Pollution policies historically defined a “pollution condition” using motion words such as dispersal, escape, release, migration or seepage because carriers had to clarify that properly contained pollutants didn’t constitute an actionable condition. By that definition mold is most often not a pollutant.

Mold spores are present in most environments and only need moisture and a food source, such as drywall or wood, to multiply and thrive. Existing mold can be dispersed by a contractor and/or tenant and such a scenario would fit nicely into the standard definition of pollution conditions as long as mold is a pollutant on the policy. The more common mold liability scenario involves someone creating a moisture problem that results in mold growth, but does not involve any dispersal of that mold.

Unique Policy Wording Required

The traditional definition of pollutants may not be a good fit for mold, and many of the environmental carriers in the marketplace today recognize that fact. The definition needs to be refined to encompass mold's unique characteristics, and respond in the event of the mere presence or existence of mold. Better environmental insurance policy wording would look like this example:

• “Pollution condition means the discharge, dispersal, seepage, migration, presence of (as a result of covered operations), release or escape of pollutants”

This definition makes it clear that the policy will respond in the event that mold is discovered, not just if it is dispersed, escapes or seeps.

Cleanup Standards

Another key issue is the cleanup of mold. Typical cleanup definitions invoke environmental law as the standard. But when it comes to mold, there often is no environmental law to reference, so instead good policy forms should indicate that cleanup should meet the approval of an Environmental Professional, and be specifically outlined when it comes to mold.

Claims Made vs Occurrence

Traditional thought on policy triggers may also need to be reconsidered. Many assume that an occurrence-based policy is better than a claims made policy whenever available. However, mold can make an occurrence policy ambiguous in the event of a claim. For example: a drywall contractor puts up interior sheetrock. He inadvertently punctures a water line behind the sheetrock with a nail, and there is a small leak. Over the next few months, moisture flows inside the wall, and at some point in the future mold is discovered. Claims adjusters may ask, “When did the pollution condition occur?” Certainly there was no pollution when the contractor did the work, or even in the period of time shortly after. Not even the moisture is considered a pollutant. The point at which mold manifested as a pollutant is unclear.

For this reason, it may be better for policyholders to consider a claims made policy with a clearly defined start to coverage – at least when it comes to mold. In a claims made case, all of the contractor’s operations, back to a retro date, are covered, regardless of when the pollution condition manifests itself.

UCPM Recommendations

Review current policies to make sure that mold is being clearly defined and affirmatively covered. Review carefully the definition of what is considered a “pollution condition” and look for wording that would provide coverage in the event that mold simply exists or is present. Check for a clear cleanup standard, and consider the clearer coverage characteristics of a claims made mold position for clients.