Set Another Mold-Related Requirement if Tenant Controls Its Space

Recently, we gave you 20 mold-related requirements to add to your lease with a tenant that controls its space. After reading “Add 20 Mold-Related Requirements for Tenant that Controls Its Space,” CLLI, Sept. 2002, p. 1, Texas attorney J. Walker Holland suggested adding another requirement. It's designed to protect you if the tenant's mold remediation contractor doesn't do its job properly.

Require Mold Remediation Contractors to Be Insured

In our article, we recommended requiring the tenant to make sure its mold inspector carries insurance that protects you. But, Holland points out, if the inspector finds a mold problem requiring the tenant to hire mold remediation contractors, you'll need additional insurance protection.

So require the tenant to have any mold remediation contractor it uses carry insurance that protects you, say Holland and Connecticut attorneys Andrew N. Davis and Catherine K. Lin. To impose this requirement, they suggest that you cover five additional points in your lease where you address mold remediation. There's a Model Lease Clause on p. 6 that you can adapt and use in your lease that covers them.

Cover Five Points on Mold Remediation Insurance

Make sure that your mold remediation insurance clause, like our Model Lease Clause, covers these five points:

Proper coverage

Say in the lease that the tenant must require any mold remediation contractor to carry contractor's pollution liability insurance; premises, operations, and completed operations liability coverage; workers' compensation insurance; and automobile coverage, says Holland. Also, if the contractor is performing consulting and/or professional services related to the identification of the mold conditions, development of remediation specifications, and performance of the work, the contractor should get “errors and omissions” insurance, with terms and limits acceptable to you, adds Davis [Clause, par. a].

This insurance coverage may help protect you if you and the mold remediation contractor are sued because the contractor didn't properly remediate the mold or mold-related hazards at the space, says Holland. It also can help protect both you and your tenant if one of the contractor's employees is injured on the job or while driving to pick up parts and supplies, he explains.

Additional insured status

Require the tenant to have the mold remediation contractor list you as an additional insured on those policies, except the workers' compensation, says Lin [Clause, par. b]. If you're not listed as an additional insured, the contractor's insurer has no obligation to defend you if a claim is made against you, she explains.

Proof of coverage

Require the tenant to have the insurance agent for the mold remediation contractor give you evidence of insurance for all the policies and a copy of any policy endorsement naming you as an additional insured, says Holland [Clause, par. c]. It's important to get this information directly from the insurance agent to prevent an unscrupulous contractor from submitting a photocopy of altered certificates, he explains.

Well-rated insurer

Make it clear that the tenant must have the mold remediation contractor get the policies from an insurer that meets your ratings standards, says Holland. Otherwise, the contractor could select a disreputable or financially unsound insurer—with few assets—to get bargain premium rates.

Several published guides rate the various insurers. The most commonly used ratings are published annually in Best's Key Rating Guide, says Davis. The guide gives each insurer two ratings:

• A letter rating ranging from S (rating suspended) to A++ (superior), which indicates the insurer's overall effectiveness in paying its claims, its financial strength, profitability, and operating performance; and

• A Roman numeral rating ranging from I (less than $1 million) to XV (greater than $2 billion), which indicates the insurer's actual financial size and the amount it has available to pay claims.

Davis, Lin, and Holland suggest that the insurer have at least a B+ letter rating and a VII Roman numeral rating [Clause, par. d].

Limit on deductible

Set a maximum deductible for the insurance policies that's not too high, advises Holland [Clause, par. e]. This is important because a mold remediation contractor might request a high deductible so it can reduce its premiums. But if a claim is made, the contractor may not have enough funds to pay a high deductible, he warns.

CLLI Sources

Andrew N. Davis, PhD, Esq.: Partner, LeBoeuf, Lamb, Greene & MacRae LLP, Goodwin Sq., 225 Asylum St., 13th Fl., Hartford, CT 06103; (860) 293-3514.

J. Walker Holland, Esq.: Partner, Holland, Johns, Schwartz & Penny, LLP, 306 W. Seventh St., Ste. 500, Fort Worth, TX 76102-4982; (817) 335-1050.

Catherine K. Lin, Esq.: Special Counsel, LeBoeuf, Lamb, Greene & MacRae LLP, Goodwin Sq., 225 Asylum St., 13th Fl., Hartford, CT 06103; (860) 293-3568.