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Fire & Water - Cleanup & Restoration

Insurance questions grow alongside mold, fungi and algae

8/15/2018 (Permalink)

Black mold growing inside a home.

Analysis brought to you by the experts at FC&S Online, the recognized authority on insurance coverage interpretation and analysis for the P&C industry. To find out more — or to have YOUR coverage question answered — visit the National Underwriter website, or contact the editors via Twitter: @FCSbulletins.

Question: I know of the exclusions for mold, rot, deterioration, etc.  However, I do not think that is what this is. I was just reading this article about algae, lichen and moss, and it talks about how algae, lichen or moss “eat” the limestone from shingles.  This is not deterioration, per se. Looking at a standard homeowners’ policy, I could not locate an exclusion. Also, it states in the policy they pay for risk of direct physical loss; no mention of the words, “Sudden” or “Accidental.”  

Should this claim be covered?     

— Hawaii Subscriber

Answer: Good question. Algae and fungi are different organisms, as far as I can tell. So the exclusion for mold, fungus and dry rot does not apply.

All living things are broken down into kingdom, phylum, class, order, family, genus species. Since Algae and fungus are in two different kingdoms, they are different. For example, a house cat is the kingdom animalia, phylum chordata, class mammalia, order carnivora, family felidae, genus felis, species catus.

People are kingdom animalia, phylum chordata, class mammalia, order primates. Notice that people and cats share the same kingdom, phylum and class. Since algae and fungus start out with different kingdoms, they’re different.

However, by the time the roof is covered with dark streaks or moss or lichen, you have a maintenance issue, which is excluded. An insured is responsible for taking care of the covered property; if that involves having the roof pressure washed now and again, it’s his responsibility. Same with the siding; it needs to be power washed or cleaned in some areas on a regular basis. The exclusion isn’t for the plant life, it’s for letting it get so bad that it damaged the roof.

Is algae considered a contaminant?

Question: We have a claim with a company that provides swimming pool maintenance as well as lifeguards. The claimant alleges that she slipped and fell on algae that formed around a drain due to stagnant water being formed.

My question is: Would algae be considered a microorganism or organic contaminant? And if so, would it be excluded, even though the claimant was not injured by it but slipped on it?

— Kentucky Subscriber

Answer: The claimant slipped on the algae and was injured so you cannot really say she was not injured by the algae but only slipped on it. If the claimant slipped on water or tripped over a chair and was injured, the insured could still be held to have acted negligently even though the water or chair did not injure the claimant, so it is the same with slipping on algae.

As for algae, the opinion here is that algae is an organic contaminant in this instance, especially since the exclusion in question states the following: “including but not limited to mold, mildew, fungus, spores.” Algae is a plantlike organism, a biological (living) organism, so the exclusion would apply.

Deciphering the microorganism exclusion

Question: The insured is a hotel. Claimant and her children and husband stayed at the insured hotel for seven days. A week after the claimant left the hotel, she went to the doctor and alleged she sustained bed bug bites. We have received reports from the claimant’s doctors stating that she had scabies. In review of the microorganism exclusion (AD68830413), it excludes biological organisms. In review of the definitions of “scabies” (Sarcoptes scabiei), it does not appear to fall into this category. We have reserved our rights at the present time but would like your opinion as to whether or not you agree that scabies would not be considered a microorganism.

— New Jersey Subscriber

Answer: The policy does not define the term “microorganism,” so we turn to the dictionary. ‘Scabies’ is defined as, “an infestation of the scabies mite (Sarcoptes scabiei).”

‘Microorganism’ is defined as, “any organism too small to be viewed by the unaided eye, as bacteria, protozoa, and some fungi and algae.”

‘Organism’ is defined as, “a form of life considered as an entity; an animal, plant, fungus, protistan, or moneran.”

This description of scabies from MedicineNet.com leaves no doubt that scabies are a form of life too small to be viewed by the human eye:

Scabies is an itchy, highly contagious skin disease caused by an infestation by the itch mite Sarcoptes scabiei. Mites are small eight-legged parasites (in contrast to insects, which have six legs). They are tiny, just 1/3 millimeter long, and burrow into the skin to produce intense itching, which tends to be worse at night. The mites that infest humans are female and are 0.3 mm-0.4 mm long; the males are about half this size. Scabies mites can be seen with a magnifying glass or microscope. The scabies mites crawl but are unable to fly or jump. They are immobile at temperatures below 20 C, although they may survive for prolonged periods at these temperatures.

