Homeowners getting squeezed by limits on cleanup claims

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Homeowners getting squeezed by limits on cleanup claims

By LePage -- Bee Staff Writer

Published 7:26 a.m. PST Monday, Jan. 14, 2002

When it comes to insurance, mold isn't just a problem for owners of rental

housing.

Homeowners, too, are beginning to feel the impact that a spike in

mold-related claims, as well as insurers' fears over litigation, is having

on insurance.

Two large insurers in California, including Allstate, have capped the amount

they will pay for a legitimate mold-related claim. Allstate limited such

payouts to $5,000.

Like Allstate, most providers of homeowners insurance for Californians

insist they have never covered mold-related damage per se but have covered

the cost of cleaning up mold if it's the result of a " covered peril. " That's

a one-time sudden event, such as a burst water pipe or lightening-damaged

roof, that causes water damage which eventually leads to mold.

What's never been covered, most insurers insist, is coverage for mold

problems that stem from long-standing water intrusion problems such as a

leaky roof that's been neglected for months or years or mold resulting from

excessive moisture buildup in an inadequately vented home.

Some companies selling homeowners insurance in the state have recently filed

clarification language with the state Department of Insurance, stating that

they will cover mold-related costs only in the event of a covered peril.

Several major insurers, including Allstate, State Farm and Farmers, have

either recently increased their rates or have pending requests before the

department. State Farm recently won approval for a 6.9 percent rate

increase. Farmers received approval last year for two 6.9 percent increases

and one 5 percent increase, and has a proposed 6.9 percent rate hike

pending. Allstate has proposed a 22.3 percent increase.

Insurers are required to provide financial justification and California

claims loss data to support the need for their proposed rate increases. So

far, none of the major insurers has cited mold as a leading cause of rising

expenses.

But many insurers are warning that water damage claims are a major culprit

in rising expenses and, within that category of claims, the cost to test for

and clean up mold has become a fast-growing expense.

" The claims from mold are becoming more extensive and the repair costs

(higher), " said Bill Sirola, a spokesman for State Farm Insurance. " It seems

to be one of these national phenomenons that's just ramped up faster than

anybody had expected. "

About the Writer

The Bee's LePage can be reached at (916) 321-1065 or

alepage@... .