Brandi Schmitt and her family are shown in a 2018 Christmas card in front of their Maryland home wearing protective gear, a nod to the water and mold damage to their home. Schmitt said they try to capture the family's situation every year in their Christmas card.
Courtesy of: Brandi Schmidt
When a nor'easter hit in 2018, high winds blew away shingles, gutters and siding on Brandi Schmidt's home in Lothian, Maryland.
Schmidt said her family was without power for three days, during which time all the food in the refrigerator spoiled and water continued to leak into the house.
Once power was restored, Schmidt said she called her insurance company, USAA, to report the damage.
A week later, an expert visited the home and determined that the 5,000-square-foot roof needed a complete replacement. As she and the insurance company discussed the claim, Schmidt said the unrepaired damage allowed snow and water from subsequent spring storms to seep into her home.
What started as wind and water damage developed into something much worse: mold.
According to “fungal activity review” investigation documents USAA provided to Schmidt and reviewed by CNBC, an independent specialist found no mold in the home in May 2018. Then in October, a follow-up investigation found “visible moisture and an increased musty odor.”
In the months that followed, Schmidt and her family developed health problems, including rashes and coughing. Their yellow Labrador and four guinea pigs also died within months of each other.
A November 2018 immunoglobulin test result that Schmidt provided to CNBC shows high levels of antibodies in her blood from exposure to Aspergillus niger, a common type of mold.
“I called USAA and said, 'Are you going to wait until this kills us?'” Schmidt said.
The family moved out of the house permanently that same month.
Read more from Personal Finance:
Here's Kamala Harris' stance on tax policy, experts say
Is the United States in a recession? About 3 in 5 Americans think so, according to a report.
Older voters face new decision in November as Harris prepares to lead Democratic ticket
Despite paying for additional coverage for “wet or dry mold or mildew” of up to $15,000 in her policy, Schmitt said USAA did not remove the wet insulation from the attic where she believed the mold was growing. Air samples in the home taken in January 2020 found “problematic concentrations of mold,” according to fungal activity review documents USAA provided to Schmitt.
Schmidt and her husband, Joseph, filed a lawsuit against the insurance company in 2019. On March 7, 2023, a jury unanimously decided that USAA materially violated the terms of her home insurance policy and awarded Schmidt $41,480 for interior repairs and $7,200 for additional living expenses. She is currently appealing the award due to estimates that the repairs would cost much more.
A USAA spokesperson said the company was unable to provide details due to the ongoing lawsuit, but said “USAA disagrees with the facts as described by Ms. Schmidt.” In a response to the lawsuit filed in Maryland court in March 2020, USAA’s attorney said the insurer did not breach its contractual obligations and that the Schmidt family failed to mitigate damages.
Schmidt’s example may be extreme, but mold damage is not unusual. In 2022, water damage, including mold, accounted for 27.6% of homeowners’ insurance losses, according to data from the Insurance Services Bureau, an industry group. Experts say these types of damages could become more prevalent as severe weather events, especially storms and floods, increase in intensity or become more severe.
Mold damage repair is expensive and often overlooked or limited in homeowners policies, which can leave consumers without much help to cover an expensive problem.
“We called it the mold stampede at the time.”
Mold limitations and exclusions have become the norm in the industry after several high-profile lawsuits. In 2001, a Texas case, Ballard v. Farmers Insurance Group, resulted in a $32 million jury verdict, sending shockwaves through the insurance industry. Although the mold-damaged homeowner’s compensation was reduced to $4 million, companies still backed away from covering mold.
“We called it the mold stampede at the time,” said Amy Bach, executive director of United Policyholders, a San Francisco-based nonprofit that advocates for consumers. Schmidt shared her experience with the group as she sought help with her claim.
“Airline after airline has said: 'We're setting a cap and we're setting a cap,'” Bach said.
We called this phenomenon at the time “mold stampede.” One after another, carriers were saying, “We’re putting a cap on this.”
Amy Bach
CEO of United Policyholders
In addition to high-profile lawsuits, the high cost of repairs, uncertainty about health outcomes and memories of huge asbestos payouts have prompted insurance companies to exclude and restrict mold coverage, experts say.
“This unknown risk of losses developing over long periods of time is the risk that the consumer transfers to the company, which is why it is so regulated,” said Scott Shapiro, head of insurance at KPMG in the United States.
