In other words, you agree completely. Grandparent never said that following the pragmatic path in this case would be morally defensible and almost certainly believes that it wouldn't be (except in the sense that the human capacity for rationalization is nearly infinite and so a person stuck in the situation would likely manage to convince themselves otherwise). I get the sense that the grandparent post was complaining that by allowing insurance companies to exclude events like this we've created a terrible moral hazard.

It's a tough choice between being a scumbag and paying two years salary[1] out of pocket for something that was not your fault and that the insurance apparently doesn't cover because they are scumbags too.

[1] The median wage in the US per person is $26,695.

I find the intuition that the insurers are scumbags interesting (not that I don't share it, on some level). After all, in this case they also didn't cause the problem, don't own the house, and never agreed to insure the homeowner against that kind of risk. What am I missing?

Of course, its important to distinguish this situation from cases where the insurer did agree to cover it, but refuses to pay anyway.

Homeowners insurance is supposed to cover general risk. But over the years they have become increasingly aggressive at lobbying state insurance commissions to accept more and more exclusions to standard policies. This behavior correlates with a shift from mutually owned companies to corporate entities.

They are scum because they happily collect their premium, and actively undercut the costs of the policies to maintain profitability in the short term. They also screw with people for claims they owe. In a case I'm aware of near my home, the insurance company low balled a fire claim by 30% for quick settlement, forcing the homeowner to roll the dice in arbitration.

The true villain in this story is the home inspector who was incompetent enough to miss a decommissioned upfeed hot-water heating system, a sure indicator of the presence of elemental mercury in the home.

Home inspectors are by and large useless. They exist because the laws say they must exist, but they don't have a strong regulatory body making sure that they're competent. Once the house is sold they're gone.

For the most part they're just yet another guy who takes a cut whenever a house is sold.

Isn't a situation like this exactly the reason why one would have insurance in the first place? What other options does a homeowner have? Is there some second insurance policy they can buy to cover the numerous holes in the first?

I didn't say that.

This is one of the cases where you're screwed and need to remediate. Typical household hazmat issues are stuff like lead paint, asbestos, etc. All of which can be stabilized (for example, you can encapsulate lead paint and personally dispose of asbestos in municipal trash) without shelling out money you don't have on remediation services that are often ineffective, and also make it clear that you were aware of the issue.

In this case for example, every neighbor saw the clean harbors guys in spacesuits at his house. When he sells the house a decade from now and the new owner finding more Mercury somewhere, the old lady across the street will tell the new owners, and this person may be sued, even though he nearly bankrupted himself on cleanup. So whenever you can maintain ignorance, you should.

Ideally you would sell it to someone with a subprime loan they can walk away from. They never make any payments, the bank repos the house. Somehow the hazmat is discovered and the bank is compelled to fix it in order to sell the house, or at an even steeper discount because of remedied hazmat. Win win!