Mold Inspection Industry Overview

Perhaps the most telling statistic as to the problems that mold represents is that 39 states have now established limitations on mold coverage in homeowners' policies. The insurance industry has sought to limit its exposure to this expensive problem by excluding or severely limiting coverage for mold related damages. Massive settlements have been reported in the media in which insurance companies were found liable for damages as they were found negligent for having delayed payment for remediation, allowing mold the time it needed to propagate throughout a structure. Several multi-million dollar lawsuits have also been won by plaintiffs alleging physical maladies, including, brain damage caused by mold.

The company references several sources that support the growing issue mold represents. In 2002, over $3 billion in insurance claims were paid for mold issues. Approximately 10,000 lawsuits are filed annually over mold issues. Significant jury verdicts, including Ballard vs. Farmers $32 million award (subsequently reduced to $4 million on appeal) and Anderson vs. Allstate $18 million (reduced to $2.4 million on appeal), represent two lawsuits in which insurance carriers were ultimately found to have breached good faith and fair dealing and were held liable for not properly responding to claims for coverage. The result of these stories reaching a wide audience through national media exposure has created a public that is much more aware about the existence of mold and the potential problems mold represents.

The 2005 hurricane season in the U.S., including hurricanes Katrina, Rita, and Wilma, also thrust mold coverage onto a national level by showing the world the aftermath of these natural disasters. The Company believes that as insurance policies are rewritten to exclude coverage for mold, this will leave lenders, builders, building owners, engineers and architects as the new targets for litigation should mold become a problem in a home. The potential for this risk makes it increasingly likely that these constituents, in turn, will seek to limit their own liability by incorporating mold prevention as a requirement on the projects they undertake.

When coupled with the relatively low cost of prevention (the Company charges on average $700 for treating a 2,000 square foot home), it would appear logical that homebuilders and their constituents would embrace a relatively simple, safe, and inexpensive process to remove mold from lumber and protect a property from potentially devastating future mold claims.

Interestingly, to some degree the current mold issue stems from the nation's focus on energy efficiency. As homes are better insulated, wrapped, and are more tightly sealed from the elements, moisture management has become significantly more difficult. Older homes were said to be known to "breathe," which allows for air to circulate and moisture to dissipate, reducing the moisture available for mold to propagate. As homes have been built to stricter building codes, and more energy efficient materials adopted, homes have become more susceptible to mold as more moisture is contained by the structure, providing ample moisture for mold to grow.

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