Will Milovcik, general counsel for the National Council of Insurance Regulators, said the organization's members have not noticed an increase in claims related to mold 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,” Milovcik said.
How does insurance cover mold and how does it not?
Today, standard homeowners policies typically don't cover mold, mildew, or wet or dry mold, unless the damage is the result of a covered peril, according to Insurance.com. (You'll likely see policies refer to this as “mildew, mildew, or dry mold” coverage. Mold is a type of fungus.)
Homeowners may need to add an addendum to their policy to cover mold removal resulting from other conditions, such as water backup or hidden water damage.
Many of these changes took hold quickly after the Ballard ruling in 2001. A 2003 paper by the Insurance Information Institute, an industry group, notes that “about forty state insurance departments have now approved mold exclusions and/or restrictions on homeowners’ insurance policies, in an effort to avoid becoming the next Texas.”
However, mold exclusions and limitations may come as a surprise to policyholders, according to Bach.
“Consumers reasonably expect to be covered when their property is damaged,” she added. “It is clear that mold can cause physical damage to property it comes into contact with.”
Unless the mold damage is the result of a covered peril — such as a burst pipe or a water heater flooding your basement — homeowners insurance typically doesn't cover it, said Scott Holman, III's director of media relations.
“In cases where mold has been present for a period of time, say several weeks or more, it will likely not be covered by your insurance policy,” Holman said. “Mold claims will not be covered if it is the result of negligence, such as a leaky pipe for months leading to water damage and mold.”
The language of the policy can be “complex,” says Peter Kochenberger, a visiting professor at Southern University Law Center and a professor at the University of Connecticut’s Insurance Law Center.
“You should always read your insurance policy and understand what you have, but no one will,” Kochenberger said. “I do this for a living, I read insurance policies, and it’s not easy.”
Insurance is regulated at the state level, he said, which can cause additional confusion if some states have specific restrictions and others don’t. For example, in South Carolina, where hurricanes and flooding are common, there are no homeowners policies that cover all mold cases, according to South Carolina Independent Agents. Instead, they’re defined by risk.
Coverage also varies from company to company.
For example, USAA includes limited coverage — $2,500 for cleanup and $2,000 for additional living expenses — for mold resulting from a covered loss at no additional premium in most states, the company said in a statement. USAA also offers optional coverage beyond the standard policy in some states.
Nationwide covers up to $10,000 in mold damage from covered incidents, but that limit cannot be increased, according to a company spokesperson.
Mold claims can result in policies not being renewed.
According to data provided to CNBC by the Federal Trade Commission under the Freedom of Information Act, of a sample of home insurance complaints filed against Allstate and Nationwide, 8% were mold-related. CNBC requested “home insurance” complaints from a sample of some of the largest property and casualty insurers, including Allstate, Nationwide and State Farm. State Farm had no mold-related complaints.
Most of the complaints focused on insurance companies limiting mold coverage, but a few people said they saw the consequences when it came time to renew their policy. One policyholder in Lindsey, Ohio, said AllState chose not to renew her policy in 2020 because she had filed a mold claim the previous year.
“Any restrictions on non-renewal vary from state to state and are part of the regulatory framework,” Shapiro said. “Generally speaking, insurers have the right not to renew insurance for any number of reasons, including a history of losses, which is often a triggering event.”
A Nationwide spokesperson said the company does not comment on individual claims. An Allstate spokesperson did not respond directly to a request for comment on the complaints, but directed CNBC to III. Mark Friedlander, III’s director of corporate communications, said the volume and frequency of claims activity could be one reason insurers choose not to renew a policy.
Insurance experts and attorneys recommend that you carefully review the details of your insurance policy and consult a professional to make sure you understand what is included in the coverage.
Shapiro said insurers assessing future risks aren't focusing on mold specifically yet, but it falls within the broader issue of how climate affects insurance, which the industry is watching closely.
“There will be a limit to what insurers can do when society needs to help with costs, or incentivize behavior, or change behavior, and that, in our view, does not fall exclusively on the insurer,” he said.
Six years after the Nor'easter hit, the Schmidt home remains abandoned.
Schmidt and her family return to stay at the house from time to time so it is not considered empty or abandoned — and she said she still gets sick during those short visits.
“Throughout this whole process, we never enjoyed this house,” Schmidt said. “My husband and I have been together for many years and have been working really hard to be able to afford a house like this.”
