from an insurable loss, like a broken pipe.”

Are You Covered?

What's covered and what's not is a tricky question, says Alan Lyons, of counsel with the New York City law office of Arent Fox LLP.

"Courts across the nation have come down on all different sides of this question," says Lyons. "Obviously, the facts of each case have to be evaluated on their own individual merits. Architects have been held responsible for design defects that allowed water intrusion that ultimately caused mold contamination; construction companies have been held responsible for faulty construction that allowed water intrusion that ultimately caused mold contamination; landlords and HOAs have been held responsible for faulty or negligent maintenance and/or for ignoring the problem; and individual homeowners have been held responsible either for their own failure to perform maintenance/upkeep, or their failure to mitigate the damage once it was discovered. All of these have turned to their insurance carriers to pay for their loss, with varying degrees of success."

Mold coverage typically can be available for either bodily injury or property damage (or both) caused by mold, Lyons says. Obviously, the specific policy or policies would have to be reviewed to provide any specific guidance. Many policies provide mold coverage on a claims-made and reported basis; this limits coverage to only the policy that was in effect at the time the claim was first made against the insured and reported to the insurance company. This is important because it means that once the coverage limit for the triggered policy is exhausted, the policyholder cannot look to prior policies to provide additional coverage, he adds. Generally speaking, standard liability policies contain exclusions for injury or damage caused by mold, Lyons says. As mold contamination and remediation issues started to become more common in the late 1990s and early 2000s, many insurers began to specifically exclude coverage for mold contamination and remediation.

"Nobody wants to be on the liability hook," says Pugliese. "The neighbors' insurance doesn't want to be on it. The condominium association sure doesn't want to be on it and they usually leave the homeowner hanging out to dry. It's very complicated. The first reaction is always plausible deniability. Everybody tries to deny it."

The good news is that even though insurers are pretty strict about mold coverage (or lack thereof) there are ways to avoid a messy—or denied—claim in the first place.

If you’re concerned that there may be a mold problem in your building, it’s better to be safe than sorry. Some mold can be seen with the naked eye, but some mold is airborne and undetectable without specialized equipment. Some people are highly susceptible to mold and that's usually where the expensive litigation against building owners and boards comes into play, says Pugliese. "I talk to people every single day and they're just a wreck; they're losing their homes, their children are sick, they're sick. Every day I hear the same story about people, their lives are strewn by this."

"The first step that homeowners and condo associations should be taking," says Lyons, "is preventative maintenance. When water intrusion occurs, it is essential to investigate and remediate immediately. The moisture should be removed, along with any mold that has developed."

Additionally, says Lyons, follow EPA guidelines for water intrusion. "For example, the EPA recommends simply discarding ceiling tiles and cellulose insulation that have been impacted by water intrusion, while carpet and hard flooring surfaces like linoleum and laminate flooring can be kept if the moisture is removed within 24-48 hours. Such maintenance, and a remediation analysis, can be performed by professional contractors specializing in mold remediation. With the rise in mold-related claims and litigation, there has been a proliferation of mold contractors. Obviously, before retaining any contractor, they should be investigated, and only experienced and reputable contractors should be retained."

Robert Madarasz of Envirospect, a New York-based environmental testing and remediation agency, suggests a floor-to-ceiling approach that involves more than just a cursory look at the mold already present. "Air duct cleaning is essential as part of any mold remediation project,” he says. “Cross contamination into an HVAC system can already have occurred even before a qualified mold remediation company has responded.” Madarasz adds that a qualified professional should have all their licenses, certifications, and associations ready for you to check out: “The air duct cleaning contractor should be a member of National Air Duct Cleaners Association (NADCA), with certified Air Systems Cleaning Specialists (ASCS) on staff. The air duct cleaning should meet NADCA standards, including the application of an EPA registered anti microbial into the HVAC system after a thorough cleaning has been performed."

The Right Way To Do It

If mold is discovered, says John Butler, vice president of HUB International Northeast, the building, the association, the building management company, or whatever entity is responsible for maintenance and repair of the building, should have what's referred to as a mold operation and maintenance plan. This, Butler says, basically does two things; number one, it outlines, formalizes and documents preventive procedures, and number two, it establishes a protocol that's immediately available and let's everyone know what they're supposed to do.

If calling in for professional assistance before mold gets to be a huge problem is the right way, there’s a wrong way to deal with mold issues, too. “Some people panic at the thought of mold, but if you have no health reactions to it—and most of us don’t—just use common sense,” says Alexander. “Try to isolate it, keep away those with compromised health problems or known reactions. Years ago, I was looking at an infested basement with the homeowner and while standing in the basement that was covered in mold, she mentioned to me that she had asthma and one of the triggers was mold. I kicked her out of her own basement—in an appropriate way, of course. The opposite reaction exists too; some people will panic at a little spot of mold on a wall.”

Butler, however, cautions that a quick response is critical. Otherwise the situation and subsequent costs will worsen if walls have to be torn down. "If you have to start to tear out the walls and the insulation and other infrastructure items that are in the way between you and the mold. And that's where a tremendous cost, and when I say tremendous cost there have been cases of multi-million dollar claims and losses associated with mold remediation, primarily because they have to pull the building apart and then basically rebuild or put back everything that got ripped out. So, the environmental insurance policy is specifically designed to pay for both the cost of cleaning up the mold as well as the cost of restoring the actual structure itself."

Alexander says that the people who panic can cause almost as much damage as, say, Stachybotrys chartarum, a common type of toxic mold. (Note: “Toxic mold” is a bit of a misnomer, since the mold itself is not toxic. The mycotoxins, natural chemicals the mold has developed to kill other molds, and prevent them from stealing its space is the toxic stuff.)

“Part of the problem with condos and co-ops is getting everyone on the same page, both management and the unit owners, says Alexander. “Management, since they can wind up with the majority of the bill, wants to minimize [labor, preventative costs] and the unit owner wants to maximize [that]. Usually, the use of a qualified hygienist can guide everyone through the process as long as both parties agree to that beforehand. Unfortunately, what sometimes happens is one party doesn’t like what the hygienist has to say or there’s an air of mistrust and they go out and get their own to counter the other and it becomes a nightmare. Getting the right firm to begin with can be key in settling matters appropriately. All that should matter is getting the indoor environment back to a healthy one—anything else is irrelevant.”

Mary Fons is a freelance writer living in Chicago and a frequent contributor to The New Jersey Cooperator. Additional reporting by David Chiu.