A homeowner has an HO-3 policy. They discover a slow leak in their upstairs bathroom that has caused significant rot and mold damage to the subfloor and ceiling below over several months. Which of the following statements is most accurate regarding coverage for this damage?
- AAll damage will be covered under the HO-3's open perils dwelling coverage.
- BThe HO-3 will cover the cost to tear out and replace the damaged plumbing, but not the rot or mold damage.
- CThe damage is excluded due to gradual deterioration, but the sudden and accidental tearing out of a wall to access the pipe may be covered.
- DThe damage is entirely excluded as mold is never covered under any homeowners policy.
Show answer & explanationAnswer & explanation
Correct answer: C. The damage is excluded due to gradual deterioration, but the sudden and accidental tearing out of a wall to access the pipe may be covered.
HO-3 policies typically exclude damage caused by continuous or repeated seepage or leakage over a period of weeks, months, or years, as well as damage from rot and mold, which are forms of gradual deterioration. However, the cost to tear out and replace any part of the building to repair a covered peril (like a sudden and accidental pipe burst) or to access a hidden pipe causing water damage is often covered, even if the resulting damage from the slow leak is not.
Why the other options are wrong
- A. Open perils coverage has exclusions, including gradual deterioration and mold.
- B. The cost to tear out and replace *part of the building* to access the pipe may be covered, but the *pipe itself* (if it's a maintenance issue, not a sudden burst) and the resulting rot/mold are typically excluded.
- D. Mold is typically excluded unless it results from a covered peril (e.g., a sudden, accidental burst pipe, not a slow leak).
HO-3 Water Damage Exclusions
HO-3 policies exclude certain types of water damage, particularly those caused by gradual leakage, seepage, or maintenance issues, as well as resulting damage like rot and mold from these causes.
- Excludes continuous or repeated seepage/leakage over time.
- Excludes damage from rot, mold, fungi, and wet or dry rot.
- Sudden and accidental discharge from plumbing is usually covered.
- Cost to tear out and replace a part of the building to repair a covered water leak (or even an excluded one, for access) may be covered, but not the pipe itself often.
Memory trick: Slow Leaks, Rotten Mold, No Cover Gold.