Keep mold coverage, state told - Homeowners, insurers face off

[Guest guest]

Keep mold coverage, state told

Homeowners, insurers face off

06/27/2001

By Terrence Stutz / The Dallas Morning News

AUSTIN - Worried homeowners from across Texas implored the state insurance

chief Tuesday to reject an effort by leading insurance companies to have

mold coverage dropped from their homeowners policies.

" It would be devastating to homeowners, " Sand of Rowlett told

Insurance Commissioner Montemayor at a lengthy public hearing that drew

about 600 people to Austin.

Ms. Sand said her family had to hastily move out of its home last Christmas

Eve after air quality tests showed that the structure was contaminated with

high levels of toxic mold. The mold, which flourished because of plumbing

leaks, caused health problems among family members that forced her to quit

her job and kept her son out of school for several months.

But insurance company officials at the hearing, led by Farmers Insurance

Group, said a surge in losses related to mold damage over the past two years

is threatening the industry's financial stability.

" The dramatic increase in mold-related claims is threatening to undermine

basic consumer expectations while at the same time presenting a serious

challenge to the financial integrity of Texas insurers, " said Rick Gentry of

the Insurance Council of Texas.

About 75 people offered testimony in the packed hearing room at the LBJ

Library - some traveled to Austin on chartered buses to have their say. Most

were homeowners who implored the commissioner to preserve mold coverage in

insurance policies sold in Texas.

Farmers asked Mr. Montemayor to allow the company to exclude the coverage

from its 800,000 homeowner policies in Texas. The commissioner said he did

not know when he would rule on the request, but planned at least two more

public hearings, probably this summer, in Corpus Christi and Houston.

Homeowners, consumer groups and insurance industry officials agreed on one

thing - the number of mold-related claims in the state has soared over the

past two years. But there is no clear cause for the increase.

" We have had 1,000 new mold-related claims just this year, " said Tom

of Farmers. Independent actuaries have estimated that insurance companies

would have to pay an additional $128.5 million in mold damage claims in

Texas in 2001.

" It may have to do with a greater public awareness of the problem. Part of

it is public hysteria because people read about some of these terrible

situations, " Mr. said.

" A lot of it is whipped up by plaintiffs lawyers who see this as another

opportunity to cash in against the insurance companies. "

But consumer groups insist that the problem is aggravated by insurance

companies that refuse to promptly pay for plumbing and water damage repairs.

Nearly all mold problems in houses - including toxic black mold - are caused

by moisture in walls, ceilings or floors.

Rob Schneider of Consumers Union said lack of insurance coverage could mean

" financial devastation " to thousands of homeowners who face mold

contamination of their homes.

" Do not succumb to unfounded fears that these claims will lead to insolvency

of the insurance industry, " he told Mr. Montemayor.

Ms. Sand was one of scores of homeowners who testified about severe health

and financial problems they have been hit with because of toxic molds in

their houses. Mold in her house started after a plumbing leak in an upstairs

bathroom.

" We moved out of our home on Christmas Eve and left all our belongings

behind, including the Christmas tree that is still standing in the house, "

the mother of four children said.

Although an environmental company is removing contaminated walls from the

home, Ms. Sand said, " I will never go back. I just can't see taking any more

risks with my family. The good news is that we are finally getting well. "

She said she was not interested in getting anything from her insurance

company other than what her family lost. " All we want is a replacement of

our home and our belongings, " she said.

Also testifying was Melinda Ballard of Austin, whose family won a $32

million jury award this month against Farmers Insurance in a case that

involved severe mold infestation of her 11,500-square-foot home near

Dripping Springs.

" Don't go down in history books as the insurance commissioner who betrayed

the confidence of Texas consumers, " she told Mr. Montemayor. " Just say no to

Farmers. "

During a break in the hearing, the commissioner told reporters that he would

continue to gather information on mold claims. He said he was " not anywhere

near ready to exclude mold coverage " from homeowner policies.

" We need to increase our knowledge of what is happening, " he said, adding

that the task was more difficult because there are no federal or state

standards for what constitutes a dangerous level of mold inside a building.

Scientists have identified more than 100,000 species of mold, with about a

thousand of those common throughout the United States. Mold is found in

virtually every environment, indoors and outdoors, and the vast majority are

not harmful to humans.

But toxic molds such as Stachybotrys - the so-called black mold - have been

blamed for a variety of health problems, ranging from serious breathing

difficulties to memory loss.

Jerry s, president of Southwestern Insurance Information Service, said

action is needed because the rapidly rising losses for mold damage cannot be

handled with premiums collected by insurers. Officials have said premiums

may have to be increased as much as 40 percent to handle the volume of

claims.

" Insurers are predicting that in the near future those claims could add up

to billions of dollars nationally, and they are simply not prepared for

those types of exorbitant losses, " Mr. s said.

" Gone unchecked, mold-related cases could rival those of tobacco liability

in the not-too-distant future. "