The American Association of Insurance Services (AAIS) has developed a series of personal lines’ endorsements insurers can use to address the recent growth in claims arising from mold.
The endorsements are available on an advisory basis to insurers that use the Homeowners and Mobile-Homeowners Programs maintained by AAIS, an insurance product development resource whose standardized policy forms and manuals are used by more than 600 property/casualty insurers nationwide.
Insurers report a rapidly growing number of property and liability claims for damage and illness allegedly caused by “toxic mold.” Claims have been reported countrywide, and have led to severe market disruption in Texas.
The AAIS endorsements give insurers three options:
*To exclude property and liability coverage for mold-related losses entirely;
*To provide limited coverage for mold injury or damage arising from any peril insured by the underlying policy; or
*To provide limited coverage for mold injury or damage arising only from the sudden and accidental discharge of liquids or steam from certain specified systems (plumbing, heating, air conditioning, etc.)
The endorsements specifically address losses from “wet rot, dry rot, bacteria, fungi, and protists,” biological domains and kingdoms that include all forms of mold and other organisms, as well as the organic compounds and other substances those organisms release.
“If we simply excluded fungi, we would not be addressing slime mold, which is a protist,” said Susan Luecke, AAIS director of personal lines and the principal developer of the endorsements. In-depth research into the biology of organisms and a very thorough statement of the peril was done, she noted, “to be as unambiguous as possible and make sure there is no question about what we are trying to address.”
The AAIS endorsements also grant an exception to exclusionary provisions to preserve liability coverage for bodily injury or property damage arising from any bacteria carried by food and beverages that cause food poisoning.
“In addressing the growing exposure to mold in dwellings we were careful not to eliminate the traditional liability coverage homeowners have for cases of food poisoning,” Luecke adds.
AAIS is providing the endorsements on an advisory basis and will evaluate input from its members and regulators before making any decisions on filing action.
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