Though, the other two basements were fine, only the "problem child" tenant had mold and that was due to his/her negligence.

I read through your post and recognised at least 10 statements you made indicating you were negligent.

Depending on the size of the property, a 500 sqft difference may be negligible or substantial.

you do not want a lawsuit for negligence due to electrical wiring or the like.  

Most independent landlords are negligent at best wrt keeping on top of their assets.

I'm going to side towards the cause being negligence rather than something else (you'd be surprised how many people are just bad at their jobs) but you'll need to cover your bases in case it's not just outright incompetence.

If you are negligent or you fail to operate the company correctly the liability protection you think you have will be lost.John Corey

In certain cases, such as negligence, your insurance policy may refuse to pay altogether, but your LLC can still afford you some measure of protection, especially if the negligence was caused by a third party and not yourself.

Please repeat after me: insurance does not protect you from liability...it only pays the litigation costs and damages once you've already been found liable/negligent and have a judgment in your personal name (if you didn't change title on that rental property and a cause of action).

However, insurance is limited because it only protects you from one type of liability: accidents/negligence.