Allstate limits policies for homes

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http://www.chron.com/cs/CDA/story.hts/business/1019698

Aug. 24, 2001, 2:31PM

Allstate limits policies for homes

If water-damaged, restrictions apply

By DAVID KAPLAN

Copyright 2001 Houston Chronicle

Homeowners whose dwellings have suffered water damage within the past three

years will not be able to buy new policies from Allstate Insurance Co., but

current policyholders will not be affected.

The third-largest property insurer in Texas said its decision to discontinue

such coverage is a result of a large number of recent mold-related claims.

" Our data shows us that many mold claims reported today are the result of

water losses that have occurred in the past, " said Schmitt,

Allstate's corporate relations manager. " It doesn't make good business sense

for Allstate or our customers if we take on risk that has the potential for

more serious losses in the future. "

The announcement comes less than three weeks after Farmers Insurance Group

decided to stop selling new homeowners policies in Texas covering water

damage.

Allstate joins a growing number of companies that are making it harder to

get more inclusive homeowner insurance in Texas because of mold-related

claims.

State Farm has submitted a plan to the Texas Department of Insurance that

would offer a policy with limited mold coverage -- covering mold damage only

in cases of sudden and accidental discharge of water, such as a broken water

pipe.

Other companies are still weighing their options.

Allstate Insurance Co. announced that it is no longer selling the more

inclusive HO-B policy for homes that have had a recent claim of water

damage. Farmers and Progressive had already stopped offering new HO-B

policies because of concerns over mold-related claims.

The more limited HO-A policies, which do not include water coverage, are

rarely sold in the state.

" We are concerned about the solvency of the insurance industry with a

homeowner's rate insufficient to pay mold claims, " said Jerry s,

president of Southwestern Insurance Information Service, an industry trade

group.

" It is very serious. It is in a crisis mode, " he said.

" There is the looming issue of an availability crisis for homeowner's

insurance in Texas unless the issue is resolved quickly, " s said.

" There is simply not the premium in homeowner's rates to support the size of

mold claims, which range anywhere from $10,000 to $100,000 per claim, "

said.

Options being considered by the state insurance commissioner will determine

the course of other insurers, s said.

Jim , Texas Department of Insuracne director of public information,

said commissioner Montemayor is trying to come up with " some kind of

answer. "

" We're still in the process of gathering information, " he said.

The commissioner's office put out a " data call " to insurance companies, and

they are to respond by Aug. 31. This will provide some " real meat " as

opposed to anecdotal information, said.

The commissioner's office also is holding hearings around the state. One

will be held in Houston Sept. 13.

Among the options being considered by the commissioner are:

· An opt-in policy in which a homeowner would buy a basic policy that does

not offer various types of water discharge coverage, but could purchase that

coverage as an add-on.

· An opt-out policy in which a homeowner would have a basic policy that

" includes everything, " said, " but if you elect to opt out of the mold

coverage, you would get a discount. "

said he wanted to make it clear that " we are holding hearings,

inviting people to write to us and seeking other ideas as well. "

Schmitt said the company has stopped providing new homeowners HO-B policies

to customers if the dwelling to be insured has had a prior water loss in the

last three years.

" Allstate will continue to issue new homeowner HO-B policies for dwellings

that do not have a prior water loss in the past three years, and customers

who are renewing their policies are not affected by this change, " Schmitt

said.

Many other states don't offer mold coverage.

The recent decisions eventually might have an impact on home sales, but it

is still unclear how.

" For Houston, it could certainly be a problem, " said Margo Isaacks, sales

manager at Heritage Texas Properties, a large real estate brokerage in

Houston.

But she said it is too early to evaluate the impact of the insurance

shortfall.

" As of this time, I have not had any of my agents come in and say: `We can't

get insurance; what are we going to do?' "