Through the use of new policy forms, insurers are trying to evict mold from the insurance landscape. Departments of insurance in 39 states have now approved exclusions for coverage of mold. Will the pesky mold problem finally go away?
Unfortunately, it isn’t likely to depart anytime soon.
There are about 10,000 suits dealing with mold pending in the United States, and one prominent plaintiff’s attorney recently estimated that, over the next five to 10 years, hundreds of thousands of cases alleging mold-related injury and property damage will be filed. Currently, Texas and California have the dubious distinction of having more of these suits than any other state. They also have been host to the most visible and prominent litigation.
Texas has been at the forefront of the mold debate from the start. The issue was problematic there because the popular Texas HO-B policy did not require water discharge to be sudden and accidental, as is required by standard insurance policies issued in most states. The firestorm of controversy started with the Ballard v. Farmers case. Melinda Ballard’s initial $32 million dollar award was linked to the mold problem, though at its heart it was a bad faith claim. The award, since reduced to $4 million, made headlines throughout the country and led to a flood of similar lawsuits, most prompted by opportunistic lawyers.
California’s version of the Ballard case was Darren Mazza, et al. v. Raymond Schurtz, et al., (Calif. Superior Court). In this case, a California family was awarded $2.7 million for injuries allegedly caused by mold exposure. The award is significant because the lawsuit was filed for personal injuries rather than for bad faith or property damage.
This has resulted in an unprecedented amount of mold-related legislation being introduced in state legislatures—33 bills in 19 states this year alone. Here again, California and Texas lead the pack.
California SB 31 deals with the certification of home inspectors, while SB 331 declares the intent of the legislature to enact legislation relating to toxic injuries. However, the bill that is most alarming is SB 850, which would allow the insurance commissioner to disapprove, deny or disallow any policy form or certificate that “is likely to contribute to a significant health risk or to a property being in an uninhabitable condition.” While the bill does not specifically mention mold, it is targeted at exclusion filings.
Texas, never willing to take a back seat to anyone, has seen the introduction of no fewer than 11 mold-related bills. The subjects of the legislation range from a prohibition of underwriting guidelines based solely on a single previous water damage claim to the licensing of mold remediators and public adjusters. Even more alarming, however, is SB 14 a prime example of the legislative backlash created by the availability/affordability problems arising from the increase in mold claims. The bill, moving on a fast track, would impose onerous prior-approval requirements for rates on all Texas homeowners’ policies.
There have been some positive developments, however.
Eighteen months ago the media was full of alarming articles about “toxic mold.” As the issue has matured, cooler heads are prevailing, with the term “toxic” being dropped from many descriptions.
In Sept. 2002, the Texas Medical Association’s Council on Scientific Affairs issued a report stating that adverse health effects from inhalation of mold spores in water-damaged buildings are not supported by medical literature. The possibility of causation or exacerbation of a medical condition due to exposure to mold in indoor environments exists only in rare cases. The report states that remediation of water damage in homes and other buildings should be based on non-clinical factors unless clear medical evidence exists demonstrating the role of mold in a particular case.
Furthermore, the Jan. 2003 issue of Clinical Microbiology Review includes a review of studies on the relationship between mold exposure and human disease. The article concludes that past studies suggesting a relationship between Stachybotrys and human disease uniformly suffer from significant methodological flaws. As a result, the authors could not find supportive evidence for serious illness due to Stachybotrys exposure in the contemporary environment.
Though mold is an unwanted houseguest, the insurance industry is trying to accommodate workable solutions with some success.
Texas Insurance Commissioner Jose Montemayor permitted less wide-ranging policy forms late last year, and reports that the rate of mold claims are beginning to taper off after increasing six-fold during an 18-month period.
Let’s hope this and other moderate approaches to the mold “crisis” can contain the spread of “mold backlash.”
Kirk Hansen is director of Claims for the Alliance of American Insurers, Downers Grove, Ill. For more information on the Alliance, log onto: www.allianceai.org.