Alliance, AIA Commend Md. DOI on Mold Regs Rollback

July 3, 2003

Maryland’s recently appointed Insurance Commissioner, Al Redmer, won praise from both the Alliance of American Insurers and the American Insurance Association for his recent action in rescinding a previous order, signed by his predecessor last November, which had ordered insurers to offer mold coverage, but had allowed the imposition of dollar limits on recovery amounts.

“Commissioner Redmer’s decision to rescind the mold order allows insurers the choice of whether or not they will decide to offer mold coverage,” stated Tammy Velasquez, AIA assistant VP, mid-Atlantic region. “This will in turn promote competition in the marketplace which will help ensure the best prices for Maryland consumers who will now be free to decide which insurer’s products best meet their policyholder needs.”

“The Alliance welcomes the Insurance Administration’s new, more flexible stance on mold coverage,” indicated Neil Malady, manager of the Alliance’s Mid-Atlantic Region. “Our association always opposes such mandates because they require coverage that was never contemplated in the initial policy contract. Mandating its coverage only creates financial instability for insurers and availability and affordability problems for consumers. By allowing insurers to offer a variety of coverages at a range of prices, consumers will be allowed to choose the coverage they need at a price they can afford.”

The Alliance noted that “The new order now allows insurers to exclude such coverage. In fact, new filings will be processed on an expedited basis and filing fees will be waived for a period of 60 days after June 27. Filings currently under review may be modified without the need to submit new filings.”

Velasquez praised Commissioner Redmer’s “willingness to review this burdensome regulation and demonstrate a more even-handed approach to mold regulations in Maryland.” She noted that “the surge in mold claims over the last few years has required insurers and regulators alike to work together to establish rational standards for mold coverage that provide consumers and businesses sufficient coverage options while also preserving a viable insurance market.”

Kirk Hansen, Alliance director of claims, stressed that wherever mold coverage has been mandated, it has resulted in higher claims costs that have led to higher insurance premiums. “Texas’ experience serves as an excellent example as to why no state should mandate coverage for mold,” Hansen stated. “Because Texas in the past mandated use of a homeowners policy that did not require water discharge to be sudden and accidental, as required by standard policies in most other states, it had the dubious honor of having the highest homeowners premiums in the nation.”

He added that a majority of states have seen the wisdom of the approach Maryland is now taking. Insurance departments in 39 states and the District of Columbia having approved homeowners exclusions for mold.

“The insurance industry functions best when free-market forces are allowed to operate,” Hansen continued.” “Consumers are best served when the free market is allowed to decide what coverages should be offered and for what price.”

The AIA noted that the MIA’s Order of Rescission No. 2003-06-020 dated June 27, 2003 can be accessed via the following link: http://www.mdinsurance.state.md.us/documents/BulletinP&C03-12.pdf.

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