MOLD & Water Damage Nightmare!

[Alexandra Hansil]

Hi All!  I am new to BP and getting a crash course on being a landlord.  Please let me know your thoughts!

After living in our home for 20 years in NJ, we decided to move to FL and rent out our NJ home last summer.  The house was rented quickly.  The only thing pending on the house was to fix a drainage issue we had with one our our sump pumps.  My husband used to go down to the basement and clear out any dirt, check the humidifier and make sure the basement was well ventilated.  I told the tenant she couldn't use the basement until we fixed that.  

I went there in December to check on the property and noticed that the fan and humidifier were not working and only 1 of 2 sump pumps were working.  The basement was partially finished and had sheet rock.  I was worried about mold.  I had a company come to rip out all the sheet rock and leave the basement completely bare.  In Feb (2 months later), the tenant calls me and says, "OMG there's mold growing on the outside of the basement door and on the molding".  I thought she was exaggerating, but when I flew down to check on the issue, I was floored!  Apparently a hot water pipe burst and I had 5' of HOT water in the basement.  When I pried the door open, it was like a sauna and mold and dew drops were EVERYWHERE.  As soon as you walked into the house, you could smell the mold.  I told her how could she let this go so long and not tell me.  She is upset that I am blaming her and she said I knew there was a problem.  I said the problem we had before is not the problem we have right now.  I have had to put them up in a hotel until a mold remediation company can come and clean the WHOLE house.  My insurance will only cover up to $10K of mold damage.  And I suspect that she is seeking some damage.  She wanted to know the kind of mold that was present since her son started getting rashes the day after we opened the door.  She is also complaining about her furniture and clothes.  

How much liability do I really have given that she did not give me notice? Also, I've been meaning to open an LLC and get an umbrella policy. If I do it now, will that do any good? Tks!