Mold has become a rising source of homeowner insurance claims. The claims resulting from mold can be as high as $30,000 according to data from the Insurance Information Institute. In contrast, a typical homeowner’s insurance claim from other causes is only about $4,000. As a result, mold removal has become an important issue for property managers and real estate buyers.
Some Facts About Mold
Mold is a fungus to which some people are sensitive, but certain types of mold can affect anyone’s health. While mold can be visible, it can also be growing in hard-to-detect areas. Mold flourishes in water-soaked conditions, but humidity alone can be sufficient for mold growth. As the presence of mold has become a rising cause of litigation, realtors and property managers have to be on alert.
Realtors and Mold Disclosure
An important reason for the higher cost of mold-related insurance claims, compared to other clams filed under a homeowners policy, is the added expense for temporarily vacating premises for mold removal. The National Association of Realtors is aware that lawsuits filed for not disclosing a property’s problems are on the rise. According to the National Association of Realtors 2011 Legal Scan survey, 75% of realtors identified failure to disclose as a top concern for them. Mold is one of the litigated non-disclosure problems.
In the past, the burden was on the buyer; that is no longer the case. In the real estate market today, sellers are responsible for nondisclosure. An April 2002 report of the Mold Working Group of the Risk Management Committee of the National Association of Realtors indicated realtors should have sellers disclose “known existing or past mold presence (other than that which is known not to adversely affect the property or its occupants) and other material defects known to the seller.”
The rationale for this disclosure according to the report was that: “homeowners and apartment residents across the country are filing lawsuits in increasing numbers claiming that indoor mold has harmed their health.” Realtors should be alert to certain signs during property inspections. Staining and discoloration on walls and/or ceilings and a moldy odor are telltale signals of the presence of mold.
Realtors May Be on the Hook for Liability in Certain Cases
Home inspectors are now adding disclaimers to their reports to limit their liability. Homeowners’ insurance policy coverage restrictions are now also common. Realtors have been alerted to the fact that they should be ready for the chance they’ll be held liable for mold problems by homebuyers. In fact, real estate agents or brokers have been liable in certain situations. Unfortunately, modern energy efficient building methods have played a role in the increasing incidence of mold.
Homeowner Policy Coverage Limitations
Mold arising from water damage caused by maintenance problems is not covered by standard homeowner policies. Maintenance problems of this type include persistent leaks and water seepage, humidity, landscaping, drainage and other condensation problems. As most homeowner policies exclude flood overage, any mold caused by this problem is also excluded from coverage. However, accidental water problems such as burst pipes are covered by most policies, as are problems caused by damage caused by rainstorms.
To protect themselves, homeowners should make sure their pipes are in good condition. Many insurance companies are now limiting or excluding mold-related damage, irrespective of source. Homeowners should read their annual policy coverage changes to avoid getting a surprise. They should keep an eye out for shifts in mold-related insurance policy overage.
If you want a policy that provides mold coverage, there are some available options. For instance, for more money, you may get limited coverage. You may also get a policy that caps the payout amount, or a policy that would only pay certain costs related to mold-related damage. Before they buy any property, homebuyers should get professional help to find out if there are any mold issues. Homebuyers can also make the sale contingent on a mold-free property as confirmed by an inspection.
Property buyers can also add contractual stipulations that include disclosure of conditions that might indicate a potential for mold, such as:
- Water intrusion
- Air-quality tests
- A history of repairs
- Environmental health-related complaints
The Presence of Mold in Rental Apartments
Renters who move into apartments without checking for mold can get an unpleasant surprise. Rather than be alerted to the problem by an allergic reaction, it is better to check for mold before the renter moves in. Renters should also protect themselves by finding out when the landlord is liable in such circumstances. Since mold often grows in hard-to-access areas, professional help is often needed to locate the source of mold.
Professionals can locate mold spores by using air samples, moisture meters and other techniques. After the location has been identified, remedial measures need to be undertaken for mold removal. These remedial measures are the landlord’s problem in case of renters, and the homeowner’s or property manager’s problem in other cases.