White Paper

These 3 Critical Lessons Can Help Avoid Mold Remediation Costs

The frequency and severity of mold claims have spiked in recent years. The biggest losses highlight the need for proactive risk management.
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White Paper Summary

Mold is not a new environmental exposure, but it is expanding. Claim frequency and severity have been on the rise for the past several years, and losses are impacting industries outside of the traditional buyers of pollution legal liability policies.

“Mold has always been an environmental loss leader, but over the last couple of years the impact has increased dramatically,” said Toby Smith, Head of Environmental, Ironshore. “It has really hit all industries in the real estate sector, but we’ve seen a big increase in claims from the hotel and hospital worlds.”

Mold remediation claims coming from hospitality and healthcare companies typically look quite different from claims coming from real estate entities managing residential or small commercial properties — because the latter units are usually renovated individually as they become available, whereas the scale is much larger with hospitals and hotels.

In a residential building, for example, mold issues are remediated on a unit-by-unit basis as tenants bring them to the management company’s attention. As such, the management company is less likely to face a major unplanned financial impact. Hotels and hospitals, on the other hand, tend to tackle maintenance issues all at once.

“We often find that hotels defer minor maintenance issues until a planned renovation, and that the lifespan of a hospital patient room is longer than in other real estate segments. Both factor into encountering larger mold issues during planned renovation which have aggregated over time without being visible to the property managers. They may perform no renovations for seven or eight years, then shut down an entire wing or floor to work on all of those rooms at once,” Smith said.

When mold is discovered in the midst of major renovation, it can add millions to the project cost and quickly surpass the deductible.

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