State Farm hike hits condos with 132% rate hike, yanks mold coverage

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State Farm hike hits condos with 132% rate hike, yanks mold coverage

By Purva Patel

Business Writer

Posted December 20 2002

State Farm came out victorious Thursday in a six-month battle with the

Department of Insurance over mold exclusions and homeowners' insurance rates

for condo associations.

Florida's largest insurer said condo associations would see their State Farm

homeowners' insurance policies rise a statewide average of 132 percent--and

none of the policies will include mold coverage--when they come up for

renewal.

The department granted the company a 70 percent average increase Thursday,

but it essentially doesn't mean much. That's because under Florida law, the

company can raise rates on a case-by-case basis as long as the policyholder

agrees to the rate. The company will not renew policies if the holder

doesn't accept the rate, said Tom Hagerty, spokesperson for State Farm. " We

felt we needed this rate increase because our claim costs had been

increasing for every dollar we collected on premium increases, " he said.

The company had asked for a 132 percent increase earlier this year, but was

shot down in June when the department said the company could only justify a

little over half that hike.

The company has about 3,900 condo association polices statewide, a thousand

less then when the company announced it would stop renewing the policies

this past summer because it had to provide mold coverage.

The company won't take on new association business or take back those who

chose not to renew before the agreement was made, Hagerty said.

State Farm has about 18 percent of the condo association market in the

state, with most of the policies located in southeast Florida as well as the

Tampa-St. sburg area.

The insurance department said it recognized that condo associations would

have to resort to a secondary market of insurers that aren't regulated by

the state.

Those insurers charge thousands more than State Farm and don't offer mold

coverage.

" We are certainly glad State Farm has continued to write this business in

Florida, " said Tami , spokesperson for the Department of Insurance.

Lauderhill resident Roxanne Nadolsky, the past president of her condo

association, said she was shocked when her agent called her with the news

today.

She said her condo association pays an annual premium of about $8,200 for

some $2 million in coverage. Her agent told her the premium would jump to

$13,940 to cover the 44-unit condo, even though the association has never

filed a claim.

" It just sounds unreasonable, " Nadolsky said. " These condos don't warrant

that kind of money for insurance. I don't know what we do from here. "

Condo associations have seen rates rise 4.4 percent in 2000 and 17.5 percent

in 2001. But State Farm agents have said those rate increases weren't enough

and the company's policies are priced thousands of dollars below what

competitors are charging.

If condo associations and homeowners can't find insurance through another

company, they can purchase it through the state's insurer of last resort --

the Citizens Property Insurance Corp.

Still, insurers called this a victory for the industry and consumers, who

will benefit from having one more insurer in the market to choose from.

State Farm's triumph comes only two days after the insurance department and

Florida Farm Bureau Insurance Company came to an agreement to limit mold

coverage on residential homeowners' insurance policies.

Though no one would say if the agreements would set a precedent for some 240

pending petitions for exclusions or limits of mold coverage, the moves show

some progress has been made on the debate.

" Hopefully this means this bottleneck is about to be broken, " said Sam

, vice president of the Florida Insurance Council.

State Farm is still discussing mold exclusions on its residential

homeowners' policies with the insurance department.

Purva Patel can be reached at ppatel@... or 954-356-4667.

Copyright © 2002, South Florida Sun-Sentinel