Contrary to popular belief, climate is not a good gauge for mold risk, according to a ranking of states at risk for mold contamination on commercial and residential property. Areas with dry climates like Nevada and Arizona made it American Risk Management Resources’ top 10 listing of mold risk areas, while some Gulf States did not come close.
Because mold damage is now excluded or severely limited on standard property insurance, concerns about the financial impact of a mold outbreak in a home or business continue to rise.
In the relative hazard ranking model developed by ARMR, and now being used by Greenguard Environmental Institute (GEI), “dry states” (Oklahoma, Kansas) intermingle with predictably high-risk mold zones (Florida, South Carolina), but Texas beat them all:
The GEI/ARMR relative hazard ranking model was developed by comparing mold losses on insurance claims with premiums paid on property and liability coverage in the 50 states. The hazard ranking model does not yet reflect claims associated with 2005 hurricanes that struck the Southeastern US. Wisconsin has the lowest relative mold loss rate, which is one-50th the loss rate in Texas, based on the relative frequency of insurance claims.
“Mention mold right now, and the Gulf Coast comes to mind first, but the contamination on real estate hit by hurricanes was generally less significant overall than mold growth caused by inferior building materials or poor construction,” said Carl Smith, CEO/Executive Director of GEI, a non-profit organization working with lenders and developers on mold risk mitigation techniques. “It’s counterintuitive to think of shopping centers in Phoenix or casinos in Las Vegas as being at risk for mold, but it makes sense when you examine the causes of mold and problems often caused by modern building practices and materials.”
According to Smith, many buildings and houses in dry climates develop mold issues when moisture is nurtured within walls and windows that are tightly sealed off from consistently hot conditions outside.
“Think of a glass of ice water sitting on your porch in 95-degree heat,” said Smith. “Condensation quickly forms on the outside of the glass, but unlike your drink, condensation in a home or business has nowhere to run off so it builds up in the cavities of the structure, creating an ideal climate for mold contamination.”
As mold decreases property values, it could force many owners into default, forcing mortgages into a “non-performing loan” category, the worst- case scenario for lenders. That classification causes a negative chain reaction from ratings agencies, regulatory authorities, and shareholders.
“In the age of universal mold exclusions on insurance policies, everyone involved in real estate needs to diligently manage the mold risk,” said David J. Dybdahl, head of ARMR, an insurance brokerage and consulting firm specializing in environmental insurance covering mold.
The top 10 states and their Relative Hazard Mold Ranking are:
South Carolina 1.91
South Dakota 1.47
The bottom dive states and their Relative Hazard Mold Ranking are:
West Virginia .07
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Source: Greenguard Environmental Institute
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