Texas Department of Insurance Commissioner José Montemayor is urging both insurers and consumers to avoid overreacting to issues concerning insurance coverage for mold. He said patience was needed as solutions are being developed to keep homeowners insurance available and affordable for Texas consumers.
Montemayor’s comments were included in a statement released Aug. 27, just days after the Office of the Public Insurance Counsel, a state agency that represents consumers in insurance matters, proposed that TDI prohibit insurance companies from refusing to insure Texas homes based on prior water damage claims.
Montemayor added that he intends to act fairly and responsibly in addressing the sudden and surprising surge of mold remediation claims in Texas. He said whatever actions he takes will be based on facts and not emotion. The department is in the process of gathering evidence on the issue through a data call, three public hearings and other means.
Information being collected includes testimony and data from health and environmental experts; testimony from insured homeowners; mold remediation cost data; and insurance company financial data on the potential impact of water damage losses on their future claim-paying ability.
Montemayor said he would consider all options and their consequences, including their possible effect on insurance company solvency, before deciding on a course of action.
He urged cooperation by both consumers and insurance companies, and offered advice to each group.
Consumers, he said, should use common sense in looking for, detecting and stopping water leaks at an early stage. Leaks should be repaired as soon as they are found and building materials that have become wet or damp should be dried out immediately.
Montemayor advised insurance companies that it is in their best interests to respond to water damage claims immediately and to adjust them quickly, so that repairs can be initiated before mold has had a chance to develop and spread.
The commissioner said the problem is long term and that solutions such as better construction methods to suppress mold need to be explored. He suggested that state certification of mold testing and remediation companies should be considered.
The Public Insurance Counsel made its proposal to TDI after several large insurance companies responded to an increase in mold and water damage claims by ceasing to write new policies for homes that have previously experienced water damage. Some insurance companies, including Farmers and Progressive, have implemented a temporary moratorium on writing any new homeowners policies in the state.
According to the Austin American-Statesman, Public Insurance Counsel director Rod Bordelon, called on Montemayor to act quickly in order to maintain a fair market for consumers.
The insurance department held the second in a series of three scheduled public hearings on mold-related issues in Corpus Christi Aug. 21. Among those testifying at the hearing were State Senator Carlos Truan, D-Corpus Christi, who called on the insurance industry to bear responsibility for faulty building practices that have contributed to an increase in water-related mold damage claims.
Sen. Truan also recommended that TDI update its residential building codes and coverage definitions,according to the San Antonio Express-News. He counseled Montemayor not to wait for legislation to develop a new statewide code, adding that a good place to start would be an upgrade to the Windstorm Code to add provisions of the International Residential Code pertaining to mold suppression.
Rick Gentry, executive director of the Insurance Council of Texas, spoke on behalf of the insurance industry. He said the industry was caught off guard by mold claims, adding that until recently, mold was not a significant factor in water damage claims. He said that in the past mold claims were regularly handled for around $3,000 adding that now they cost upwards of $90,000. Gentry said if the trend continues as it has, per policy losses will have risen 135 percent over the past two years.
Gentry and other insurance industry representatives urged the Commissioner to allow insurers to offer consumers the option of buying various levels of insurance, including policies with no mold coverage at all. He also called for the creation within the policy of a sub-limit for mold-related claims. Those options, said Gentry, would help stabilize insurance costs for consumers. Gentry also requested that the policy form be amended to clarify that damage from mold and other fungi is linked to accidental discharge of water or to other mold-causing contaminants “in such a way that reasonable people could not disagree as to whether coverage is provided.”
The National Association of Independent Insurers (NAII) called for all sides in the debate-consumers, insurers and regulators-to resist overreacting before a solution to mold issues can be reached and cautioned that no regulatory action should be taken before all the facts are gathered. The association encouraged education on proper remediation and maintenance to reduce the incidence of mold in addition to the commissioner’s review of the facts. The NAII also pledged to work with TDI, other government agencies and consumer organizations to develop and disseminate mold information.
The next mold hearing is scheduled for Sept. 13 in Houston. Montemayor expects to make recommendations on mold issues to the Texas Legislature before it meets again in 2003.
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