WHY CPL: Fungi/Bacterial/Pollution Liability Insurance is a MUST have when operating a restoration company. The following link is the detailed version of the synopsis listed below:
WOULD YOU WANT YOUR COMPANY INVOLVED AND NAMED IN SUCH A CLAIM?
ARTICLE TITLE: Roof Repair Leads to $1 Million Mold Claim
A home the restorer had worked on in 2008 to repair a tree-damaged porch roof was sold to a husband and wife in 2012. The work was finished without incident or complaint by the home owner in 2008. No work was done on the roof of the home itself.
The purchasers of the home decided in 2014 that the home they had purchased was infested with mold. The new owners of the home are telling the court in their lawsuit that their home is now uninhabitable and valueless, plus the husband and wife are ill as a result of living in it.
Seeking money to cover their loss, the home buyers decided to sue:
• The lender who had provided the financing on the purchase of the home without first evaluating the condition of the property,
• The home inspector who missed the mold in the home during the inspection, and
• The restoration contractor who had repaired the porch roof in 2008.
The plaintiffs are claiming more than $1 million in damages.
Business Liability Insurance: How it’s Supposed to Work
A business liability insurance package should insure claims arising from a contractor’s operations and completed operations on a seamless basis over time. The core business liability insurance policy used to accomplish this is the Commercial General Liability (GL) insurance policy. The GL policy has some exclusions, which create insurance coverage gaps that are filled by purchasing other types of liability insurance like Automobile Liability, Workers Compensation, Professional Liability and Contractors Pollution Liability (CPL) insurance.
But wait, the contractor was not working on a mold remediation, they repaired a roof. The proximate cause of mold in the built environment is water and water damage should be covered by the GL policy, right? A lot of contractors think that is the way things work in their insurance coverage – and they are dead wrong. Get a speck of mold involved in a loss and you can throw the GL policy out the door if it has a mold exclusion, which they have all had since 2005. The same concept applies to bacteria and Category 3 water.
Advice: This was a perfect case example to illustrate why
• Real or perceived water intrusion related to a contractors work can lead to uninsured mold losses many years after a project was completed.
• Changing insurance vendors can create coverage gaps for future claims arising from completed operations.
• 90% of restoration firms today have inherently flawed GL coverage interfaces. If your GL policy is with a different insurance company than your CPL policy and the GL policy has a fungus/bacteria exclusion endorsement on it, you can be certain that you are buying inherently flawed liability insurance coverage.
• When faced with a mold/bacteria/Category 3 water loss, immediately seek out expert advice on how to present that claim to your insurance companies. The way you present the claim to the adjuster can avoid a lot of headaches and lost sleep.
There are three things every contractor should do to avoid such a problem with claims adjusters on mold/bacteria/Category 3 water claims.
1. Verify that your CPL coverage has continuity of coverage for your completed operations.
2. Lock onto a functional liability insurance design and stay the course with your insurance vendors as long as you can. Changing insurance vendors creates unneeded complexity and coverage gaps in a claims situation that spans multiple policy periods. However, do not lock on to a fatally flawed insurance design.
3. If a claim is made against you seeking damages associated with mold/bacteria/Category 3 water, get expert help in reporting that loss.
Virtually any job that could be associated with a water loss can create a claim for mold damages many years after a project is completed. Highly specialized liability insurance coverage is needed to address these loss exposures. The contractor in this example had purchased state-of-the-art liability insurance coverage since 2010 and still encountered problems getting the claim covered. At the end of the day, this contractor had liability insurance. Many would not be as lucky.