Mold problem across state for insurers

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Friday, August 24, 2001

5:24 a.m. CT

Mold problem across state for insurers

From staff and wire reports

Skyrocketing claims for mold damage are changing the way homeowner insurance

policies are sold in Texas.

Allstate Insurance has stopped selling new, comprehensive insurance for

homes that have had water damage during the past three years,

Schmitt, an Allstate spokesman in Irving, said Thursday.

Many mold claims are a result of water damage that has occurred in the past,

Schmitt said.

Allstate will offer scaled-down insurance policies for homes with prior

water damage, and the company tracks water damage by insurance claims filed

for the problem, Schmitt said. The decision does not affect existing

policies.

The Office of Public Insurance Counsel, a state agency, said this week

during a public hearing on mold in Corpus Christi that several insurers have

stopped selling new policies for homes that have had water damage.

On Thursday, Rod Bordelon, the public counsel, said because of

confidentiality agreements he could not name the other insurers, and that

Allstate came foward on its own.

Insurance companies don't know how to calculate the financial risks when it

comes to mold, Bordelon said.

" That's what they're telling us, " Bordelon said.

In Amarillo, there has not been of problem of home buyers having trouble

getting home insurance, said Cunningham, president of the Amarillo

Association of Realtors.

, a real estate agent in Round Rock, said she has seen house

closings delayed in the last few weeks because home buyers couldn't get

insurance.

" This would be devastating to the housing market in Texas if most insurance

companies take similar action, " said.

Farmers and Progressive have stopped selling any new policies because of

concerns over water and mold-related claims.

Insurance companies say mold-related claims are threatening the industry's

financial stability.

" When we talk about mold in Texas, we are talking about a crisis for the

insurance industry, " Jerry s, president of Southwestern Insurance

Information Service, an industry trade group, said.

s said claims are becoming more frequent and larger, making it difficult

for insurers to determine how much to charge. Some insurance officials have

said premiums could increase as much as 40 percent to handle the volume of

claims related to mold.

Mortgage companies almost always require that a homeowner policy be issued

before they close a home sale.

State Farm Insurance, the largest insurer in Texas, is continuing to sell

homeowner coverage across the state, but officials are closely monitoring

water damage claims.

At a hearing this summer, Farmers officials said they had received more than

1,000 new mold-related claims this year. They said independent actuaries

have estimated that insurance companies will pay an additional $128.5

million in mold damage claims in Texas in 2001.

Farmers Insurance recently asked state Insurance Commissioner

Montemayor to let the company drop mold coverage from its homeowner policies

in Texas. That request came after the company was hit with numerous

lawsuits, including one that resulted in a $32 million jury award this year.

The insurance commissioner has the authority to change the rules. Montemayor

has not ruled on the Farmers request, but he is holding hearings around the

state on the issue of water and mold coverage in homeowner policies.

Globe-News Staff Writer Max Albright contributed to this report.