Category 3 Water — water that is grossly contaminated with pollutants including fungi and
bacteria. Universal exclusions in property and liability insurance policies for
losses related to fungi/bacteria automatically apply to Category 3 water losses
because of the bacteria and/or fungi in the water. Insurance coverage gaps for
losses associated with Category 3 water can be filled using the same risk
management tools and environmental insurance products created for fungus/mold
risks in 2003.