Mold: The Fungus Among Us Is Difficult to Evict

By Kirk Hansen
May 9, 2003

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.

Mold itself certainly isn't going anywhere.

There are more than 100,000 species of mold and at least 1,000 different strains common to the United States. According to the Centers for Disease Control, there is always a little mold everywhere, including in fresh air. It has been around longer than mankind, and it's a fair bet that it will outlast us. As will the lawsuits.

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., (California 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 are leading 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.

Editor's Note: To see the full story, see the May 5 issue of Insurance Journal. 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.