The Situation: A commercial real estate campus consisting of multiple buildings is faced with a multi-million-dollar mold clean-up when mold is discovered in several of the buildings that have been left vacant for the past couple of years. It turns out that water damage went undiscovered for quite some time because the building was empty. Both the property carrier and the environmental carrier will be involved in cleaning up the water damage and the related mold infestations.

Mold Basics: Mold is part of the natural environment. In the outdoors, molds play a part in nature by breaking down dead organic matter such as fallen leaves and dead trees — but indoors, mold growth is a problem. Mold reproduces by means of tiny spores; the spores are invisible to the naked eye and float through outdoor and indoor air. Mold may begin growing indoors when mold spores land on surfaces that are damp. Mold has the potential to cause serious health problems because it produces allergens (substances that can cause allergic reactions), irritants, and in some cases, potentially toxic substances (mycotoxins). Inhaling or touching mold or mold spores may cause allergic reactions in sensitive individuals.

Coverage Basics: Site pollution policies generally cover three main exposures:

• 1st party clean up costs,
• 3rd party property damage, and  
• 3rd party bodily injury.

There are almost a limitless number of variations of these three coverage parts, and a policy can be customized to fit the needs of the Insured, the requirements of a lender, the specific risks a property represents, or the past issues already involved.

Coverage for Mold: Options are available for bodily injury, property damage and clean-up costs caused by pollution conditions emanating from a covered property. Mold is available as a covered pollutant if the insured has a professionally prepared written Mold Plan in place. Coverage for Lead Based Paint and In-Place Asbestos is also available. Multi-year policy terms are available for many risks.

Coverage Concerns: Properties with existing/prior contamination will be declined by some carriers. Residential risks with prior Mold/water damage claims will be declined by some carriers.

Policy Term & Minimums: In general, most carriers will offer extended terms on site pollution policies. The most common is 1-3 years, but longer terms are becoming common. There is typically a significant cost savings in buying a longer-term policy. Minimum premiums on any given policy start at about $5,000 without coverage for mold, and $10,000 with mold coverage.

Information from UCPM Environmental Insurance.