Insurers seek cap on mold claims

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Insurers seek cap on mold claimsBy Purva PatelFlorida CorrespondentJuly 3, 2003A growing number of Floridians are blaming mold in their homes for making them sick -- and they have been turning to their homeowners insurance companies for relief.Now, the insurance companies are turning to the state for relief.To stem potential losses, companies want to curb how much they might have to pay out as a result of claims involving mold. More than 200 insurance companies have asked state regulators to cap mold coverage and allow policyholders to buy extra protection.Bob Lotane, a spokesman for the Office of Insurance Regulation, said several companies have received approval for the caps but an exact figure was not available.Allstate Floridian Insurance Co. got permission more than a month ago, said Grawe, an attorney for the insurer. Allstate, the state's second-largest home insurer with about half a million policyholders in Florida, has started to notify customers whose policies are coming up for renewal.The insurer analyzed how much mold losses cost and concluded that $5,000 would be enough to cover a legitimate mold claim, Grawe said. But after negotiating with regulators, the company agreed to a $10,000 cap.However, some consumer advocates contend that ceiling is too low, especially if the mold leads to health problems."Medical claims can be significant, and if you're out of work for a while, it's a pretty severe impact on your life," said Bill Newton, executive director of the Florida Consumer Action Network.Companies that specialize in removing mold also say the average cost of a claim can be hard to establish.Bob Varela, with the International Association of Mold Remediation Specialists, said claims could vary depending on the size of a home and the extent of damage."You can't put a cap on a new roof of an $80,000 home in comparison to a roof of a $1 million home," he said.Varela's group suggests requiring state licenses for remediators in Florida to keep unscrupulous businesses from inflating claims. Hunter, insurance director of the Consumer Federation of America, said the caps may be reasonable, but they should be given in lieu of a rate increase or in exchange for a rate cut. Insurers predicated their rates on mold claims and should give consumers a correlating break, he said.But most Florida insurers say the caps are a pre-emptive move made to keep rates from rocketing as they did in Texas. Existing rates don't reflect mold losses, they say, because the claims are a relatively new phenomenon in Florida."That sounds like bull to me," Hunter said, adding that if the coverage wasn't so valuable and homeowners weren't making claims, insurers wouldn't be trying to limit their payouts.Decisions on many of the more than 200 applications for caps filed by the companies last year were temporarily tabled when Florida Farm Bureau Insurance Co. and State Farm filed lawsuits against state regulators for rejecting their requests.Florida Farm Bureau eventually was allowed to limit mold coverage in residential homeowner policies to one-time payouts of $10,000 with a cap of $20,000 per policy period. The move set a precedent for other insurers to do something similar.State law doesn't require mold coverage, and most insurers only pay for mold that results from a sudden and accidental loss, such as a burst pipe."With the absence of any statutory authority to mandate coverage, we thought it was in the consumers' best interest to get something rather than nothing," said Lotane, of the state's insurance office.While State Farm, the state's largest insurer, wants total exclusion and an option to let consumers buy the coverage at an additional premium, the company would consider limiting coverage in base policies like Florida Farm Bureau has done, said company spokesman Tom Hagerty. A decision from the Office of Insurance Regulation is still pending."The ball is in the OIR's court," Hagerty said.Purva Patel is a business reporter for the South Florida Sun-Sentinel, a Tribune Publishing newspaper.

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