Alabama Insurance Department rethinks mold limit

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http://www.bizjournals.com/birmingham/stories/2002/03/11/story4.html

March 8, 2002

State Insurance Department rethinks mold limit

Zganjar Staff

The state Insurance Department is reconsidering an earlier decision that

allows Allstate to limit coverage for mold damage in homeowners' policies to

$5,000.

The department approved Allstate's request last fall and the cap went into

effect in November. State approval is required before insurance companies

can make changes to their coverage.

ny , deputy commissioner, says the department now wants to see

the $5,000 limit doubled. He says department officials spoke with Allstate

officials as recently as March 1 and are awaiting a formal response from the

insurer.

" We want everyone to get at least $10,000 coverage for mold, " says.

Allstate spokesman Trevino says the company is " having conversations

with the Alabama Insurance Department about concerns the department has " but

has received no formal notice that the agency wants the cap increased.

Insurance

Trevino says Allstate is seeking caps on mold claims in nearly all of the

states in which it writes homeowners' insurance.

" It's not being done just in Alabama but is part of a strategy we have

implemented across the country, " he says. " The intent is to make sure that

premiums don't skyrocket because of spiraling claims and costs for mold

damage. "

The Insurance Department can withdraw an earlier decision it has made, but

the affected company has the right to a hearing and can appeal the agency's

decision, says.

The department recently approved a $10,000 cap on mold damages for Alabama

companies represented by the Insurance Service Office Inc. The cap went into

effect Jan. 1 and is optional, meaning ISO companies can implement it if

they wish.

The ISO, based in Atlanta, represents approximately 1,500 insurance

companies nationwide and files requests on their behalf with states for rate

increases, coverage changes and other matters.

Dave Dasgupta, an ISO spokesman, won't identify the Alabama insurance

companies that his organization represents or those that have implemented

the cap. He says his organization doesn't require client companies to say

whether they have included mold limits in their homeowners' policies.

Texas, the mold state

The interest in limiting coverage for mold damage stems from an onslaught of

mold claims in Texas last year. Allstate saw its mold claims there jump from

250 in 2000 to more than 4,600 in the first nine months of last year.

Consumer groups in Texas say the average mold claim is $17,000.

says mold currently is not a problem in Alabama but that insurance

companies are taking pre-emptive steps to limit coverage or to make sure

their policies are specific about what kind of mold damage is covered.

Mold typically is covered only if the damage is a result of a " covered

peril. " For example, if a storm or accidental water discharge from a burst

pipe causes mold, the mold damage is covered. If mold damage results from

excessive humidity, leaks or condensation, or a homeowner's failure to

repair the property, the damage is not covered.

While the ISO represents a number of insurers in Alabama, three firms have

the bulk of the homeowners' insurance market: State Farm, Alfa and Allstate.

The three companies have 63 percent of the market, based on premiums

written, says.

Neither State Farm nor Alfa thus far have sought to limit mold coverage,

says, although State Farm has asked the Insurance Department for

permission to change mold-related language in policies it sells in Alabama.

Contact reporter Zganjar at (205) 443-5631 or

lzganjar@....