Insurers nix mold coverage

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http://www.myrtlebeachonline.com/mld/sunnews/3828517.htm

Posted on Fri, Aug. 09, 2002

Insurers nix mold coverage

By Oster

The Wall Street Journal

What's the best way to get rid of mold? The insurance industry has an

answer: Exclude it.

State Farm Mutual Automobile Insurance, the largest home insurer, has

eliminated coverage for mold in 33 states, including South Carolina. Even if

the mold is the result of storm damage covered by a State Farm policy, the

company won't pay to eliminate it.

In its most widely used policy, No. 2 home insurer Allstate has added

language to clarify it doesn't cover " mold, fungus, wet rot, dry rot or

bacteria " unless the problems arise from events already covered by the

policy. In those cases, cleanup costs are now limited to $5,000 - an amount

likely to fall short of most claims. Both companies began limiting coverage

last year but in recent months have sharply curtailed the number of states

where they provide mold coverage.

Other insurers are seeking approval from regulators to impose similar

restrictions. Hartford Financial Services Group and American International

Group want to drop mold coverage in dozens of states. Already, the

California insurance department has approved 247 mold-exclusion filings that

will allow insurers to drop or limit mold coverage on new policies. It has

115 more filings pending.

The problem has gotten so dire the federal government may step in. Rep.

Conyers, D- Mich., has drafted a bill that would create a federal insurance

fund for homeowners whose insurance policies don't cover mold claims. And

last month, a House subcommittee held a hearing on mold, focusing on

scientific research of the problem and the economic impact of mold claims

and litigation.

For homeowners, the mold exclusions are the latest in a series of changes

making it progressively harder for people to use their insurance when they

need it most. Insurers have been dropping homeowners they view as

undesirable risks while also raising premiums and deductibles. In some

instances, consumers who file a single water-damage claim risk having their

policy not renewed. Some companies have instituted policies under which

holders who file two or more claims within a few years lose coverage. Hit by

dwindling investment returns and big claims from a series of major storms,

the industry says the moves are necessary to stem losses.

Two years ago, mold was barely on insurance-company radar screens. Then

health concerns about some types of mold surfaced, ranging from severe

allergic reactions to potential neurological damage. Homeowners filed an

avalanche of claims. Last year, the industry paid $1.3 billion to remove

mold and repair its damage.

Insurance companies contend the spike in mold claims is fueled by trial

lawyers and the media. " There isn't more mold today than there was 20 years

ago or 30 years ago, " says Bob Hartwig of the Insurance Information

Institute, a trade group.

But some scientists and companies who specialize in getting rid of mold say

construction techniques have increased the amount of mold in homes. " Today's

construction techniques make a house like a Tupperware container, " says

of Engineering & Fire Investigations, which specializes in

mold claim investigations.

Central heating in winter helps keep mold alive. Air conditioners that

provide additional humidity give mold an extra food source. And the paste

used in drywall, says, is one of the best forms of food for mold.

What can consumers do? " More than ever, you need to shop around - call two

or three agents to see if you can find broader coverage and lower prices, "

Lambe says. Independent agents, who have access to more than one insurance

company, can be helpful in finding companies that still cover mold claims.

A few, smaller carriers make the coverage available, including Automobile

Club of California.

Other companies vary in how high a cap they put on mold claims.

While Allstate has a $5,000 cap on claims, Safeco Corp.'s is $10,000. And

higher caps are available, at a price, from many companies.