Ambiguities in the policy must be read in favor of the insured, and exclusions must be narrowly read. However, the common meaning of the terms “microorganism” and “organism” leave no room for ambiguity. Scabies mites are alive and microscopic. Thus, scabies can be considered microorganisms. It is our interpretation of the facts that scabies are excluded here by the microorganism exclusion.

Artillery fungus damage

Question: Our homeowner recently had mulch delivered to his home by a local nursery. After the mulch was spread around his plants, some artillery fungus sprung from it and attached themselves to the home. The paint job is now ruined and substantial expense will be involved to remove the fungus and re-paint the home.

The insurer has denied the claim based on the exclusion of the, “release, discharge, or dispersal of pollutants or contaminants.” This interpretation seems rather harsh to us and we would appreciate your thoughts on the matter.

— Pennsylvania Subscriber

Answer: The current ISO homeowners form 3 excludes damage done by the “release, discharge, or dispersal of pollutants or contaminants.” Webster’s Ninth New Collegiate Dictionary says that a contaminant is something that contaminates — it soils, stains, corrupts, or infects by contact or association. This is what the artillery fungus has done and such damage would be properly excluded by an ISO homeowners.

However, as we have said on other occasions, we do not believe that this is the type of claim intended to be reached by the exclusion. It is a sudden and accidental claim and out of the control of the insured. The insurer must examine its own claims-paying philosophy regarding payment of the claim. But, as we said, it is technically not covered.

On the other hand, one independently filed homeowners form does not contain such wording. Rather, it excludes contamination — a process that occurs over time. That is what we believe to be the spirit of the exclusion — to avoid coverage for the long-term contamination and pollution exposure.

If the homeowners carrier does pay the claim, then it has a cause of action against the nursery that provided the mulch. However, if the homeowners insurer denies the claim, then the insured homeowner must institute his own action against the nursery.

When mold remediation is part of the job

Question: Our insured is a pest control business. Endorsement CG 24 25, limited fungi or bacteria coverage, is attached to the insured’s CGL form and the question we have is this: Does this endorsement cover the insured’s exposure for the mold work he performs?

The insured will tear out and treat mold ridden areas of a home or business. Does CG 24 25 provide coverage for the insured for the work he does to contain, treat, and neutralize mold? If the insured completes his work and then the mold comes back in a month or so, will he have coverage for a claim made against him?

— Pennsylvania Subscriber

Answer: CG 24 25 will provide liability coverage for the insured is a claim is made against him for bodily injury or property damage based on the inhalation or ingestion or contact with or exposure to mold (that is, fungi) or bacteria within a building or structure. So, if the insured treats a house and then down the road, the insured is sued because the mold comes back and causes a health issue, the endorsement will provide coverage.

Now, there is no coverage for re-doing the insured’s work, that is, correcting the previous work. The endorsement only applies to claims for BI or PD and does not apply to any expense or costs to do any re-mediating or correcting any previous negligent work on the part of the insured.

Mold coverage and a rot endorsement

Question: An insured has a very large two-story deck off the front of his home. He lives on the Oregon Coast, so the wood has a tendency to rot and decay faster than in other regions. The underside of the deck is open, which is clearly visible from the ground floor. It was found that one of the 6×6 wooden support posts along with other parts of the deck has started to rot and needs to be replaced. The insured believes coverage should be extended under the wet or dry rot endorsement. Your thoughts?

— Minnesota Subscriber

Answer: The policy ( HO 00 03 02 00 with HO 04 05 12 02) has the usual wear and tear exclusion, as well as the mold, wet or dry rot exclusion. The endorsement provides coverage for fungi, wet or dry rot when the loss is caused by a peril insured against. The insured’s damage to the deck is simply wear and tear and is not covered, even by the endorsement.

The endorsement excludes the presence of condensation, humidity, moisture or vapor over a number of weeks unless the damage is unknown to the insured and hidden. As the deck is readily visible, and the insured knows he’s in an area that is prone to faster decay due to being on the coast, the damage to the deck was not hidden.

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