Mold Exclusions, You Have Rights

Today, l’d like to discuss a common issue in insurance claims: mold exclusions. Most homeowner and commercial property insurance policies have one or more mold exclusions. As it turns out, many insurance claims which involve mold damage are not adjusted properly. The problem is that at times insurance companies apply their policy’s mold exclusion too broadly in order to save money.  This results in Louisiana policyholders’ claims being wrongfully underpaid or outright denied.

The Commissioner of Insurance, pursuant to his constitutionally created and legislatively enacted powers—La. Const. art. 4, §11 and La. R.S. 22:2—has advised carriers and policyholders alike as to the proper application of mold exclusions. He issued Advisory Letter No. 01-02 and an addendum thereto. He directed: “[mold] exclusions should not be used to deny coverage for the costs of repair and restoration of the insured premises for damage, even if some mold is present.” He went on to give an example to explain this further: when water escapes from a bursting pipe and “mold appears on the wet sheetrock or carpet, the insurer is not relieved of its obligation to make the covered repairs, including, taking the usual and customary steps of treating the damaged area with bleach and thoroughly drying it out.” The Supreme Court has shown great deference to the Insurance Commissioner’s view of insurance contracts. Doerr v. Mobil Oil Corp., 782 So.2d 573 (La., 2000) (“We believe that a full discussion of the issue in this case would be wanting without discussing the position of the Louisiana Commissioner of Insurance on this issue.”).  In a nutshell, this means that, covered damages should always we paid for by your insurance carrier, regardless of the presence of mold. Also, many policies specifically provide for mold remediation coverage.

A recent Louisiana appellate decision cited the Advisory Letter with approval. Partly by referencing the Advisory Letter, I helped a South Louisiana family settle their insurance claim that had been denied based on the mold exclusion. The carrier had wrongfully denied their claim by alleging that the extensive damage to their home’s kitchen was not covered because some mold was present. In the end, though, the truth came out and we convinced the carrier to cover the claim by showing them the applicable law and pertinent parts of the policy. My clients are well on their way to having their kitchen repaired and getting on with their lives.

If you’re claim has been denied or underpaid based on a mold exclusion, don’t take your carrier’s word for it. You have rights under your policy, and all exclusions must comply with Louisiana law. Feel free to contact me for a case consultation.