Insurance
Fire Sprinkler Contractors
Mold and Fungi Insurance Coverage
By Patrick Barnes
I
f you have read the exclusions in your General liability
policy, you will note they exclude organic pathogens,
mold, or fungi. All contractors that install fire sprinklers,
plumbing, or HVAC have mold and fungi exposure that is
excluded on their General Liability policy.
about 10,000 to 20,000 mold claims pending. The growth of
reported claims filed is continuing to grow. A large, uninsured
mold claim could put you out of business. Also, the number
of mold removal companies has grown leaps and bounds from
five years ago, which reflects the increase in reported claims.
What is mold and fungi?
Let’s look at some real court cases:
How does this mold and fungi exposure
affect the fire sprinkler contractor?
First, mold and fungi (microscopic filamentous fungi) exist In California, the Superior Court settlement of a lawsuit
everywhere. They can grow on
for mold in the ceiling tiles of
“Mold and fungi from water damage is a
any organic material, as long as
a judge’s courtroom chambers.
moisture and oxygen are present. litigation avenue for attorneys claiming bodily The judge’s settlement was
Mold and fungi release spores,
$40,000 in addition to $277,500
injury and property damage due to fungi and from 10 contractors who built
as part of their reproductive
process, that are claimed to cause
the County Court house where
mold contamination when small leaks in the
illness to humans, and to damage
mold was found. The judge
fire sprinkler system allow mold and fungi to expected to get five more
almost any surface they come in
contact with. Mold undetected
contractors to settle for $80,000
grow over time.”
can destroy a building with slow
to $180,000. The judge was
rot and give the people working or living in the building out of work for a year with illnesses she attributed to mold
serious medical issues, including respiratory illness. Mold exposure. She got $317,550 and is hoping for another $180,000
and fungi from water damage is a new litigation avenue for for a grand total of …. $497,500!
attorneys claiming bodily injury and property damage due
In Florida, one of the nation’s largest real estate investment
to fungi and mold contamination when small leaks in the fire trust will pay a multimillion-dollar settlement because one of
sprinkler system, plumbing, or HVAC system allow mold and their properties had 450 units out of 452 units that had mold
fungi to grow over time. When mold goes indoors it grows and fungi spores equal to 100 times the number of spores
very fast. It can weaken a person’s immune system, leading to naturally occurring outdoors. The more than 1,000 residents
other medical issues like infections of the lungs, in addition to of the property filed a class action mold lawsuit… The total
the damage to property.
settlement for repair, damages, and related cost of $25,000,000!
Since your General liability policy excludes mold and
fungi, if you have not purchased a separate mold and pollution
liability policy… you are self-insured.
Most of the mold claims my clients have reported have come
from the use of CPVC, not steel, pipe, even though steel pipe
can also leak. CPVC pipe is used in residential construction
and the CPVC pipe is usually installed in the attic, where the
HVAC contractor is installing his duct work. In the tight space
in the attic, the HVAC contractor, or your installer, could easily
step on your CPVC, causing a small crack in the pipe that, if
not detected, could lead to a mold and fungi claim. It is almost
impossible to prove the HVAC contractor caused the leak by
stepping on the CPVC pipe. If you don’t have mold and fungi
coverage, you will have to pay the cost to settle the claim
yourself.
From my research, California, Texas, and Arizona, have
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The average cost to just to remove the mold
can run $25,000 or more, depending on how
bad the mold has grown.
What can the fire sprinkler contractor do
to protect his company for mold claims?
• I recommend that you purchase a mold and pollution policy
to limit your risk and transfer it to the insurance company. You
must be careful when purchasing mold and pollution coverage,
because some jobsite pollution policies don’t include mold and
fungi coverage. Mold is a separate exposure from that of job
site pollution coverage.
I just quoted a fire sprinkler contractor a mold and pollution
quote based on his gross receipts of $540,000, a limit of
$1,000,000 per claim with a $2,000,000 aggregate limit annual
premium of $3,307.75. The policy has a $5,000 deductable. So
you can see the coverage is not out of reach, even for the small
contractor.
February 2014
• Store all CPVC/PVC pipe out of the sun or heat, and follow
the manufacturer’s guidelines for storage and cure time.
• Pay close attention to your pressure test of the system,
looking for small leaks
Mold and fungi exposure is an area that I don’t recommend
that you self-insure. Instead, purchase mold insurance and limit
your exposure to just the deductable of $5,000. Mold and fungi
claims are a new frontier for legal action targeting fire sprinkler,
plumbers, and HVAC contractors.
Protect yourself and your business…buy mold coverage!
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About the Author:
Patrick Barnes is Assistant Vice President at Tutton Insurance
Services Inc., 800-750-1002, (949) 417-4057, Fax 949-4171036, pat@tutton.com, www.tutton.com.
Liability Insurance Programs for
Fire Suppression Contractors
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Contact: Patrick Barnes, 800-750-1002 ext. 103
Direct Fax 949-417-1036, Pat@Tutton.com
Tutton Insurance Services, Inc.
2913 S. Pullman Street, Santa Ana, CA 92705
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February 2014
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