Mold might not be covered

[Guest guest]

Mold might not be covered

Few noticed changes in their insurance policies, exec says

By MICHELE DERUS

mderus@...

http://www.jsonline.com/story/index.aspx?id=519866

Posted: Oct. 17, 2006

American insurance companies quietly enacted mold-damage exclusions

on general liability and homeowner policies in recent years -

significant coverage changes that went unnoticed by most customers,

an insurance executive said Tuesday.

" They blasted through more policies than anything in history -

faster than terrorism, asbestos or pollution. They quietly excluded

(mold damage coverage) from everyone's policies, and they got away

with it, " said Dybdahl, president of American Risk Management

Resources Network, a Middleton-based national specialty insurance

broker.

Faced with mounting claims over a nationwide outbreak of the

household fungus, Dybdahl said, insurers capitalized on the national

distraction with terrorism in 2003 and 2004 to push mold exclusions

through regulatory channels.

" They did it as an endorsement that gets stapled on your policy and

overrides policy language. It's a trump card, " Dybdahl said. " You'd

think bankers would be paying attention to something like this. But

they haven't done a thing about it. "

That will change in coming months as mortgage lenders realize their

losses in Gulf Coast regions that belatedly are dealing with year-

old Hurricane Katrina damage, he predicted.

" There'll be thousands of cases " where mold exclusions reduce

insurance payouts, he said. " Homeowners will lose their equity, but

banks will lose everything. "

Dybdahl's comments came during and after a presentation to about 150

businesspeople at the Clarion Hotel & Conference Center, as part of

a seminar on mold issues sponsored by the Milwaukee Lead / Asbestos

Information Center.

Insurance industry spokespeople said Dybdahl didn't have all his

facts straight.

It is true that most American homeowners and businesses have had

their insurance policies changed in recent years to restrict or

charge extra for mold damage coverage, said Loretta Worters, vice

president of the Insurance Information Institute in New York City.

Such changes stem from a $32 million jury award in Texas in 2001

that alerted the industry to the fact that mold had morphed from

embarrassing household nuisance to major financial liability,

Worters said. " The owner of a 22-room mansion got $4 million in

damages and $17 million for mental anguish and punitive damages, "

she said.

Though an appeals court reduced that award, Worters said, " the

number of claims had increased significantly since then and the

issue became a hotbed for lawyers. "

Insurers could have raised prices to cover mold risks, Worters said,

but most chose to restrict or eliminate coverage instead.

Minimal impact

The impact of these new mold exclusions on Hurricane Katrina damage

areas in Louisiana and Mississippi has been minimal, according to

ph Annotti, senior vice president of public affairs for Property

Casualty Insurers Association of America.

" Most of the losses down there have been paid - I think there's only

about 1,000 still out there - and I haven't seen one dispute over a

mold issue, " Annotti said.

Worters estimated that about 10,000 of the industry's 330,000

Katrina-related damage claims are still unresolved. About 60% of

property owners with flood damage weren't insured for their losses,

she said.

Dybdahl " may have a point on mold exclusions, " Annotti

conceded. " That Texas judgment sent shudders down the spines of many

insurance companies, and they started retrenching. For the most part

on homeowner policies, if mold is a result of a covered claim,

you're OK. But if your house floods and you get mold, you're not

covered. "

100 million exclusions

This change is sweeping, and potentially devastating to

policyholders, Dybdahl said.

" We've got 100 million mold exclusions out there, " he said, " and

bankers who think they have all-risk insurance but don't, " the

insurer said. " Most people in the mold business have some

protection, but everybody ought to have some. "

His advice: Homeowners should ask their insurers to restore mold

damage protection in their policies, with a high deductible if

necessary, and businesses should seek coverage through specialty and

environmental insurers and investigate ways to reduce risk.

From the Oct. 18, 2006 editions of the Milwaukee Journal Sentinel

Have an opinion on this story? Write a letter to the editor or start

an online forum.