Some NAMIC member companies in Texas have continued to see their number of mold claims and lawsuits slowly starting to decrease.
Ron Rhodes, vice president of underwriting and claims, Germania Companies; Brenham, Texas, said the number of mold claims that Germania Companies receive has decreased. No claims have been received through their property companies, and very few from their liability companies.
The reason is not because the problem has gone away, but due to the fact that the company, like many others in Texas, were able to exclude mold or place limits within the policy to mitigate the losses that each and every dwelling insurer was facing, Rhodes stated.
He stressed that most mold claims were covered as an ensuing loss from the accidental water discharge peril provision within each policy.
The cost of the accidental water discharge peril portion climbed from $8 million pre-2000 to well over $30 million in 2002 causing our combined ratio to hit an all-time high of 118 at 2002 year end, Rhodes said.
During the height of the mold crisis, Germania had to revamp their underwriting guidelines to require certified plumbing inspections on all new business, utilize point of sale reports such as CLUE (Comprehensive Loss Underwriting Exhange) to isolate previous water claims, and require detailed explanations of repairs and remediation of previous mold claims.
It totally taxed our claims department to the point that our entire field staff was tied up most of the time on mold claims, leaving little time to work on storm or other claims, Rhodes said. We have a rather large field claims staff for our size of company, but in that period we had to utilize independent claims adjusters, mold testing companies, and mold remediation contractors specializing in these claims. These services added a great deal of expense.
The long range impact coming from the mold crisis was two-fold: a series of rate increases had to be put in effect to mitigate the loss of policyholder surplus that Germania sustained during that period.
Our policy form, as were most in Texas, was changed to mitigate the losses from the accidental water peril (ensuing losses from mold and dwelling foundation settlement). We ceased writing business in our regulated homeowners lines due to the inability to obtain an adequate rate, Rhodes said. We dont have a real extreme liability book with mold claims.
Mike Gerik, vice president and state manager of Texas Farm Bureau Mutual Insurance Company; Waco Texas, said changes in homeowners policies have made a huge difference.
We have gone from a peak of $70 million in claims a year ago to a low of one to two million in claims this year, Gerik said. Thats a very big decrease.
Larry Wentrcek, vice president of marketing/claims, Farmers Mutual Association of Texas, said he has seen a definite downward turn in mold claims.
But the impact has been higher premiums, stricter underwriting, redefined policy coverages, and improved claims handling practices, Wentrcek said.
Timothy B. Salge, president of Farmers Mutual Fire Insurance Association of Comal County; New Braunfels, Texas, said a lot of insurance companies started putting more exclusions in their policies to make sure it was spelled out that mold is not covered in a policy.
Typically, homeowners insurance policies have covered mold problems that resulted from a natural disaster, such as a hurricane, or a home maintenance problem, like a broken water pipe.
I think there were a lot of people taking advantage of the mold problems to get more money, Salge said.
But repairing a home eaten up by mold can also be expensive. While a sample spot on a carpet can cost less than $500 in cleanup, a more complicated problem involving structural damage can run a tab from $5,000 to tens of thousands of dollars.
More costly projects put insurance companies between angry homeowners and builders doing quick but sloppy work. Air pockets are left in the walls, in some such cases, allowing moisture to seep in. Mold can grow hidden behind the panel of a window that may not have been properly installed.
Salge said repair companies dont care who writes the check but often blame the builders rather than the insurers for homeowners mold problems.
It usually winds up being a mess, but the good news is that a lot of the claims are finally starting to decrease, Salge said.
