Fw: Insurers pre-empting mold claims

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Insurers pre-empting mold claims

By karellano@...Kristi ArellanoDenver Post Business WriterMonday, November 10, 2003 - Insurance companies, still reeling from costly mold claims filed by homeowners, are moving to insulate themselves from what they believe could become the next big source of mold payouts - auto insurance claims. At least one insurance company has excluded mold coverage from its auto policies and others are expected to follow.

"It's being discussed, and it's probably a reasonable thing to do," said Bob Hartwig, chief economist for the Insurance Information Institute. "It may sound silly, but five years ago, it would have sounded silly to put the same exclusion in homeowners insurance."

State Farm Insurance, along with most large insurers, implemented a mold exclusion for its homeowner policies early last year. The insurers said the high cost of mold payouts would drive premiums skyward unless the coverage was eliminated.

But State Farm went a step further and extended the exclusion to its auto policies in December. Policyholders are notified of the change when it's time to renew their coverage.

"With vehicles, mold is not a significant issue, but we saw it as something that could potentially become an issue in the the future," said , a spokeswoman for State Farm.

Representatives for other large insurers said the issue is too new for them to weigh in on but that they are watching it closely.

The likelihood of developing a serious mold problem in a vehicle is minimal, said Doug Rice, laboratory director for environmental health services at Colorado State University in Fort . The fungus can occasionally develop because of faulty air conditioning, prolonged leaks or when cars are damaged in floods or hurricanes, he said.

Part of the reason insurers are eyeing their auto coverage is a 2002 lawsuit filed against General Motors Corp. by Everett Greene, a gospel musician and minister from Boone, N.C.

Boone alleged that faulty weather stripping in his 1999 Cadillac Escalade resulted in mold growth that led to a host of medical problems. The claim was resolved in a confidential settlement.

Greene's attorney, Duffus of Duffus & Associates, said he is preparing to file nearly half a dozen similar suits.

The suits so far have been limited to manufacturers, but they still have the insurance industry squirming.

"It seems like trial lawyers are bending over every which way to find coverage in deep pockets where it doesn't exist," he said.

Kirk Yeager, Colorado's deputy insurance commissioner, said most auto policy holders won't miss the mold coverage, since the coverage is intended to pay for physical damage and injuries resulting from accidents.

"One of the things that's happened over the years is that the courts have construed insurance coverage as broader than it was meant to be," Yeager said. "Insurance companies are going into defensive mode, so they don't have to increase rates for coverage that was never meant to be included in the first place."