Our client is an HVAC contractor, who performed maintenance at the home of their customer. Part of the maintenance was the "blowing out of the lines" that apparently caused a condensation pipe leading away from the A/C system to become disconnected. Over the course of the next 2 to 3 weeks, and during the time that the homeowners was on an extended trip, the condensation water leaked onto a plaster ceiling in a bedroom, allowing water to saturate the ceiling and insulation. Upon his return, the homeowner found the ceiling bowed from weight of the water, and mold had ensued. The ceiling paint was lead-based so its removal required special handling which accelerated the repair costs but that was part of the damage and basically immaterial to the claim. The total cost of repair was in the $5,000 range and not large enough for the customer to incur legal costs to litigate the denial.

The insurer investigated and subsequently denied the claim, citing the CG 21 67, fungi or bacteria exclusion. The statement to me during the investigation was that  "everything that was removed from the room contained mold and mildew", which we do not dispute, but the property was also wet. The mold did not grow on other areas that were not originally affected by the water and had to have still been wet at the time of the work.

Our agency appealed the declination to both regional and national levels of management of the insurer without success. As agents, we are struggling to understand how the property damaged by the water is not a covered claim. Wasn't the original intent of this exclusion to exclude mold/mildew and its remediation?