Stampede to Exclude Mold Claims Continues - now in Arizona

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Tucson, Arizona Saturday, 21 September 2002

Ariz. insurers scale back mold-damage coverage

/ Staff

Photos: Ted of TM Building and Development wrestles a toilet out of a

stripped-down home on Foothills Drive where mold has taken over.

Mold coats a closet wall of the Foothills home as shown in this photo by TM

Building and Development.

of TM Building and Development tapes up the front door of a

Foothills home as part of mold cleanup.

By Wichner

ARIZONA DAILY STAR

Rushing to stem billions of dollars in claims losses, Arizona insurers have

moved to exclude or limit coverage for mold damage from homeowners'

insurance policies.

The insurers' pullback means homeowners may find it increasingly hard to

press claims for mold damage caused by water leaks or flooding, industry

officials say.

Since the beginning of this year, four of Arizona's five biggest home

insurers have moved to shore up policy exclusions on mold-related claims or

to limit the amount they will pay to clean up mold, according to the Arizona

Department of Insurance.

" By and large, homeowners' insurance policies have always excluded mold, "

Insurance Department spokeswoman Klug said. " There's no prohibition on

this type of exclusion. "

Insurers say they are acting to prevent financial disaster, citing major

losses in Texas, Florida and other states.

Nationwide, the industry paid out $1.2 billion in mold-related claims last

year, contributing to a $9 billion loss on homeowners coverage, according to

the Insurance Information Institute.

The effect is harder to pin down in Arizona, where mold-related claims are

not tracked separately from water-damage claims.

However, water claims are the second-largest contributor to homeowners

insurance costs in Arizona, and such claims have helped push the average

cost of homeowners' claims 29 percent higher in 2001 compared with 1999,

said Jim Frederikson, executive director of the Arizona Insurance

Information Association in Phoenix.

Frederikson said the mold claims have been driven in part by a series of

highly publicized lawsuits over the health effects of toxic mold, including

a much-publicized, $32.1 million award against Farmers Insurance involving a

Texas family last year.

" They've never covered mold because it hasn't been an issue, " Frederikson

said. " There's a great debate over whether mold is a danger or not. "

Mold is a natural and necessary part of the environment, even in dry

Arizona.

But some types of mold produce toxic substances called mycotoxins, and in

large concentrations, some molds can cause allergy-like symptoms in

susceptible people, especially those with weakened immune systems, according

to the Centers for Disease Control and Prevention.

Insurers blame trial lawyers, aided by media hype over " toxic mold, " for the

growth of mold claims.

" They look for ways to exploit a situation, and all of us end up paying for

this, " Frederikson said.

The state's largest home insurer, State Farm, this year clarified its policy

language to strengthen its exclusion of mold coverage, company spokeswoman

Luwanna Nielsen said.

" The exclusion was to clarify the extent of the policy, because the

insurance was never intended to cover mold caused by lack of maintenance or

construction defects, " Nielsen said.

Mold-related claims caused by a covered loss, such as a burst pipe, are

handled on a case-by-case basis, she added.

Allstate, Arizona's third-largest home insurer, has a similar policy,

spokesman Joe Gacioch said.

" Your homeowners insurance is intended to cover things that are sudden and

accidental, " he said. " Most of the time, mold is something that occurs

gradually. "

However, Allstate does offer to pay up to $5,000 for mold remediation,

including removal and testing, for claims associated with a covered loss,

Gacioch said.

But a typical homeowner's mold claim costs between $15,000 and $30,000, and

in Texas alone last year, about half a billion dollars was paid out in such

claims, according to the Insurance Information Institute.

The cost of mold remediation can run much higher, especially in cases where

water damage was discovered too late to prevent it from infiltrating the

entire home.

TM Building and Development, a Tucson contractor that performs mold removal

and remediation, is currently working on a Foothills townhome owned by a

winter resident that was literally being eaten by mold after a burst

bathroom sink pipe flooded the home.

