Mould menace creeps into Canada

By Stéphane Desjardins | September 20 2002 06:16PM

Ever since a court awarded compensation of over US$32 million to a Texan family because of toxic mould that contaminated their home, insurers have been on high alert. The phenomenon is spreading to Canada.

“The industry is in wait and see mode,” said Gerald Wolfe, President of General Cologne Re Canada. “Each insurer and reinsurer is waiting to find out a bit more before they form an opinion on this topic. We’re looking at what’s happening in the American courts and especially the opinions of legal experts and biologists who are going over cases with a fine-toothed comb.”

Will the mould phenomenon plague Canada? “It’s starting,” insisted George Socha, Assistant Vice-President and reinsurance broker at Guy Carpenter Canada. “I talked to a few clients who already received this type of claim and had to pay. I got the impression that this subject will make things a bit thorny during the next policy renewal season.” Guy Carpenter has published an exhaustive report on risk related to toxic mould, available at

“Several of our clients now offer specific coverage for this problem,” Mr. Socha explained. “Ever since mould made the cover of Time magazine in the summer of 2000, there has been tremendous interest within the industry.”

“There is no doubt that problems related to mould are already on the desk of Canadian insurers,” said Constantin Petallas, Canadian Director at AXA Corporate Solutions. “As soon as this type of problem hits the insurance industry somewhere in the world, certain players will automatically introduce exclusions or riders. Several Canadian players have already done so. It may be premature to say that the problem is major in Canada, but there will certainly be sizeable claims over the next few months, as the Honoré-Mercier Hospital case in shows. The problem will become very serious for insurers.”

Henry Klecan, President of SCOR Canada, is already planning a seminar on this topic, slated for some time before yearend. “The problem is not limited to hot and humid regions. We have to educate insurers. It will definitely affect everyone, not just home insurers.”

Ken Irwin, President of Munich Re Canada, considers that it is mainly insurers, not reinsurers that must face the music. “Reinsurers should not make decisions about mould unilaterally. You have to precisely determine who will be liable for a mould problem in case of claims.”

The Insurance Bureau of Canada (IBC) recently formed a “mould” committee, representing insurers, reinsurers, the Reinsurance Research Council (RRC), and an engineer. “We are trying to determine the impact of this problem on the way in which insurance policies are currently written,” said Bruce Street, coordinator with the committee. “As there are no scientific standards in this area, there will certainly be an impact on the wording of policies.”

“I do not believe that we are facing a crisis situation, as in the United States,” said Cameron MacDonald, President of Transatlantic Reinsurance Company and President of the RRC. “But we are seeing signs of an increase in the number of claims related to hospitals, schools, and the sick building syndrome in general. One fact remains: this type of claim will increase because people are becoming more aware of this problem. The industry has to face this phenomenon, which may result in a series of hefty bills.”

“The mould problem affects not only owners of homes and buildings of all kinds,” he added. “Construction contractors and those working in renovation or damage clean-up will be hit particularly hard. They will be held responsible for claims related to mould if water damage is observed after their work.”