Insurers could face claims on a similar scale to asbestos if mould in damp properties is judged to be a health hazard. Jeff Charlton reports

From my point of view there are two key issues waiting to trip up insurers, loss adjusters and their contractors: new legislation on asbestos and the worrying signs of activity from lawyers on toxic mould.

While perhaps 20% of UK homes already have a mould problem, the proof or defence may be difficult to provide without guidelines, or evidence.

The unfortunate reality is that few contractors dry water-damaged buildings down to acceptable levels, or within realistic time frames. The resulting dampness encourages mould growth.

From the US experience, insurers may be facing substantial latent damage and health claims, as the proof and litigation support of conditional fee arrangements coupled with easily-obtainable scientific evidence provide a formidable basis for a claim. The health effects are universally accepted and time-barred claims could easily extend to 15 years, with the prospect of long-tail health claims.

No win, no fee solicitors are already canvassing the market for a suitable toxic mould case to take to court. If a precedent can be set, proving that toxic mould has caused health problems and that the toxic mould was caused by inappropriate drying regimes, then the industry is in for a tough time.

Insurers must also look closely at new legislation aimed at controlling asbestos exposures. The Health & Safety Executive has found significant exposure to building and restoration contractors, who are not aware that asbestos may exist in materials or sites they are working on. This has prompted the requirement for all workplaces to be surveyed prior to work being undertaken. Where asbestos is detected, only asbestos-licenced contractors can work there.

In fire or flood incidents, for example, it would mean that insurers' preferred or nominated contractors must obtain a specialist survey report prior to undertaking any work which may result in exposure.

Many of our clients initially thought that this legislation applied only to commercial claims. But, where contractors are working in a domestic property - especially under the direction or request of insurer or adjuster - this site becomes a work or commercial site.

The implementation of this legislation may have serious effects on those who are unprepared, as failure to comply is a criminal offence. Insurers and adjusters will be held liable along with the contractor.

  • Jeff Charlton is with Phoenix International Consultancy