Poor air quality is an issue that is so widespread that the data around it may seem hard to believe.

But the facts are that 99% of the world’s population lives in areas where the air quality is so poor that it exceeds World Health Organization (WHO) limits for pollutants. Pollutants are not just outside, they are in the air within our buildings and can be caused by systemic issues from the building itself, such as mold, building materials (example: volatile organic compound (VOCs) off-gassing) and indoor use of gas appliances. Indoor air can also be influenced through a collection of sources from outdoor pollutants, which have migrated indoors, such as pesticides, smoke (including wildfire), petroleum products (gasoline) or other aerosols.

Some indoor pollutants are aggregated within the building from building design and naturally occurring pollutants such as radon collecting in basements or below-surface building structures and are only deemed pollutants due to the building construction in such areas of high concentration and as a source of the construction type itself.

These pollutants, while derived from a variety of sources, are collectively known as indoor air pollutants.

With most people in the United States spending 90% or more of their time indoors, indoor air pollution can arguably pose an even greater threat than other sources of pollution to human health, with exposure levels two to five times higher than outdoor levels, according to the US Environmental Protection Agency.

The scope of indoor air pollution, particularly mold exposure, represents a massive public health challenge that often goes unnoticed until serious consequences emerge. The WHO reports that 2.31 million deaths annually are linked to indoor air pollution exposure, making it a significant risk factor for heart disease, pneumonia, stroke, diabetes and lung cancer.

“The costs of indoor air pollution are not only astonishing from a statistical standpoint, but are escalating through liability litigation as a source of alleged causation, or exacerbation or health concerns over time, and can aggregate into serious bodily injury allegations,” said Jamie Langes, vice president and environmental underwriting officer for Philadelphia Insurance Companies (PHLY).

Several factors increase the likelihood of adverse reactions to indoor air pollution exposure, such as age, pre-existing medical conditions and individual sensitivity (allergies) to the specific pollutant of concern.

Jamie Langes, vice president and environmental underwriting officer for Philadelphia Insurance Companies

Indoor air pollution can be hard to detect, but yet, it holds significant health risks for building occupants, resulting in potentially severe financial liabilities for property owners if third parties are negatively affected by indoor air quality issues in their buildings.

According to Langes, understanding these risks is crucial for any building owner or operator, but especially for sensitive population end-user risks such as habitational property management, senior care or living facilities, healthcare and even hospitality risks.

For risk managers, typical key indoor air quality concerns often center around moisture intrusion and resulting mold conditions behind walls from piping or seeping through ceilings from leaks or roof breaches, as well as legionella bacteria aggregation and distribution through building piping.

Just recently, an outbreak of Legionnaires’ Disease, which is caused by inhaling water droplets contaminated with the Legionella bacteria, killed seven and infected 114 people in Harlem, NY. The bacteria flourish in the condensers of air conditioning systems, hot tubs, humidifiers and other places where water may collect.

“Environmental concerns from properties traditionally developed from outdoor pollutants and largely involved a risk of catastrophic cost from remediation, both in terms of length of the project and scope. Now, concerns are expanded to include mold and legionella, whereby we see a more frequent issue to also address the human health considerations as a result of these indoor pollutants,” Langes said.

Mold is a naturally occurring fungus with approximately 100,000 known species, exists virtually everywhere and remains invisible to the naked eye as it floats through indoor and outdoor air. The fungus requires only moisture and organic material to consume—such as wood, paper, carpet, drywall or furniture—to spread and colonize rapidly throughout buildings.

The financial impact of mold exposure is staggering. In the United States alone, an estimated $22.4 billion is spent annually on illnesses caused by mold exposure, according to research published in the Journal of Environmental and Public Health. This figure underscores the economic burden that extends far beyond immediate health care costs to include lost productivity, property damage and legal expenses.

Mold manifests in various forms, textures and colors, sometimes appearing as discoloration or stains on surfaces, while other times taking on fuzzy or rough appearances depending on location. Its ability to hide behind drywall or above ceilings due to long-term leaks or unnoticed water exposure makes detection particularly challenging, often allowing extensive growth before discovery.

“Mold needs only moisture and something to ‘eat,’ be that building content or materials such as wood, paper, carpet, foods, drywall and furniture, etc. There is no shortage of opportunities for both moisture being in places unexpected from aging infrastructure, moderate to low maintenance activities for buildings, and changing weather patterns, as well as something to “eat” in size and breadth of buildings in general,” Langes said.

Legal Liabilities and Financial Consequences

Property owners face substantial legal and financial risks when mold problems are inadequately addressed or ignored entirely. Insurance companies have documented increasing frequency and severity of mold-related claims from both property owners and tenants of habitational properties, with liability extending across multiple areas including bodily injury, property damage, remediation costs, legal expenses and defense costs.

