The following is an insurance claim question we answered for a policyholder through the United Policyholders Ask an Expert Forum.

Q. Our insurer rejected our mold claim, even though we have additional coverage for mold, as well as for, "Sudden and accidental tearing apart, cracking, burning or bulging of a steam or hot water heating system, an air conditioning or automatic fire protective sprinkler system, or an appliance for heating water". The a/c repair man as well as the claims adjuster and the engineer who investigated the claim (both hired by our insurer) attributed, in writing, the cause of our mold to tearing of the attic duct work tape. The insurer claimed they would not cover our Section C loss from mold because, "the claimed loss and damage and the mold was the result of humidity and condensation. There was no physical damage; therefore the mold is not a result of a covered cause of loss." Can you please explain why they are rejecting our claim? Thank You

A. Thanks you for your question. This is not an isolated issue in property insurance disputes. While I have not read your policy or the denial letter, I will assume your policy is an all risk form which gives you coverage for all risks (perils) except for those that are excluded.

So based on your question; "How does an insurer define physical loss to property" the answer (again I have not read your specific policy) is that there must be "direct physical damage" to the insured property. Since direct physical damage may or may not be defined in your policy, my guess is, it is not. So first we have to consider the findings of the people sent out by your insurance company.

From what I understand they are saying the duct tape around the duct system came loose which allowed moisture to condensate and thus form mold. So it sounds like they are viewing the cause of this loss to be a maintenance issue and not damages from a covered loss. 

Direct physical damage must result from a covered loss in order for the damages to be covered. So if you have an all risk policy, the burden is now on you to prove that the duct tape came apart from a covered loss. Can you make a case that wind vibration from the hurricanes caused the duct tape to loosen? Also, did you have a recent inspection of your attic area and have a written report that could be helpful by showing the conditions before you found the mold?  If so, it may point to the hurricane being the cause of the physical damage i.e. a breach in the duct system resulting from the effects of the hurricane, and thus a covered loss. 

In summary, you will have to determine if there was a covered loss that caused direct physical damages. A covered loss can be a loss that is in part covered and in part excluded. You will need to do some research to overcome what appears to be a denial on the basis that the carrier is saying this is likely a maintenance problem unrelated to an insured peril.