The Burst Supply Line: Water, Mold, and the Failed Pipe
The Vances insure their Tucson home on an HO-3 with $400,000 Coverage A, a $1,000 deductible, and the standard fungus/mold sublimit. While they are in Oregon for three weeks, the copper supply line to the second-floor bath fails at a soldered joint and water runs until a neighbor notices the water bill. The adjuster finds $22,000 of damaged drywall, cabinets, and flooring, mold growth across 180 square feet of wall cavity, and a $6,000 bill to open the wall and replace the failed pipe. The heat was left at 55°F and the house was occupied up to the day of departure. The insureds demand payment for everything, including the mold, and ask whether it matters that nobody checked the house for three weeks.
1. Itemize the loss: what is covered, what is capped or excluded, and what does the insurer owe after the deductible?
Read the worked answer
Covered - direct water damage ($22,000). Accidental discharge of water from a plumbing system is a covered peril on the HO-3. The loss was sudden, the home was heated, and the dwelling was not vacant, so neither the freezing exclusion nor the vacancy exclusion applies.
Capped - mold remediation (limit $10,000). Mold resulting from a covered water loss is treated as an additional coverage with its own dollar sublimit (commonly $10,000), not as a separate peril. The $38,000–$40,000 remediation bid is therefore trimmed to $10,000; the excess is the insured's exposure, not the carrier's.
Excluded - the pipe itself ($6,000, in part). The cost to tear into the wall to reach the system is covered as tear-out, but the failed soldered joint itself is damage to the system that failed and falls under wear-and-tear/faulty-workmanship. Pay the access, not the plumbing repair.
Payment: $22,000 + $10,000 = $32,000, less one $1,000 deductible = $31,000. One occurrence, one deductible.
2. The insureds ask whether their three-week absence matters, and what would change if a slow leak under the kitchen sink had seeped for six weeks before discovery.
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Their absence does not defeat coverage. The HO-3 has no general 'occupancy check' condition, and the vandalism/vacancy exclusion requires 60 consecutive days of vacancy - three weeks is well short. The duty after loss to protect property from further damage is a mitigation duty, not a condition precedent to an accidental-discharge claim.
A six-week slow leak changes the analysis materially:
- The 'constant or repeated seepage or leakage over a period of 14 days or more' exclusion removes the water damage itself from coverage.
- Mold that results from an excluded cause is likewise outside the grant of coverage; the $10,000 sublimit only expands coverage for mold that flows from a covered loss.
- The result flips: the insured recovers little or nothing, and the insured cannot cure the exclusion by discovering the leak late.
This is the judgment the exam tests: same water, same dollar figure, opposite outcome, driven entirely by how the water escaped.
3. The adjuster proposes applying a second deductible to the mold portion. Evaluate that position.
Read the worked answer
Incorrect on the standard HO-3. The mold provision is a sublimit - a cap on how much the carrier will pay for that element of the loss - not a separate deductible. Deductibles attach once per occurrence, and the ruptured line and the mold it produced are one occurrence.
Two refinements worth stating:
- If a policy actually schedules a separate mold deductible (some carriers do by endorsement), then two deductibles apply - but you must find that language in the form; you may not assume it.
- Order of operations: apply the sublimit to the mold element, total the covered elements, then subtract the single deductible once. Do not subtract a deductible before capping the mold, or the insured is penalized twice.
Properly computed: ($22,000 + $10,000) − $1,000 = $31,000.