Commercial general liability policies typically exclude injury or damage arising from mold. As a result, insurers often deny coverage whenever an alleged injury is caused in whole, or in part, by mold. Without insurance, the cost of defending the case and paying an ensuing settlement or judgment can be crippling. It is important, therefore, for a close analysis to be made of the allegations made by the claimant before any denial of coverage is accepted by the policyholders.
While mold-related exclusions bar coverage for arising from mold, they do not bar coverage for injury arising from something other than mold. So, if a complaint alleges multiple causes of injury (e.g., mold and water) the insured may be entitled to coverage. The New Jersey Supreme Court has made it clear that when a complaint alleges both potentially covered claims and claims that would fall within a policy’s exclusion, an insurer must defend the potentially covered claims until no potentially covered claim is left in the litigation. Moreover, in New Jersey, unlike other jurisdictions an insurer must consider information outside of the underlying complaint in making its coverage determination. Thus, if information obtained during the discovery process shows that there are also allegations of injury from causes other than mold, that should serve as a basis for coverage. Any such information should promptly be brought to the attention of the insurance company which will then have a reasonable period of time to assess the matter of coverage in light of any non mold-related allegations.
If the insurance company continues to deny coverage, despite allegations of injury caused by something other than mold, a declaratory judgment suit seeking to compel the carrier to provide coverage should be strongly considered. Insurance companies may reflexively deny coverage when allegations of mold are made, but under the law, they should provide a defense if it is alleged that the injury was caused by something in addition to, or instead of, mold.
Questions? Let Mitchell know.
Mitchell Kizner is a New Jersey focused attorney in Flaster Greenberg PC’s Litigation and Environmental Law departments. He represents clients in insurance, environmental, construction and other commercial matters as part of his active litigation and commercial law practice. He is also General Counsel to the firm. He can be reached at firstname.lastname@example.org or 856.382.2247.