January 2013

Property damage caused by mold can be a real problem – especially here in Florida.  The combination of Florida’s humid climate and often rainy weather create the perfect petri dish for the creation and growth of toxic and damaging mold.  Fortunately, most homeowner’s insurance policies provide coverage for the damage caused to your property by mold.  Unfortunately, the coverage provided by most policies is extremely limited.  Up until a few years ago, damage caused by mold was covered under Coverage A of your homeowner’s insurance policy.  Coverage A of your policy provides coverage to the main structure and sets forth a policy limit which, at least in theory, is related to the replacement cost of your entire home.  A few years ago, the insurance industry lobbied for and were allowed to alter their policies to include the following language: 

Fungi, Wet or Dry Rot, Yest or Bacteria.

a.   We will pay up to $10,000 for:

(1)  The total of all loss payable under Section I – Property Coverages caused by “fungi”, wet or dry rot, yeast or bacteria;

(2) The cost to remove “fungi”, wet or dry rot, yeast or bacteria from property covered under Section I – Property Coverages;

(3) The cost to tear out and replace any part of the building or other covered property as needed to gain access to the “fungi”, wet or dry rot, yeast or bacteria; and

(4) The cost of testing of air or property to confirm the absence, presence or level of “fungi”, wet or dry rot, yeast or bacteria; whether performed prior to, during or after removal, repair, restoration or replacement.

The cost of such testing will be provided only to the extent that there is a reason to believe that there is the presence of “fungi”, wet or dry rot, yeast or bacteria.

Now – what does all that mean?  There are two kickers to this policy language.  First, no matter how catastrophic your damage is or how high the cost to repair – your policy will only provide coverage for up to $10,000 for these repairs.  Secondly, the insurance company can deduct from this limit the amount the insurance company spent initially investigating this loss!  In other words, if mold caused $50,000 worth of damage to your home and, upon contacting the insurance company, the carrier spends $2,500 investigating the existence of the mold damage and calculating the amount of the loss, you would only be provided coverage for $7,500 to repair your home ($10,000 coverage minus $2,500 investigation expense incurred by carrier).  You would then be on the hook for the remaining cost of repairing your property. 

Although the mold coverage available under your homeowner’s insurance policy may be very limited, there may be other portions of your policy which may provide coverage.  Therefore, it is important to seek legal advice from an attorney with experience with water and mold claims in order to best protect your rights.

Back in 2007, the insurance industry lobbied for the passage of an alternative dispute resolution mechanism for disputed sinkhole claims – a process which they cleverly entitled “Neutral Evaluation”.  The concept was that if there was a disagreement between a property owner and an insurance company as to any issue related to a sinkhole claim, either party could request that the matter be submitted to the neutral evaluation process.  Upon submission to neutral evaluation, a “neutral” third party expert would review all available reports and estimates and render an opinion as to the cause of the loss and/or the cost to repair.  (Please refer to my previous post re: Neutral Evaluators for a further explanation as to why I place the word “neutral” in quotation marks.)

The new wrinkle in this process is that Citizens is now electing to ignore the recommendations of the neutral evaluator – even when Citizens demanded that the property owner submit to the process!  The scenario we are seeing is that as soon as Citizens senses a dispute between its experts and the property owner, Citizens will immediately file for neutral evaluation in order to prohibit the property owner from filing a law suit.  BUT – if the neutral evaluator then decides that Citizens’ position on the claim is incorrect and that either coverage should be found or a better repair method is warranted, Citizens will then refuse to honor such decision and will mandate that the property owner agree to Citizens original position.

Clearly, Citizens’ current tactics are in direct contravention of the purpose of the neutral evaluation statute.  Citizens new stance on this process is especially shocking in light of the fact that the neutral evaluation process was a product of the insurance industry’s efforts to limit property owners rights with regard to sinkhole claims.  Clearly, it is now more important than ever to seek the advice of a qualified lawyer who specializes in sinkhole claims in order to best protect your rights against the insurance company.