Our insured was away from his home for a period of time over the winter. He had left the thermostat set on low, but it malfunctioned and the furnace never came on during an extremely cold spell. The pipes froze and burst, and when the homeowner returned he found considerable water damage as well as mold beginning to form.

We have no problem paying for the water damage, but are not sure whether we owe for the mold damage. The ISO HO 00 03 10 00 states that the policy does not pay for mold, fungus, or wet rot unless it is "hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure if such loss results from the accidental discharge or overflow of water or steam from within [a] plumbing…system." But here, the mold was not hidden; it was obviously beginning to grow.

Do we owe for this loss? Would it make any difference if endorsement HO 04 27 04 02 limited fungi, wet or dry rot, or bacteria coverage were attached?

Colorado Subscriber

The cost to clean up the mold is covered. The proximate cause of the loss was the pipes freezing and then bursting. The same would be true if, for example, a tornado ripped the roof off and before remediation could effectively be undertaken mold began to develop. The mold would be attributable to the windstorm peril.

The accidental discharge or overflow of a plumbing system cause of loss is a different covered cause of loss than freezing of pipes. The language in the form makes that clear. The mold resulting from accidental discharge is covered only if it is hidden, but nothing is said about mold resulting from freezing of pipes since it is a distinct peril. Further clarification is provided by the named perils applicable to coverage C, personal property. Under peril B.12. accidental discharge or overflow of water or steam, paragraph b.(2) states the peril "does not include loss caused by or resulting from freezing except as provided in Peril Insured Against 14. Freezing."

If form HO 04 27 was attached, the coverage for mold remediation would still be there; however, it would be limited to the amount indicated in the endorsement's schedule. Because the endorsement refers to an "additional coverage" for mold, the impression is that it is providing coverage when none existed, but this is not the case. The endorsement limits the coverage, on a per occurrence basis, that will be provided for mold remediation, and this amount is included in the limit applicable to the damaged property. The endorsement also includes a section II aggregate sublimit for claims for bodily injury or property damage resulting from mold.