Mold Damage and Homeowners Insurance: A Coverage Gap That Still Surprises Homeowners

In 2018, when a nor’easter tore through Brandi Schmitt’s home in Lothian, Maryland, she had no idea that the storm’s aftermath would lead to a much bigger problem—mold. Like many homeowners, Schmitt assumed that her insurance policy would cover the damage caused by the storm. But as water continued to leak into her home due to unrepaired damage, mold began to take hold, leading to a battle with her insurance company that would stretch on for years.

Despite having extra coverage for “fungus, wet or dry rot,” Schmitt’s insurer, USAA, did not remove wet insulation where mold was suspected to be growing. Her family suffered health problems, and the situation worsened, culminating in a lawsuit against the insurer. Schmitt’s experience, while extreme, is not unique. Mold damage is a common issue that many homeowners face, yet it remains a gray area in insurance coverage, often leaving policyholders surprised and unprotected.

 Why Mold Coverage is Limited or Excluded

Mold exclusions in homeowners’ insurance policies became the norm following a series of high-profile lawsuits in the early 2000s, particularly the Ballard v. Farmers Insurance Group case in Texas, which initially resulted in a $32 million verdict. The high cost of mold damage repairs, combined with the uncertainty of health outcomes and memories of costly asbestos litigation, led insurers to limit or exclude mold coverage. As a result, most standard homeowners’ policies now either do not cover mold damage or offer only minimal coverage, often requiring homeowners to purchase additional riders for better protection.

 The High Cost of Mold Damage

Mold damage can be expensive to repair, especially if it goes unnoticed for a period of time. Mold thrives in moist environments, and once it takes hold, it can spread quickly, damaging walls, floors, and personal belongings. Beyond the structural damage, mold can also pose serious health risks, contributing to respiratory issues, allergies, and other health problems. Given the potential for high costs, insurers have become increasingly cautious about covering mold, often capping the amount they will pay for mold-related claims.

 What Homeowners Can Do

For homeowners, understanding what is and isn’t covered by their insurance policy is crucial. Mold coverage is typically limited unless the mold results from a covered peril, such as a burst pipe. Homeowners living in areas prone to moisture or with older homes where leaks may go unnoticed should consider purchasing additional mold coverage or a rider to their existing policy. Consulting with an insurance professional to review and understand your policy can help ensure you have the coverage you need to protect your home from mold damage.

 The Ongoing Impact of Mold on Homeowners

Six years after the nor’easter, Schmitt’s home remains uninhabited, a stark reminder of the long-term consequences of mold damage. While she and her family occasionally stay at the house to prevent it from being classified as vacant, the lingering mold continues to affect their health. Schmitt’s story highlights the importance of being proactive in understanding your insurance coverage and taking steps to mitigate mold risks before they become a major problem.