Add mold to the growing list of household hazards that
insurers won't cover.
After suffering steep losses relating to mold-related
claims between 2001 and 2003, property and casualty insurers moved
quickly to restrict coverage for mold damage in states such as
California, Texas and Florida, where heat and humidity create an ideal
breeding ground for mold.
Now those coverage cutbacks are spreading to the
Northeast, Midwest and other areas of the U.S. More consumers are
receiving notices from their insurers informing them that mold is being
excluded from standard policies, unless the damage is a direct result of
a water-related events that are covered under their policies. Currently,
some 44 states have such exclusions, according to the Insurance
Information Institute, a trade group based in New York.
As a result, homeowners must decide whether to pay
extra for mold insurance "riders" that provide additional coverage, or
take responsibility for preventing the spread of mold in their homes on
their own. This week, I look at some things homeowners can do now to
limit their exposure to mold-related damage.
Amid the confusion, many homeowners may take the
"better safe than sorry" route and sign up for additional coverage to
protect against mold. But generally that's a bad idea. Mold riders on
standard insurance policies can be expensive, and insurers typically set
low ceilings for claims.
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STOPPING IT BEFORE IT STARTS
Forget about mold insurance riders. Instead, spend some time
being vigilant in performing preventative maintenance and
inspecting damp areas of your home for the first sign of
infestation. Here are a few steps to follow:
• Repair water leaks
immediately. Mold can form in as little as 24 hours. Dry
exposed area thoroughly;
• Uses your senses: A
damp, musty smell or particles in the air that cause your eyes
to water are signs of a mold problem. Look for water stains on
sheet rock or discolored ceilings or floor boards;
• Control water and
moisture in your home by keeping indoor humidity below 60%. An
air conditioner or central-air cooling system can help;
• Keep exhaust vents (or
windows) open in bathrooms and kitchens, ensure clothes-dryer
exhausts are clear and keep gutters and drains clean of
debris;
• Drainage and
landscaping should slope away from foundations;
• If condensation forms
typically often on windows, walls, or pipes, install a
de-humidifier;
• An inexpensive
leak-detection system (less than $25) will set off an alarm
when it senses rising water.
• If you detect mold
growing, clean it up immediately. Scrub mold off hard surfaces
with detergent and water, and dry the area completely. You can
find more details on mold-prevention and cleanup techniques at
the
EPA's Web site1.
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Wayne Holdredge, a principal at Tillinghast, the
insurance-consulting arm of Towers Perrin in St. Louis, says the cost of
additional coverage for mold damage ranges widely, depending on the
insurer and the homeowner's location.
"I've seen costs as low as $50 for an additional rider
up to $1,400 or more with [fees]," he says.
Coverage caps also vary, but generally claims are
limited to a maximum of $25,000. But that's still far shy of the
mold-cleanup claims in Texas that averaged $35,000 in 2003.
Instead of paying extra for limited mold protection,
Mike Kuhn, a veteran home inspector and co-author of the "Idiot's Guide
to Home Inspections," says it's smarter to spend your time and money on
mold prevention. The box to the left provides a list of detection and
prevention techniques to keep mold at bay.
If you're uncertain whether you have a mold problem,
you may be tempted to hire an air-quality expert to test your home for
contaminants. But while air-quality tests that cost between $500 and
$600 can sample the air for mold, the tests often can be misleading,
says Mr. Kuhn.
"Our industry shies away from [air testing] because
what you see may not represent what's going on elsewhere in the house,"
he says. "That test may not address the issues in other inaccessible
places in the home, such as an attic or crawl space," so an all-clear
reading "can give a false sense of security to the homeowners."
Your best bet is to routinely do some thorough
investigative work on your own, checking and re-checking sources for
potential leaks or dampness throughout your home. If you find that mold
is a problem and you need professional help removing it, do some due
diligence first to ensure you get a competent, experienced removal
expert.
Read this article2 for tips on what to ask about when
interviewing mold-removal firms.
There are no federal or state guidelines for certifying
or licensing mold remediators because the Environmental Protection
Agency and the Centers for Disease Control and Prevention are still
struggling to define what levels of mold contamination are dangerous.
'Black Gold Rush'
In the past, protection from mold never was explicitly
detailed in standard insurance policies. Instead, mold cleanup generally
was covered as part of water- or fire-related claims.
That changed after a couple in Dripping Springs, Texas,
filed a small claim with their insurance company for water damage to a
hardwood floor in their 22-room mansion. The claim later grew to include
allegations of rampant mold contamination throughout the home and health
problems resulting from the mold, which the couple blamed on the
insurer's mishandling of the original cleanup project.
In 2001, the mansion's owners, Melinda Ballard and her
husband, Ron Allison, were awarded $32 million after a jury found their
insurer, Farmers Insurance Group, at fault. The award later was reduced
to $4 million by a state appellate court, and the couple settled out of
court for an undisclosed amount.
"When a home has been so infested with very aggressive
wood- and sheetrock-eating mold that the structure of the home has
actually been compromised, it can be financially devastating to a
family," says Ms. Ballard. The battle with her insurer prompted her to
launch Policyholders of America, a consumer advocacy group in Austin,
Texas.
The couple had the contaminated home bulldozed two
months ago.
Jose Montemayor, insurance commissioner for the state
of Texas, says the couple's multimillion-dollar court award resulting
from its mold claim set off a "black gold rush." The average number of
mold claims in Texas grew tenfold in the space of just two years, says
Mr. Montemayor. And as mold-related claims increased exponentially,
insurers in turn drove homeowners' premiums through the roof as they
struggled to stem losses.
Soaring claims and growing losses had a chilling effect
on the industry, causing most insurers to explicitly limit or suspend
coverage of mold-related claims in homeowners' policies.
What insurers haven't been doing, says Ms. Ballard, is
slash homeowners' premiums to reflect the diminished coverage.
"The insurance companies lobbied their state regulators
for premium increases based on what they perceived to be their liability
from these mold claims, and they got their wish," she says. "Then [the
insurers] said they wouldn't cover mold claims anymore, and guess who's
stuck with the raised rate? The consumer."
Texas state legislators passed reforms in September
2003 aimed at lowering sky-high premiums there after cutbacks in
coverage by insurers helped stem the flood of mold-related losses. All
but two of the insurance companies, State Farm and Farmers Insurance,
doing business in Texas are complying, with premium reductions ranging
from 1% to 32%, according the state commissioner's office. The other two
insurers are disputing the reforms in court.
If your insurer is cutting back or limiting your
coverage on mold-related claims, lobby your state insurance commissioner
to do something about providing relief in your state.
Also please visit:
[Build-Water-Damage-Business] [Mold-Insurance Coverage] [CLUE-Property-Blacklist] [Loans-Insurance-Mold-Problems]