Discovered by a housesitter an estimated three to four weeks later, the home

was covered ceiling to floor in mold, TM Building marketing manager J. Lynne

Prikosovits said.

" Within 24 hours it can begin to grow, and within a few days you can have a

big, big problem, " she said.

The home has been stripped of all its wallboard and furnishings by workers

clad in safety suits, gloves and respirators. The final tab is expected to

run between $80,000 and $90,000.

Not far away, Northside resident Rob Vugteveen came home after attending a

wedding over Labor Day weekend last year to find his house had been flooded

by a broken hose on his refrigerator's icemaker.

" It was the smell that knocked you over when you walked in the door, "

Vugteveen said, recalling his family's arrival home from a six-day trip.

Since then, he and his family have been living in a rented home while he

wrangles with his insurer, Safeco, to settle a claim that may run in the

hundreds of thousands of dollars.

Vugteveen said a Safeco adjuster initially told him the mold damage wasn't

covered, even though it was clearly stemmed from a covered loss.

He said he had to hire a public adjuster - a professional who represents

policyholders to settle claims with insurers - and his own air-quality

expert to properly test his home and remove mold-infested materials.

Now, the house his wife's parents built in the 1400 block of East Via

Entrada has been stripped down to the wall studs.

" It's been a life-changing experience, " said Vugteveen, who criticized

Safeco for dragging its feet on a claim that may run as high as $120,000.

" I believe they have acted in their own best interest, not ours. They've

tried to minimize the costs. They've tried to low-ball every repair, " said

Vugteveen, a geophysicist and marketing and outreach director for the

Flandrau Science Center at the University of Arizona.

A Safeco official said he could not discuss Vugteveen's case in detail,

citing customer confidentiality policies.

But Summers of Safeco confirmed that the company has paid thousands

of dollars to remove the mold and house the family, and continues to work to

settle the claim.

" We're diligently trying to work with him, as we do all customers, " Summers

said.

Vugteveen's public adjuster, McDougall of Tucson, said that Safeco and

other insurers he's dealt with on mold claims often don't address water

damage quickly enough to avoid more serious mold damage, though in

Vugteveen's case the mold likely had already grown out of control.

Like other public adjusters, McDougall gets a percentage of the final claims

settlement.

McDougall and Prikosovits stressed the importance of cleaning up water

damage quickly and completely to avoid mold growth in the first place.

Mold tips

* Here's what to do to help keep your home free of mold:

Regular cleaning and home maintenance should keep potential mold problems at

bay. Fix plumbing leaks at once and thoroughly dry wet areas.

Small mold situations shouldn't require professional cleanup or inspection,

which can be expensive. Exceptions include leaky pipes or standing moisture

where mold has grown unchecked.

Keep humidity low by opening windows, venting bathrooms, dryers and other

moisture-gathering places. Always keep windows open when using evaporative

coolers.

Reduce condensation on cold surfaces, including windows, piping, exterior

walls, roofs and floors, by adding insulation.

Turn water off at the main when leaving the home for extended periods, or

use a housesitter.

Find out whether your insurance policy covers mold removal and cleanup (pay

special attention at renewal, when coverages may change).

To remove mold:

Wash walls with a mixture of 1 cup of bleach per gallon of water. Allow the

bleach to stay in contact with the walls for 15 minutes before you wash it

off, and dry thoroughly.

Seal walls and paint over them. Do not paint or caulk moldy surfaces.

Wear protective clothing, including rubber gloves, long-sleeved shirts and

respirators when dealing with large mold spots.

Absorbent or porous materials, such as ceiling tiles and carpet, should be

thrown away if they become too moldy.

For more information:

U.S. Environmental Protection Agency's Indoor Air Quality Information

Clearinghouse, 1-800-438-4318 Web site: www.epa.gov/iaq/molds/

Arizona Department of Health Services, Office of Environmental Health,

1-800-367-6412. Web site: www.hs.state.az.us/phs/oeh/.

* Contact reporter Wichner at 573-4181 or at wichner@....