Mold: Underwriters Endorsing CGL to Remove Coverage

June 11, 2008

  • June 11, 2008 at 8:53 am
    Jordan Fogal says:
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    If the houses were built properly this would not happen.
    The builders should have required reading: “Sick Building Syndrome” by David Straus should be first.
    Houses, even a hundred years old do not have mold. They were built with pride by craftsmen.
    Now houses are built air tight,with low quality materials. These house many times have faulty roofs. They are built with little supervison and by workers who have little or no training.
    If the insurance companies did their jobs and inspected these houses before they wrote the policies it would not be neccessary for them to keep dropping coverage all the while raising rates. The insurance companies also have clauses that state they do not cover builder defects or substandard contruction and many of the new houses sure are sub standard.
    Insurance companies will be glad to take your preimums. Just do not try to make a claim. Then you are not covered. You can’t just drop the insurance or the mortgage company will call the mortgage.
    Once again the consumer is screwed everyway possible. Insurance companies and builders plan, unfortunatly they just plan on how to get more of your money.
    Consumers aren’t in good hands with all state. It is sad that the American Dream has been allowed to deteriorate into such a sham.

  • June 11, 2008 at 1:57 am
    Joe says:
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    Good Luck!!!!

  • June 11, 2008 at 3:22 am
    Stat Guy says:
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    Right you are! Plaintiff’s attorneys think that mold is the new and “better” asbestos; from what I can tell, most state’s require at least a limited offering for mold. I doubt any line underwriter will successfully prevent a lawsuit based on the revised insurance contract. Many judges rule against defendant carriers, regardless of the clear policy language; coverage will be found and the duty to defend will remain….

  • June 11, 2008 at 5:00 am
    Retired says:
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    As the legal guys say “MOLD IS GOLD”

  • June 11, 2008 at 6:21 am
    Jon says:
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    A company in Florida offers a ten year warranty against mold growth. They apply an anti-microbial to the framing.
    http://www.encleanusa.com

  • June 11, 2008 at 6:51 am
    Cindy S says:
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    Mold rots houses, which is very expensive, whether one believes mold is unhealthy for humans or not. Perhaps if builders didn’t take so many shortcuts they would not have such problems with their insurance carriers.

    Most homeowners who have mold as a result of construction defects only lose money. I believe “mold is gold” is a saying invented by someone who thought if it rhymed, it must be true. Great legal theory, huh? I volunteer for a consumer org that gets thousands of complaints a year on bad builders. By the time people find us their leaky new house may have already developed a mold problem. These homeowners find it very difficult to even find a lawyer, let alone win a jackpot. Lawyers know these cases are more work than they’re worth most of the time, and decline them. Even if a homeowner wins, they may never collect. And, arbitration clauses in builder and warranty contracts prohibit suing, instead forcing disputes into a process where arbitrators do repeat business with the companies, a clear conflict of interest. Should a homeowner by some miracle win even a fraction of their damages in arbitration, they still may never collect.

    Sometimes the homeowners are sick for months before they even find out they have mold. Proving mold harmed them is still very expensive and difficult and many do not have the resources. Moving out of a moldy house often improves their health though some who are exposed for a long time suffer lingering effects. Far from it being ‘gold’ for them!

    As for whether the builder’s insurance should cover it or not a very important factor is not being adequately addressed: if builders built the house right in the first place, and stood behind their work, this would not be an issue. And, if so-called home warranty companies honored their end instead of selling illusory policies with the typical arbitration trap, we might not have as much of this problem either. Many new home complaints never make it to court because of these warranties which act as a liability shield for builders and do little for the consumer. Since warranties are typically RRG’s not insurance, they are barely regulated in any way meaningful to the consumer.

  • June 12, 2008 at 10:20 am
    Huh? says:
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    So you’re saying that:

    “If the insurance companies did their jobs and inspected these houses before they wrote the policies it would not be neccessary for them to keep dropping coverage all the while raising rates..”

    Please give me something to go on here because that statement just threw me for a loop… First, I trust you are referring to….homeowners policies? Else, how would you possibly expect an(y) insurance company to inspect every inch of a home whether for a “buyer” (HO policy) or a “contractor” (on a CGL policy) and miraculously tell whether it’s not going to develop problems in the future? Are you insane, or do you own an inspection company? Do you propose that someone go in every year and check the roof, walls, windows, plumbing, AC, heating or other systems and give the house a clean bill of health? Imagine the costs to keep that one going!

