Md. Commissioner Decides Policies May Not Exclude Mold Coverage but May Limit Liability

March 21, 2003

Maryland Insurance Commissioner Steven Larsen announced that insurance companies may not exclude coverage for liability arising out of toxic mold in either Personal or Commercial lines Liability Coverage; however, the announcement indicated that “they may limit coverage for liability stemming from mold at $50,000.”

In addition, the decision states that in both commercial and personal lines property coverage, a policy “may limit loss from mold or remediation in which the ‘proximate cause of loss is a peril that is a covered loss’ (water damage as a covered loss, as an example). The minimum aggregate for mold and remediation coverage is $15,000 and may include Loss of Use or BusinessIncome/Extra Expense coverage.”

The decision follows a hearing on mold in November. The full text may be read on the Maryland Insurance Administration Web site:

Other provisions included provisions governing the time for filing claims, specifying that “the policy may not unreasonably restrict the time period for reporting a mold claim, meaning it may not require a mold claim to be filed within a specified number of days following the covered loss nor may policy language require a loss due to mold to be reported during the policy period in which the original covered loss occurred.”

“While mold has become a problem in some other states, such as Texas, there is little evidence it is a problem for insurers here in Maryland,” Larsen stated. “This decision achieves a middle ground by not permitting insurers to completely exclude coverage for mold, but they have the ability to cap the exposure. I must balance the responsibility to encourage and maintain a viable insurance market against potential damage to consumers that would result from reduction or elimination of insurance coverage for mold.”

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