Mold After a Burst Supply Line
On February 2, a supply line to a second-floor toilet bursts while the insureds are out of town. They return February 9 and find water throughout the first floor; they call a restoration company, which begins drying on February 11. On February 25, the insured smells mold and a contractor finds mold growth in the kitchen ceiling and HVAC ducts. The HO-3 policy covers accidental discharge but excludes mold unless resulting from a covered peril; it has a $10,000 mold sublimit and a duty to mitigate. The insurer has paid $22,000 for water damage but denies mold, citing the exclusion and "failure to mitigate." The public adjuster is hired March 10. The insured had a small supply-line leak in 2021 that was repaired; no mold then. The insurer requests 3 years of maintenance records, a sworn proof of loss, and an examination under oath. The adjuster wants to file suit immediately.
1. Is the mold loss covered? Analyze the exclusion, the sublimit, and causation.
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The mold is likely covered up to the $10,000 sublimit if it resulted from the accidental discharge, which is a covered peril. The policy excludes mold generally, but the exclusion contains an exception when mold results from a covered peril. The adjuster must establish causation: the burst supply line caused water intrusion, and the mold developed in the wet kitchen ceiling and HVAC ducts before the structure could be dried. The 2021 leak was repaired and produced no mold, so it does not support a chronic-leakage theory. The insurer cannot rely on the mold exclusion alone; it must show the mold arose from an excluded cause such as repeated seepage or long-term leakage. The $10,000 sublimit caps the mold remediation, but the water damage payment is separate. The adjuster should obtain moisture readings, drying logs, and a mold protocol that separates remediation from unrelated improvements.
2. How should the insurer's "failure to mitigate" defense be evaluated given the facts?
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The duty to mitigate requires reasonable steps, not impossible ones. The insureds were out of town when the line burst on February 2 and returned February 9. They called a restoration company promptly and drying began February 11. The seven-day delay was not within their control, and the insurer has not shown that a reasonable person would have discovered the loss sooner. Mold can begin within 24 to 48 hours, but the insured is not strictly liable for mold that develops while away. The insurer must prove that the delay was unreasonable and that it increased the loss. The adjuster should document the timeline, humidity readings, the restoration company's drying logs, and whether the insurer delayed assigning a vendor. Failure to mitigate may reduce recovery for the incremental mold damage, but it does not void the entire water claim. The insurer should not use the defense as a blanket denial.
3. What is the proper procedural path: appraisal, proof of loss, EUO, or suit?
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Appraisal determines the amount of loss, not coverage. Because the insurer is denying mold on coverage grounds, appraisal may not resolve the dispute. The insured should still comply with reasonable policy duties: submit a sworn proof of loss with documentation, preserve damaged materials, and appear for an examination under oath if the policy requires it. The EUO should be limited to relevant questions, and the adjuster should prepare the insured and object to irrelevant or harassing inquiries. The 3-year maintenance records request should be narrowed to the plumbing and HVAC areas at issue. Filing suit immediately is premature and may waste the appraisal and proof-of-loss process. The better path is a written coverage demand, a timeline, a mold protocol, an appraisal demand on valuation if coverage is accepted, and preservation of the suit-limitation date. The adjuster should not let the insurer run out the clock.