    The problem is that an insurance company should not be liable for every crappy contractor who uses shoddy workmanship, unskilled labor or cuts corners just to “git-er-done”.

    If you think you can cover every possible scenario, or insure everything that could possibly happen, to a house, apartment, office, or any other building typically constructed using multiple entities, nobody would be able to afford insurance.

    The exclusions are initended to keep costs down for the “majority” who are the fly by nite contractors. Albeit, from a company perspective, and seeing some of these claims… All I have to say is “you gotta be kidding me.”

    Ever hear the saying “But Doctor.. It hurts when I do this…”

    Same thing applies “Hey Contractor – your policy doesn’t cover this… SO DON”T DO IT!”

  • June 12, 2008 at 2:51 am
    Cindy S says:
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    RE: comment by “Huh?”

    That’s kind of my point, though my concern is for the consumer. If home OWNERS made claims often, or for things that aren’t covered, their rates would go up or they’d be cancelled, right? So why does the building community think they can continue to use their insurance as if it’s a warranty, and not have higher rates or cancellations? They are holding consumers to a different standard of personal responsibility than professionals, which is hypocritical and illogical.

    I am not sure but think “Jordan” is trying to say the builders insurance co’s need to do some inspection of their clients’ work before insuring them. As anyone who knows anything about building code enforcement is aware, not all new construction is inspected for codes compliance either, but a sampling of them are. At the very least, insurance co’s might consider inspecting a sampling of the ins co’s choice, before insuring that builder. This’d be very easy with tract builders who have a number of houses under construction at any given time.

    Would increased oversight make their insurance cost more? Sure…but if builders want low rates they have to be at least as “personally responsible” as consumers, and stop doing the things that make their rates go up or their policies get cancelled. I am at a loss as to why this simple, obvious concept is not on the minds of the NAHB and local building associations, and every single builder. The solution is always about putting more restriction on the consumer, (limiting their legal recourse, award caps, arbitration clauses, etc), never about making BUILDERS accountable for their own work.

    I suspect that up until now at least, the insurance industry has just gone along with this, figuring that sticking it to the consumer is the easiest route. But it’s still wrong. The insurance industry needs to hold builders accountable and STOP insuring builders who cannot build a house correctly. It is not the home buyers’ fault nor should it ever be the consumer’s duty to make sure any product is made right. What do we pay “professionals” for? Let them do it right or go under for inability to get insurance.

  • June 12, 2008 at 3:10 am
    Sharon Kramer says:
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    Dear Chris,

    Your article is well written and I think I understand what you are saying about policy language/coverage/exclusions. I just saw something similar from a self insured employer in the workers comp language.

    The entire concept does not make sense to me. Why would injury and property damage from mold be addressed any differently than, say a defectively installed Heating system that causes a new homeowner family to inhale smoke and burns up all their property?

    What it looks like from where I am sitting is that insurers are acknowledging that many people are being harmed from errors in construction causing mold growth, it is expensive for insurers and they don’t want to pay out for it anymore.

    It doesn’t make sense to me that a builder would want insurance to cover him for only things that are not expensive and occur frequently. Isn’t that the purpose of having insurance? In case of major expenses/potential “castrophic events” of their business’s financial well being?

    What is insurance for, if not to protect the builders from personal financial liability (ruin) should an error prove very costly?

    Isn’t this kind of like saying, “I will do my best to insure you, Mr. Builder…. but not for areas where you probably really need me!”

    What am I missing?

  • June 12, 2008 at 3:43 am
    Sharon Kramer says:
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    Chris,

    On further thought, it seems to me that what would be fair and logical is for insurers to cover builders for mold damage and injuries, IF the builder can show he moved quickly to correct the problem once notified there was a problem. Typically, if builders let a known problem sit, is when the damages to both human health and the buildings become extremely expensive and the situation becomes litious.

    So how about this for policy notification:

    The underwriters have been polled.

    Crying “Mold is gold” has gotten REAL old.

    And now the contractor have been told,

    insurers will leave them in the cold

    if they don’t stand behind what they sold.

    They can do the right thing or have to fold.

    Cuz mold’s NOT gold…It’s deadly!!!

    …And we are ALL sick of suffering for the actions (or lack there of) of shoddy builders.

    LOL,
    Sharon



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