Brandi Schmitt and her family pose for a 2018 Christmas card in front of their Maryland home wearing protective gear, alluding to the water and mold damage in their home. Each year, Schmitt said they try to capture the family’s situation through their Christmas card.
Courtesy: Brandi Schmitt
When a nor’easter struck in 2018, intense winds blew shingles, gutters and siding off Brandi Schmitt’s home in Lothian, Maryland.
Her family was without electricity for three days, during which time all of their food in the refrigerator spoiled and water continued to leak into the home, Schmitt said.
As soon as the power came back on, Schmitt said she called her insurance company, USAA, to report the damage.
An adjuster visited the home a week later, and determined the 5,000-square-foot roof needed a total replacement. While she and the insurer debated points of the claim, Schmitt said, the unrepaired damage allowed snow and water from subsequent storms that spring to seep through into her home.
What started as wind and water damage evolved into something much worse: mold.
An independent specialist found no mold in the home on May 2018, according to a “review for fungal activity” investigation documents USAA provided to Schmitt that CNBC reviewed. Then in October, a follow-up investigation found and “observed visible moisture and an increased moldy odor.”
In the intervening months, Schmitt and her family had developed health issues, including rashes and coughs. Their yellow Labrador and four guinea pigs all died within months of each other.
An immunoglobulins test result from November 2018 provided to CNBC by Schmitt shows high levels of antibodies in her blood from exposure to aspergillus niger, a common mold.
“I called [USAA] and said, ‘Are you going to wait for it to kill us?'” Schmitt said.
The family moved out of the house for good that same month.
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Despite paying for extra “fungus, wet or dry rot” coverage of up to $15,000 in her policy, Schmitt said USAA did not remove wet insulation from the attic where she believes the mold is growing. Air samples in the home taken in January 2020 found “problem mold concentrations,” according to fungal activity review documents USAA provided to Schmitt.
Schmitt and her husband, Joseph, sued the insurer in 2019. A unanimous jury on March 7, 2023, determined USAA materially breached the terms of their homeowner policy and awarded Schmitt $41,480 for interior repairs and $7,200 for additional living expenses. She is currently appealing the damages because of estimates that repairs will cost much more.
A spokesperson from USAA said the company is unable to address specifics due to that ongoing litigation, but said “USAA disagrees with the facts as characterized by Ms. Schmitt.” In a response to the suit filed in a Maryland court in March 2020, an attorney for USAA said the insurer did not breach its contractual obligations and the Schmitt family failed to mitigate damages.
Schmitt’s example may be extreme, but mold damage is not unusual. In 2022, water damage, including mold, represented 27.6% of homeowners insurance losses, according to data from Insurance Services Office, an industry group. And experts say these kinds of damages could become more prevalent as severe weather events, especially windstorms and flooding, become more common or more powerful.
Repairing mold damage is expensive and often left out or limited in homeowners policies, which can leave consumers without much help to cover a pricey problem.
sending shock waves through the insurance industry. Despite the award for the owner of the mold-damaged home later being reduced to $4 million, companies still pulled back on mold coverage.
“We called it at the time a mold stampede,” said Amy Bach, executive director of United Policyholders, a San Francisco-based nonprofit that advocates on behalf of consumers. Schmitt shared her experience with the group as she sought help with her claim.
“One carrier after another said, ‘We’re capping it, we’re limiting it,'” Bach said.
We called it at the time a mold stampede. One carrier after another said, ‘We’re capping it, we’re limiting it.’
Amy Bach
Executive director of United Policyholders
Along with high-profile lawsuits, the high cost of repairs, uncertainty around health outcomes and memories of hefty asbestos payouts drove insurers to exclude and limit mold coverage, experts say.
“That unknown risk of the development of losses over long periods of time, that’s the risk that the consumer is transferring to the company, and that’s why it’s so regulated,” said KPMG U.S. insurance sector leader Scott Shapiro.
Will Melofchik, general counsel for the National Council of Insurance Legislators, said the organization’s members haven’t come across an increase in mold claims specifically.
“As long as customers can get the coverage they need somewhere in the market, carriers should have the ability to exclude things as long as the exclusion is clear and customers are aware of it,” Melofchik said.
do not cover mold, fungus, wet or dry rot, unless that damage is the result of a covered peril, according to Insurance.com. (In policies, you’re likely to see it referenced as “fungus, or wet or dry rot” coverage. Mold is a type of fungus.)
Homeowners may need to add a rider to their policy to cover removal of mold stemming from other circumstances, like water backup or hidden water damage.
Many of those changes took hold swiftly after the 2001 Ballard verdict. A 2003 whitepaper from the Insurance Information Institute, an industry group, notes that “seeking to avoid becoming the next Texas, some 40 state insurance departments have now approved mold exclusions and/or limitations on homeowners insurance policies.”
Still, mold exclusions and limitations can come as a surprise to policyholders, according to Bach.
“Consumers reasonably expect coverage when there is property damage to their home,” she said. “And mold can clearly cause physical damage to the property that it comes in contact with.”
Unless the mold damage is a result of a sudden, covered peril — such as a bursting pipe or water heater flooding your basement — homeowners insurance typically won’t cover it, said Scott Holeman, media relations director for the III.
“In cases where mold has been around for a while, say several weeks or longer, it likely won’t be covered by your policy,” Holeman said. “Mold claims won’t be covered if it’s a result of neglect, such as pipe leaking for months resulting in water damage and mold.”