Two significant case examples illustrate the potential financial exposure property owners face. In one instance, tenants of an apartment complex alleged that mold exposure impaired their ability to function, filing bodily injury claims including headaches, inability to concentrate and difficulty breathing. The resulting lawsuit generated defense costs exceeding $1 million with settlement costs surpassing $250,000, creating a total liability of more than $1.25 million.

A more severe case involved a family’s apartment where mold exposure triggered an asthma attack in a child, resulting in oxygen deprivation and subsequent brain injuries.

Despite months of tenant complaints, the property manager ignored a severe mold infestation. The family's lawsuit against the property owner resulted in a $9 million settlement with additional legal expenses exceeding $1 million, creating total liability of more than $10 million.

These cases demonstrate three primary liability routes property owners face. Remediation costs can be substantial as mold easily spreads through HVAC systems throughout entire buildings, often requiring costly professional services from certified industrial hygienists to ensure proper and complete remediation according to governmental guidelines.

Bodily injury claims arise when mold exposure causes or exacerbates allergic reactions, asthma or other respiratory complaints, including irritation of eyes, skin, nose, throat and lungs. These effects manifest as hay fever-like symptoms such as sneezing, runny nose, red eyes and skin rashes, with aggregated daily exposure potentially causing severe bodily injury, particularly in sensitive populations, including elderly individuals and young children.

Property damage occurs when mold settles on building materials and content, gradually destroying the surfaces on which it grows. Once mold affects items such as furnishings or drywall, complete removal of contaminated surfaces often becomes the only remedy, resulting in significant replacement costs.

Insurance as Risk Management Partners

Despite the scale and impact of mold exposure, methods exist to not only detect mold, but to mitigate it effectively, and thus reduce liability for property owners and property managers.

Insurance companies serve as valuable partners in both coverage and risk mitigation for property owners facing mold liabilities. Comprehensive mold insurance coverage helps property owners manage exposures through multiple liability routes, with associated legal expenses and defense costs for investigating allegations and proving negligence or fault.

“Make sure to have the right mold coverage in place,” Langes said.

“The litigation for habitability, especially for real estate clients, has increasing frequency on targeting mold specifically as a part of the overall claimant’s concerns. Many property policies
specifically preclude mold, sublimit the coverage, or restrict it materially. Pollution insurance is designed to go beyond other property and casualty lines for this specific contaminant of concern and give better support to our clientele by offering an opportunity to achieve a more holistic program, which includes mold. PHLY’s suite of environmental coverages has the capacity to review insurance solutions in partnership with our insured’s risk management practices. Together, we can better mitigate against potential remediation costs for mold, or bodily injury and property damage allegations made by tenants.”

The most effective approach to mold risk management focuses on moisture control as the primary prevention strategy. Property owners can utilize property monitoring devices, such as PHLYSENSE, for alerts when water leaks are detected. Property owners should also implement immediate repairs for all water problems or leaks, and ensure proper cleaning and drying of building materials and furnishings within 24-48 hours to prevent mold growth.

Reducing indoor humidity through proper ventilation of bathrooms, dryers and other moisture-generating sources, combined with strategic use of air conditioners and dehumidifiers, creates an environment less conducive to mold growth. These preventive measures, when combined with appropriate mold insurance coverage, create a comprehensive risk management approach.

Beyond traditional coverage, insurance companies offer specialized environmental coverages and risk management protocols specifically designed for habitational properties.

PHLY offers a wide range of risk management services in the area of property, liability, auto and areas such as abuse prevention and protection of elderly populations.

“We have top-rated customer service, breadth of operations across the country, expert and tenured underwriters with backgrounds in environmental engineering, and brokerage. We built our business upon a solid knowledge base and combined it with modern forms to bring best-in-class terms and conditions to the marketplace for indoor air quality issues, along with traditional environmental risks. Because of our modernization and continued goals towards bringing value to the marketplace, PHLY is poised to be the premier carrier for pollution insurance. This not only includes our capabilities to partner on mold and legionella concerns in our product solutions, but also through the entirety of the PHLY offerings, such as PHLYSense, and ServiceNow trainings and management system tracking through our risk management group,” Langes said.

PHLY’s risk management group is comprised of seasoned professionals that have experience in risk analysis, loss prevention and safety. The risk management team can work not only with policy holders but also agents to provide a holistic approach to managing risk, protecting human health and lessening liability exposures.

These partnerships provide property owners with both financial protection and expert guidance on procedures for inhibiting indoor air pollution issues, such as mold growth, creating a proactive approach to liability management that benefits both property owners and tenants. &