'Cooked' houses burn insurers

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'Cooked' houses burn insurers

Frauds grow more mold before claims

By Elder Caller-Times

May 5, 2002

They come to your house, convince you that you have a huge mold problem and

urge you to leave immediately. While you're stuck in a rental property, they

put wet towels in the house, spray down the draperies, hose down furniture -

anything to increase moisture. They close the windows and crank up the heat.

It's called " cooking " the house, and it's a recipe for sprouting mold and

bilking insurance companies out of thousands of dollars.

House-cooking, according to some in the industry, is the newest accelerant

in the conflagration of mold claims in Nueces County. The rumors of the

scams - done at times unbeknownst to homeowners and at times with their

collusion - have spurred a statewide investigation, with a hard look into at

least one company here.

" They do what they can do to infiltrate the house with mold, " said Mark

Hanna, a spokesman for the Texas Department of Insurance.

" What we have looked for are people who are in the restoration business who

have concocted a plan with the homeowner to make their homes much worse than

it may actually be as far as mold proliferation. "

The losers in the scams are ratepayers, said Androff a spokesman for

State Farm Insurance in Dallas. Insurance companies say house-cooking could

drive up insurance rates here.

Last fall, the Texas Department of Insurance asked the Texas Attorney

General's office to look into possible price gouging practices in Nueces

County in connection with mold removal services.

Nueces County fell under the department's scrutiny after insurance companies

reported that the costs of mold claims here far exceeded the rest of the

state. The department found that while Nueces County has only 1 percent of

the state's homeowner policies, it had 8 percent of the largest mold-related

claims - those worth $15,000 or more.

So far, no mold removal firms have been indicted. But the ramifications of

the investigation have been felt locally.

Tom Kelley, a spokesman for the Attorney General's office, said the agency

at one time had been investigating a Portland company, Mold Inc., a

remediation company owned by Fred Rich. Kelley won't comment about that

case, and said the attorney general is no longer involved in it.

In late March, special crimes investigators for the Department of Public

Safety and U.S. Customs secured a warrant to search the office of Mold Inc.

and a storage bin behind Rich's home.

Tom Vinger, a DPS spokesman, confirmed that an investigation was under way

and that the agencies obtained a search warrant. The Caller-Times was unable

to verify what court issued the warrant and the agencies declined to comment

about the investigation. Vinger said a federal court might have issued the

search warrant, but he could not confirm it.

'They're just fishing'

Rich said he has done nothing wrong and that he had never heard of house

cooking. He said that officials had presented a warrant to him March 28 and

that they had removed records from his business. Officials have not returned

those records to him, he said.

" I think they're just fishing, " he said. " They started contacting customers

of mine three or four months before and questioning and threatening them and

try to scare them into not doing their claim. They couldn't get anything

there so they came and got my records. "

Rich, who no longer operates Mold Inc., said he doubted that the

investigation had anything to do with house-cooking. The investigation is

most likely being pushed by insurance companies against anyone who tries to

help homeowners, he said.

" An insurance company might offer $9,000 for something that costs $80,000 to

clean up. You need proper equipment, proper machines set up, and it's very

expensive. "

Rich also said other local companies were being investigated. Kelley, with

the Attorney General's office, would not confirm that.

Frequent fraud in area

Dick Poremba, a partner with engineering and environmental assessment

company HNP Inc., said fraudulent mold actions against insurance companies

occur frequently in Corpus Christi and The Rio Grande Valley.

HNP investigates mold and mold sources for insurance companies and other

organizations. The 5-year-old company also provides clearance on mold

remediation work, meaning that Poremba inspects the job after it's done.

Poremba said he recently went to a house where a homeowner blamed his air

conditioning unit for a mold problem.

Poremba said the unit wasn't the problem. During HNP's investigation, it

found a 2.5-inch-tall toolbox that had been flooded, indicating that water

deeper than that had poured into the home.

'People follow the money'

When HNP opened for business five years ago, it was the only firm

investigating mold. Now the company has 40 local competitors. Not long ago,

there were only two or three mold remediation companies. Now there are about

100.

" People follow the money, " Poremba said.

While some companies are legitimate, the consumer should beware, Poremba

said.

" There are a lot of good people who are doing this, there's a lot of people

doing this who don't have experience and there are some that are just a

scam, " he said.

The Texas Department of Insurance first heard of house-cooking from insurers

who said they had heard about it from homeowners and neighbors, Hanna said.

House-cooking scams can be orchestrated by any variation of players, said

Alan Bligh, president of the Better Business Bureau in the Coastal Bend.

" It's fairly widespread, where an adjuster comes by to tell someone they

have mold, and tell them they have to move out, and proceed to water down

the house and grow mold, " Bligh said. " The homeowner might be an innocent

bystander. "

Because house-cooking is a criminal offense and is typically perpetrated

against insurance companies, the BBB does not log such complaints, Bligh

said. Neither the Texas Department of Insurance nor the Attorney General's

office could say how many suspected cases of house-cooking have occurred.

Who's in on the scam?

Bligh said he had heard that some mold remediation companies create mold, or

in some cases make the problem worse, then offer to clean it up for

thousands of dollars. Homeowners then pass the bill on to insurance

companies.

In other cases, a public adjuster is in on the scam, he said. Public

adjusters represent policyholders and receive a percentage of the payout, as

opposed to insurance adjusters who work for the insurers.

The public adjuster might own rental property and steer the homeowner to

that property after telling the homeowner that his or her home is

mold-infested, Bligh said. A public adjuster can also be the same person who

cleans up the mold.

Androff, the State Farm spokesman, said he hadn't heard of that particular

form of fraud against insurance companies, but said Texans already pay the

highest insurance rates in the nation and house-cooking couldn't help.

Last summer, Allstate, Farmers and State Farm - which together sell about

two-thirds of all homeowner policies in Texas - said they would stop selling

the most common state-mandated policy to new customers.

State Farm alone has agreed to sell a modified policy to new customers.

The decision by the big three didn't affect existing policies. But as

policies come up for renewal, homeowners will have to go with a modified

policy.

Some mold removal companies are urging customers to hurry " before time runs

out " to make their mold claims.

While insurance coverage is scaled back, the costs are expanding. In March,

Rod Bordelon, who leads the state Office of Public Insurance Counsel,

encouraged homeowners hit with excessive rate increases to file complaints

with the Texas Department of Insurance.

Again, insurance companies blamed the rate increases on an unexpected wave

of mold claims.

Kelley with the Attorney General's office said the investigations were no

reason to suspect that remediation companies are inherently dishonest.

" There are certainly companies that are on the up and up and we're looking

at the industry broadly, " he said.

Contact Elder at 886-3678_or elderl@...