We have an insured who sustained damage to personal property as a result of a defective air conditioning unit. The carrier did not investigate the cause of the loss .They have relied on the HVAC contractor that originally installed and subsequently repaired the unit. Their indications are the manufacturer sent the unit without the condensate plug. The unit was installed and was regularly maintained. Six months after installation they indicated the plug was missing and caused the unit to leak

The insured is a science lab and noted unusual cell growth in the scientific samples. They disposed of the few beakers that contained the cell growth, believing that the beakers were contaminated. Within a few days they noticed additional growth within some of the research material. They determined the contamination was mold and began to investigate the source of the mold growth. They determined there were a few wet ceiling tiles and found the A/C unit to be leaking.

The carrier denied the claim, stating that the loss does not meet the definition of "water damage."

The client's policy contains mold coverage. The mold exclusion endorsement provides three changes to the insuring agreement. The first change amends the wear, tear, deterioration, animals exclusion by removing the wording excluding mold and wet or dry rot. The second change adds to the endorsement's coverage for mold or other fungi, wet or dry rot, or bacteria but limits the coverage to certain perils. The third change adds to the endorsement's coverage for seepage or leakage. This wording reads:

3. The following is added to the Exclusions–Losses We Won't Cover section.

Seepage or leakage. We won't cover mold or other fungi, wet or dry rot, or bacteria loss caused by or resulting from water or steam that seeps or leaks, or the presence of condensation or humidity, moisture, or vapor, that occurs over a period of 14 days or more.

Our position on this claim is that the peril of seepage or leakage exclusion provides the insured with coverage for mold, resulting from seepage or leakage, as long as the loss is discovered within fourteen days of occurrence. The carrier disagrees with this position , indicating that the loss must first meet the definition of "water damage" before seepage or leakage would be given. We have advised the carrier that we believe the policy drafters intended to cover the subsequent mold damage as a result of unforeseen seepage or leakage but limits the amount of time they were willing to cover the subsequent mold damage.

New Jersey Subscriber

If it can be shown that the seepage or leak did not occur for more than a period of fourteen days, we agree that the mold loss should be covered. The provision you provided does not state that the definition of "water damage" must first be met.