The cost of mold

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http://www.amarillonet.com/stories/041402/tex_thecost.shtml

Sunday, April 14, 2002

6:54 a.m. CT

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Home Sweet Home: Annie Webb and her son, Sam, 5, spend time outside their

Amarillo home. The Webbs spent about $60,000 to eliminate mold from their

home.

Lemmons / mlemmons@...

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The cost of mold

Texans will feel the price of fighting fungus

By Deon Daugherty

deondaugherty@...

AUSTIN - When homeowner Jim Riddle received his insurance renewal this year,

he had a choice to make - spend another $500 for limited water damage

coverage or risk vulnerability to mold.

Riddle decided to take his chances. He skipped out on the 75-percent

increase, but he'll also miss out on water damage coverage.

The Lubbock real estate agent had options with his renewal: no water damage

coverage; damage clean-up, but no repair; or pay for the whole shebang, he

said.

" I'm really not afraid of it. I've got children, grandchildren, and

great-grandchildren, and I would tell them the same thing - keep your house

clean, watch for water leaks, and you won't have a problem, " Riddle said.

Other Texans are opting to pay up.

Jim , a spokesman for the Texas Department of Insurance, just renewed

his policy along with an increase of about 98 percent for the same coverage.

" I get lots of calls from people complaining, and boy, can I sympathize with

them now, " he said.

Annie Webb's family life was disrupted for months and her son now has a

chronic illness that she attributes to mold in her Amarillo home.

After $60,000 in repair and remediation work, her house has been declared

" clean. " Her son is still susceptible to any respiratory sickness, she said.

" It has to be because of this house, " Webb said. " Now, the house is better,

but the lungs are ruined. "

Webb said her family was fortunate compared to others now confronting the

mold problem in their homes. She had a good policy with a company that met

the family's needs.

Webb said she will make sure her home continues to be protected, even at a

higher rate.

" I guarantee I'll pay it, " Webb said. " It's not that I believe in it - I

think it's a scam - but if I had lost our home, our family would be

devastated. "

Webb said she thinks remediation costs are unfair and a big part of what's

driving insurance premiums up.

" You're rolling the dice every time you pay your premiums, but if you went

through what I went through, you'd pay more than $500 or $600 extra a year, "

Webb said.

Insurance Burden

Recent changes in water damage coverage and mold repair put a bigger burden

on policyholders to become more " insurance savvy, " said.

An increase in claims drove up the cost to insurance companies by millions

of dollars, company representatives said. Those companies passed on the

costs to their consumers.

State Rep. ee, R-Amarillo, chairman of the House Committee on

Insurance, said many Texas homeowners are finding their insurance renewal

rates have increased from 30 percent to 300 percent. And they're the lucky

ones, he said.

Others are confronted with a new policy substituted to provide substantially

less coverage, and some policies are canceled.

The attitude of many companies is " take it or leave it, " ee said.

Because having a mortgage requires having insurance, owners are forced to

pay significantly more for either the same coverage or a plan that is

substantially less, he said.

Mold is not a new pest to homeowners. In the biblical book of Leviticus,

Moses gives instructions on handling mold.

What's caused the recent fervor, many experts say, is the use of new

building materials that are airtight and allow less circulation.

A $32 million jury award for a homeowner in Dripping Springs based on one

company's slow response to a water damage claim has put mold dangers in the

public eye.

And reports of children in the hospital with mold-related illnesses have

frightened consumers.

" People might see mold and at one point, they would just use bleach to clean

it. Now, they panic, " ee said.

Compromised Plans

Doug , a spokesman for the Insurance Council of Texas, said new

products permitted on the market will remove some of the problems plaguing

insurance companies.

" It's a step in the right direction. I think it's getting better, but in

terms of it being averted, I'm not sure, " said.

The council is a trade association that represents 424 property and casualty

insurance companies that operate in Texas.

Offering different policy options is a good idea, said.

" What you'll find is as things shake out, a number of people won't opt for

mold coverage, " he said.

The evidence shows mold can grow anywhere that's damp, so people shouldn't

assume that because they live in a dry part of the state, they won't have a

problem. Left untreated, a water leak can cause mold damage, said.

" Each individual homeowner needs to look at what they have, what they need

and purchase accordingly, " he said.

Rob Schneider, senior staff attorney for the southwest regional office of

the Consumers Union, said the insurance department's permission for the

compromise policies has basically solved the problem for insurance

companies, but not consumers.

" It's really about companies eliminating water damage from policies, " he

said. " Consumers are in a pretty bad spot right now. "

Because rates aren't regulated, everyone will see a dramatic increase, he

said.

" We were predicting this rate increase crisis, but we didn't think about

mold. We thought it would be a hurricane, and then without rate oversight,

rates would increase dramatically, " Schneider said.

Texas rates are the highest in the nation, he said, but that's not the

biggest problem for consumers.

What hurts people buying or attempting to renew policies is rates that

aren't stable and predictable from year to year, he said.

" A family is going to have to come up with several hundred dollars they

didn't budget for - it's very difficult, " Schneider said.

Schneider was part of a task force appointed by Insurance Commissioner

Montemayor. The group is recommending that companies, by rule, have to

respond to water claims within 48 hours.

" It's OK to have other deadlines with a claim that's not going to result in

ruinous results by waiting, but it's not the case with mold, " Schneider

said.

Halting Growth

The House Insurance Committee is preparing a report to the Legislature that

calls for action.

Currently, insurers have 15 days to respond to a water damage claim. The

overwhelming scientific evidence shows water damage should be handled within

48 hours, and ee said lawmakers should act to narrow companies'

response window.

Also driving the cost of insurance is the work of " public adjusters, " the

people who solicit mold claims and high-cost remediation of water damage.

The adjusters and remediation providers aren't regulated by industry

standards or the insurance commission - a situation that should be rectified

by legislative action to require licensing through the insurance department,

ee said.

" We've got to get control, " he said.

In addition, there is little rule on what insurance companies can charge for

coverage, he said.

The state's insurance commissioner should be able to review company rates

and losses to make sure cost is appropriate, he said. Montemayor has

recommended such a " file and use " system to replace the current benchmarks.

" Right now, 95 percent of the Texas market is totally unregulated, and we

suspect several have taken advantage of the situation to raise costs more

than they should, " ee said.

Other issues in the industry are beyond the control of the Legislature, he

said. However, the insurance report likely will suggest the Texas Department

of Health establish standards for remediation.

" There may be a lot of over- remediating now that's unnecessary, and the

companies are just having to pay it, " he said.

And because insurance companies have to pay, so do consumers. The Texas

industry traditionally has offered a comprehensive HO-B policy, one that

included water damage as a matter of homeowner coverage.

However, faced with millions of dollars in losses, companies have pared

those policies down dramatically and many offer water damage coverage at an

additional cost.

Insurance for a $100,000 home in Texas cost about $900 in the past; now

homeowners can expect the cost to rise by $400 to $500 or more, ee

said. Water damage claims have skyrocketed in the past nine months, he said.

Renewed premium rates reflect the skewed claim numbers.

ee said he has not had to decide about the premium for his own Amarillo

home. His policy will be up for renewal later this year.

" But I've already been warned the company has been increasing at a pretty

substantial rate, about 40 percent, " ee said. " So I know it's coming.

" It's hitting a bigger percentage of the population each month. By the end

of this year, everybody will feel this. "