Saturday, September 1, 2001

Fast decision is needed on mold claims

AUSTIN - The debate over whether insurance companies should cover water-related damage continues to spread throughout Texas. Insurance companies say mold-related claims are costing them millions of dollars and they no longer want to cover water-related damages on the standard homeowners' policy. But homeowners say mold from water problems is making them sick and forcing them to move.
   Texas Insurance Commissioner Jose Montemayor is working to resolve the dispute. But some insurance companies aren't waiting for his recommendations - a move that has irked the commissioner.
   Allstate Insurance Co., the third-largest property insurer in Texas, has stopped selling policies for homes with a recent water damage claim. Concerns over water and mold-related claims have also prompted Farmers and Progressive to stop selling new policies. And other large insurers are reducing coverage.
   Montemayor said he is concerned that such practices will have a detrimental effect on the residential real estate market.
   ''While I fully appreciate insurers' concerns about the increasing frequency and severity of mold claims, I also believe these actions are disruptive to the market in the short term while I am working toward a long-term solution," Montemayor told the companies in a recent letter.
   This dispute is serious and Texas homeowners could be the big losers unless something is done quickly to remedy the situation. The end result of rising water-damage claims and fewer insurance companies offering policies could be higher insurance costs for Texas homeowners.
   Water-related claims are a problem in other states, but Texas is at the forefront of this issue because of the generous water coverage of the standard homeowner's policy in the state. The standard Texas HO-B policy, which is preferred by about 96 percent of all homeowners, does not cover mold that develops spontaneously. But it covers damage from plumbing leaks and other accidental water discharges, including remediation of any mold that may develop as a result.
   Texas' Office of Public Insurance Counsel, which represents consumers in insurance matters, asked the Texas Department of Insurance to prohibit companies from refusing to insure homes based on prior water damage claims.
   ''There is no connection between a prior water claim which was properly repaired and future claims, whether mold related or not,'' said Rod Bordelon, director of the Office of Public Insurance Counsel.
   On Thursday, Montemayor sent a letter to insurance companies, calling for an immediate halt to ''restrictive marketing practices'' that some companies adopted in response to the unexpected surge in mold claims.
   ''I ask that you give me the opportunity to develop solutions to this problem before you take drastic actions that could destabilize the Texas market and have unduly harmful effects on Texas consumers,'' Montemayor wrote.
   ''My job is to examine this coverage, look at what's happening in the market place and act to assure that home owners can get the insurance they need, when they need it, at reasonable prices,'' Montemayor said. ''I am gathering all the evidence I can. Whatever action I take will be based on facts and not emotion. I will make the right decision in an expeditious manner, but not before I have the data and the facts.''
   Montemayor's advice to be patient is good. But it's difficult to expect either side to be too patient, especially when insurance companies say they are losing millions and some homeowners are living out of hotels because their houses make them sick. This gridlock demands that Montemayor expedite the process and come up with recommendations to resolve this growing problem. Montemayor has a tough task before him and will likely face criticism no matter what he recommends. But moving quickly and decisively will go a long way to resolving one of the most important issues facing Texas homeowners today.
   Ty Meighan is chief of the Scripps Howard Austin Bureau and can be reached at 512-334-6640 or meighant@scripps.com
  
  

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Ty Meighan is chief of the Scripps Howard Austin Bureau. You can reach him by phone at (512) 334-6640 or by email at meighant@scripps.com.

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