Mold infestations can have significant financial exposure for property owners, insurers, responsible parties, and third parties in buildings where mold damages have been identified and require remediation.
A typical pollution liability policy may contain coverage for mold cleanup under a “microbial endorsement” and treat mold as a “pollutant” within the policy. However, coverage can be complex and varies significantly from policy to policy. Given the potentially high costs of mold remediation and the varying scope of insurance coverage, cost management during the investigation, cleanup and restoration phases is critical for all parties involved to mitigate the loss in the most cost-effective option possible.
This edition of HETI Horizons explores cost management and control strategies in mold response/mitigation within the framework of environmental/pollution liability policies. It highlights the factors driving mold claims, risk management, best practices, and recommendations for ensuring cost-effective mitigation strategies.
Understanding Mold as a Pollution Condition
Mold is a type of fungus that grows and can amplify naturally in the exterior or interior environment – in the presence of favorable conditions including a sufficient food source (organic material), nutrients, temperature, and water source. Mold growth may damage interior building materials and become unwanted, or a “pollution condition” – when it spreads beyond normal levels because of moisture intrusion, poor ventilation, or building defects. Within insurance, particularly pollution legal liability (PLL) or contractor’s pollution liability (CPL) policies, mold is typically considered a biological contaminant or microbial matter.
Common Scenarios in Mold Claims
Mold-related losses generally rise out of three different scenarios:
- Sudden and accidental water sources in a short period of time – such as from storms, flooding, or water/plumbing leaks
- Chronic water conditions over a longer period of time – such as from chronic water leaks, HVAC issues, or roof leaks over time
- Construction defect issues arising from an insured’s workmanship or product – such as in new or renovation construction, product defects, improper installation, etc.
Cost Drivers in Mold Mitigation
Mold mitigation costs vary widely depending on:
- Extent of contamination: Minor surface mold vs. systemic contamination.
- Access issues: Mold behind walls, under flooring, or in HVAC systems increases labor and time.
- Delays in notification and response: The longer mold is allowed to spread, the more extensive (and expensive) the remediation may become. Mold amplification can occur within 24-72 hours following a water event. So it becomes time critical to mitigate the water loss and stop the mold growth to alleviate spreading the damages.
- Lack of documentation: Insufficient inspection or lack of early moisture detection complicates claims and increases potential coverage disputes. Failure to identify, separate and document water damage from mold damage during the initial assessment and remediation process can result in challenges determining reasonable and necessary costs at the completion of remediation activities.
- Regulatory compliance: State or local laws may mandate specific licensed personnel or protocols for mold remediation.
Best Practices in Mold Cost Control
Early Detection and Immediate Response: Timely identification of moisture intrusion and mold conditions dramatically reduces remediation costs. Use of regularly scheduled facility inspections, moisture meters, and infrared imaging can detect early-stage issues. It is recommended that property owners and facility managers:
- Conduct routine inspections of high-risk areas (basements, crawl spaces, windows, roofs, HVAC systems).
- Install moisture alarms and dehumidifiers.
- Address leaks or water intrusion immediately.
- Quickly identifying and fixing the source of moisture can prevent mold from amplifying and reduce the severity of cleanup.
Use of Pre-Approved Contractors: Using qualified environmental contractors and Certified Industrial Hygienists (CIHs) – with pre-negotiated rates and proven remediation protocols – can limit cost inflation, reduce disputes, and facilitate compliance with industry guidelines and policy conditions.
Scope-of-Work Verification: Before starting remediation, a clear scope of work should be defined based on a third-party assessment conducted by a CIH. The scope should be commensurate with the extent of contamination and industry-accepted guidelines. The scope should include:
- Defined areas for containment
- Specific quantities of contaminated materials to be removed or cleaned
- Types of chemicals and equipment to be used
- Estimated labor hours, cost, and schedule
- Specific clearance protocols/criteria and achievable endpoints, that are clearly understood among all parties
Having a clearly defined and documented scope reduces the risk of “scope creep” and unexpected cost overruns.
Approved Remediation Proposals: Before starting remediation, proposals based on the approved scope of remediation work should be reviewed. The proposals should be commensurate with the extent of contamination and industry-accepted guidelines. Having clearly defined proposals should reduce the risk of “scope creep” and unexpected cost overruns. In many cases, multiple/competitive bids should be secured from several experienced, regional vendors familiar with protocols for cleaning up mold damages.
Third-Party Oversight: Using a qualified CIH pn the project site during the remediation ensures the work is necessary and complete. The CIH can act as an objective party, offering defensible data and preventing unnecessary remediation activities disputes over the extent of contamination or the effectiveness of the cleanup.
Documentation and Chain of Custody: Detailed records of site conditions, testing results, photographs, remediation activities, and disposal documentation are critical for both cost recovery and defending against third party claims. Detailed documentation of the following should be maintained:
- Inspection results and testing data
- Daily labor logs and time tracking
- Materials and equipment used
- Waste disposal records
- Invoices with line-item breakdowns
This information supports cost recovery and can defend against inflated claims or third-party litigation.
Reasonableness and Necessity Reviews: Insurance carriers often conduct cost reviews to assess whether charges are reasonable, and remediation is necessary. Insureds can prepare for this by ensuring line-item breakdowns and daily job logs including subcontractor personnel logs, equipment usage logs, and personal protective equipment logs are maintained. Using an experienced CIH to review these project documents can assist with separating pollution from non-pollution related costs.
HETI: Partnering for a Healthier, Safer Workplace
Mold response and mitigation can be expensive, but costs can be managed properly with the right strategies for each project. From early detection and accurate scoping to thorough documentation and the use of qualified professionals, cost control in mold remediation requires proactive planning and disciplined execution.
HETI’s staff of experienced Certified Industrial Hygienists can assist clients with proper assessment, project oversight, and invoice review – critical for managing and controlling mold remediation costs effectively.
To find out more about this and other HETI industrial hygiene services, please contact us.
Michael Henderson, PhD, CIH Director, Industrial Hygiene
Phone: 978.263.4044 development@hetiservices.com