Connecticut Mold Coverage Rules Tighten

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Mold Coverage Rules Tighten

August 16, 2002

By DIANE LEVICK, Courant Staff Writer

Many Connecticut consumers will end up with less insurance for mold damage,

and some businesses will lose coverage for mold-related liability claims

under a long-awaited decision by regulators.

The guidelines the Connecticut Insurance Department released this week

follow a deluge of requests by insurers to drop or limit mold coverage, with

some planning to offer it as an option for additional premiums.

Mold claims have skyrocketed in some states, such as Texas and Florida,

driving up their insurance rates. Although insurance companies say they've

received relatively few mold claims so far in Connecticut, many want to

protect themselves by changing policy language here and around the nation.

Connecticut regulators will allow some - but not all - of the restrictions

proposed by insurers.

Insurers will still have to pay homeowners and businesses for mold damage,

cleanup and testing if it's the result of a fire or lightning. Those

accidents can lead to water entering a building and providing the damp

conditions for mold to grow.

But for mold claims that stem from other causes, insurance companies will be

permitted to limit the amount they pay under a homeowner's or commercial

property policy to as little as $10,000 a year.

Previously, there weren't special limits on mold, although insurers say

policies were meant to pay only when mold results from something accidental,

not from poor home maintenance.

Now there will also be limits on mold coverage in liability insurance, which

protects policyholders from the costs of lawsuits.

Insurers, for instance, will be allowed to put an annual limit as low as

$50,000 into homeowners' policies on what will be paid for mold-related

liability claims. Mold liability coverage can't be excluded altogether from

homeowners', other dwelling, and personal liability policies, the insurance

department says.

For businesses, though, insurers can exclude or limit coverage as they wish

for mold-related liability claims, the department says.

The guidelines apply to bacteria as well as mold.

" We believe the guidelines reflect the reasonable needs for coverage of

consumers as well as the needs of the industry to identify the exposure they

have to loss, " said Walter Bell, director of the insurance department's

property and casualty division.

" While claims related to mold have existed in property policies for years, "

Bell said, " the explosion of claims in certain states, such as Texas, has

made everyone concerned about the potential impact in other states for this

type of a claim. "

Connecticut regulators will now review insurers' filings on mold coverage

and approve the restrictions that meet the department's guidelines. Once

approved, the changes would take effect upon renewal of policies.

The changes are expected to be widespread because there have been filings by

many individual companies as well as an industry organization that develops

model policy language.

The insurance department has warned insurers that property policies " may not

unreasonably restrict " the time within which a policyholder must report a

mold claim. One company filed an unacceptable proposal to require reporting

of a mold claim within 48 hours of the incident that caused it, Bell

recalled.

The mold guidelines are posted on the insurance department's website at

www.state.ct.us/cid/ under " What's New & What's Hot!!!! "