Molded by Insurance
On Tuesday, Texas Dept. of Insurance staff presented Insurance Commissioner Jose Montemayor with a recommendation that attempts a long-awaited compromise between the weird world of fungus and the equally weird world of homeowners' insurance. TDI's recommendation would cap mold-damage claims at $5,000 in standard homeowners insurance policies and would give policyholders the option of buying additional mold coverage in amounts equal to 25%, 50%, and 100% of policy limits.
Montemayor had moved up the deadline for the recommendation -- originally due Oct. 1 -- after panicked insurance industry reps predicted rate hikes of 40% to 60% if mold damage claims continued to increase unchecked. The number and severity of mold-damage claims have been sharply on the rise across the country since 1999 and have been especially high in Texas.
TDI's recommendation was based on testimony given by industry reps, medical and environmental experts, and policyholders at a series of public hearings held this summer in Austin, Corpus Christi, and Houston. Parties on both sides of the issue will likely have bones to pick with it. Rick Gentry, a spokesman for the Insurance Council of Texas, suggested to the department that mold may not be legitimately covered by any policy. "Every home already has mold in it," Gentry told Montemayor Tuesday at a public hearing in Corpus Christi. "While water is a catalyst for mold, it is not the genitor of mold, bringing into question whether mold is even an insurable risk."
Montemayor will allow a 30-day period for public input and an additional, yet-to-be-scheduled public hearing some time in October, after which the recommendation may be adopted, with or without further tinkering.
Complicating TDI's final decision is that medical and environmental experts -- including officials from the Environmental Protection Agency, the Centers for Disease Control, and the Texas Dept. of Health -- disagree over what health risks, if any, mold contamination may cause, and what levels of exposure induce adverse reactions. "It's not really clear whether indoor exposure to mycotoxins [toxic substances released by some species of molds] are of sufficient magnitude to cause illness from toxic exposure," says Texas Dept. of Health spokeswoman Kay Soper. "It's very poorly studied and not very well understood."
Testing for levels of mold is also complicated: Airborne mold levels may vary with time, season, and life cycle of the mold, requiring continuous air sampling over a period of days or weeks. High testing expenses jack up costs for insurance companies, which are already in what industry spokespeople didn't scruple to call a "crisis."
Before 1999, State Farm Insurance, which writes about 30% of Texas homeowner policies, addressed mold claims as only a minor part of larger water-damage claims. This year, more than 1,100 mold-related claims were filed against the company by August, and the average amount of claims was $58,000. State Farm has racked up a net operating loss for 2001 of about $322 million, says company spokeswoman Denise Ruggiero.
"For every dollar of premium we are collecting today, we are spending $1.69 in losses and expense," Ruggiero says. "These trends are not sustainable if we are to provide homeowner insurance that our customers can afford."