Mold may have growing effect on homeowners

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Mold may have growing effect on homeowners

Insurers all over are raising costs

By Sue Ingram

Daily Press

October 9, 2002

Virginia insurers are nervously watching a rise in claims involving

pernicious black mold in the Commonwealth, mindful of the havoc the fungus

has wreaked in other states.

The scale of the mold problem in Virginia has not yet reached the epidemic

proportions it has in other states, such as Texas. State Farm Insurance,

which has more than one-fifth of the state's homeowners' insurance policies,

didn't even track Virginia's mold claims as recently as a year ago. But now,

" mold is on the rise, " said Beth Cramer, State Farm's spokeswoman in

Charlottesville, noting that fewer than 100 mold claims have been filed in

Virginia since November.

Toxic black mold, which claimants link to such things as neurological

damage, memory loss and coughing up blood, has also had an almost

catastrophic effect on the insurance industry in Texas. Claims in California

and Florida have also surged in the past two years.

Gigantic payouts from loss claims and lawsuits have forced some insurers to

bail out of or drastically reduce their coverage. For example, State Farm

has stopped writing new homeowners policies in Texas, and Farmers Insurance

Group announced last week it would not renew the policies of 700,000

homeowners. Allstate Insurance Co. remains the only insurer writing policies

among the three biggest home insurers in the Lone Star State. And after

recently witnessing a spike in claims, Californians started calling the

phenomenon " the Mold Rush. "

What all this means to Virginians is that a standard insurance policy still

typically pays for damage from mold caused by a single, sudden water-related

event (covered peril), but not damage from years of wear and tear or from

undetected damage.

" If the mold came as a result of a covered loss, such as a broken water

pipe, your insurance policy would cover that, " Cramer explained. But if a

pipe has been leaking undetected behind a wall for several years, insurance

is not going to cover the mold problems that result.

The outbreak of black mold claims has been a boon to a few Hampton Roads

businesses, such as Hall Construction Co., a York County restoration

contractor that does repairs for direct water loss to homes and commercial

buildings.

" There's mold everywhere, " said Mike Hall Jr., who has attended a weeklong

seminar on mold in Louisiana and a weekend course in land. " It's outside

in the air you breathe. It's inside. Very few of the kinds of mold are

toxic. "

He has seen his share of those, however.

" If you have a direct water loss, more mold spores grow, " Hall said. " We did

one in Newport News after Hurricane Bonnie. Some of the units were condemned

and sat there for two weeks. You talk about mold and mildew all over the

walls - it looked like wallpaper. We had to tear out all the sheetrock and

abate the mold. That was $20,000 just for mold abatement. "

Those kinds of jobs aren't the ones staggering the insurance industry. That

was for multiple units in an apartment complex. The blockbuster that hit

insurers happened in Texas last June, when a jury awarded $32 million after

family members charged that their insurance company, Farmers, failed to

cover a claim for a water leak, which allowed toxic mold to spread through

the house and destroy their health.

Though huge payouts haven't become common in Virginia, loss claims from mold

are on the rise, said L. Burke IV, who heads a firm of independent

insurance adjusters in Newport News.

" We're seeing mold claims more frequently, " said Burke, president of Pete N.

Marcos Agency Inc. " The problem is when folks have water damage behind the

walls and they don't know it's going on. Or they have a claim and a vendor

comes out and dries out the floor, but inside the walls, the mold is still

growing. If you go in and clean and dry it properly, mold is not an issue.

Still, there is little consensus on how to eradicate black mold - or on its

health consequences.

Gretchen Schaefer, spokeswoman for the American Insurance Association, said

the Centers for Disease Control are studying the issue but have not

published conclusive evidence about the health effects of mold.

But the impact on all insured homeowners can swiftly become significant. In

2001, 70 percent of the mold claims in the country came from Texas. Today,

Texas homeowners pay an additional $444 a year in insurance premiums for

mold coverage, compared to additional costs to Texans of just $22 a year in

early 2000.

Now the spread of the problem in Texas is causing " the rest of the country

is having to share the expenses, " said Jeff a Nationwide Insurance

agent in burg. Nationwide, losses for the insurance industry have

escalated to $41 billion last year from $31.3 billion in 1992.

Katha Treanor, from the Commonwealth's State Corporation Commission, said

the insurance industry was already getting tighter before the mold issue and

the Sept. 11, 2001, terrorist attacks.

" Underwriting guidelines have become stricter, " Treanor said. " They're

taking a closer look at water-loss claims. "

Cramer, State Farm's Virginia spokeswoman, said she was not surprised that

her company stopped writing new homeowners policies in Texas - given the

amount of money that was paid out.

" If you keep losing money, you have to stop that loss of dollars, " she said.

" Our first responsibility is to our current policyholders. "

Sue Ingram can be reached at 247-4767 or by e-mail at

ssingram@...