Minn. Drafts New Requirements for Mold Exclusions

The Minnesota Department of Commerce issued a bulletin describing new filing criteria for rate, rule and form filings by insurers that exclude loss or damage caused by mold.

The department defined mold for purposes of the bulletin as:

Any type or form of fungus, including mold or mildew, and any mycotoxins, spores, scents, of by-products produced or released by a fungus.

Wet or dry rot.

Bacteria.

The following criteria apply to all commercial and personal lines covering real property:

Companies may not excluded coverage for loss or damage arising out of the peril of mold unless an unrestricted exception is made for cases in which the loss or damage from mold directly ensues from a covered loss (i.e. a loss caused by a peril insured against). Partial or restricted exceptions that cap or limit the amount of coverage (expressed as a specific dollar amount or a percentage of the total limit) for ensuing losses are not permitted.

In most instances, these criteria simply represent a continuation of the current level of coverage afforded by property insurance policies. If a company already has an absolute exclusion for mold (i.e. without an exception for ensuing losses) or one containing only a restricted exception, such exclusion must either be withdrawn or revised to conform to the above criteria.

The department recognizes that loss or damage from mold has become a general concern of the property and casualty insurance industry on a nationwide basis. However, the department believes that the prevailing conditions found in certain states giving rise to this concern are not in evidence in Minnesota. Companies with actuarial experience to the contrary are encouraged to contact the department.

The following rules for liability coverage for bodily injury and property damage arising out of mold exposures apply only to homeowners-including mobile homeowners and dwelling owners, personal liability, and farm dwelling liability:

Companies may not exclude coverage for bodily injury or property damage liability arising out of exposure to mold. However, such liability coverage may have a cap or sub-limit for the mold exposure if, and only if, (1) such sub-limit does not also function as an annual aggregate limit and (2) a corresponding rate reduction or credit is made. Such reductions must be actuarially sound. For lines of insurance that are required to be filed with the department, rate reductions/credits must be reviewed and approved by a departmental actuary prior to implementation.

If a company already has an absolute exclusion for mold (without a cab or sub-limit) or one containing a cap or a sub-limit without a corresponding reduction in premium, such exclusion must either be withdrawn or revised to conform to the above criteria.

Topics Property Minnesota