Calif. Mold Bill Dropped In Committee

By Caroline McDonald

NU Online News Service, June 28, 12:36 p.m.EST?A bill that insurer organizations said would haveprevented insurers from keeping mold coverage available andaffordable has failed to advance from the California AssemblyInsurance Committee.

The bill's author, Sen. Deborah Ortiz, D-Sacramento, abruptlyannounced her decision to drop SB 1763 during a meeting of thecommittee.

The bill would have required insurers to offer "confusing" newdisclosures to consumers and would have established newrestrictions on an insurer's ability to manage the growing risks ofmold, according to the Washington, D.C.-based American InsuranceAssociation.

The committee did approve two auto bills, SB 1427 and SB 1648,that insurer groups warned could encourage drivers to beunderinsured and would block insurance companies' rights to investin auto body repair shops, improve customer service and lowercosts.

"It was good news for California homeowners that the mold billwas shelved this year," said Sam Sorich, senior vice president ofthe National Association of Independent Insurers, which lobbiedagainst the bill.

Before mold disclosure requirements are imposed and before anycoverages for mold are mandated an ongoing study of mold exposureand remediation should be completed, Mr. Sorich said.

SB 1763 would have prevented insurers from excluding mold losseswhen such claims are triggered by a covered peril, such as a fireor heavy water damage, Mr. Sorich explained.

It also would have created "impossible claims handlingrequirements," since it would have forced an insurance claimshandler to make a mandated disclosure whenever mold is "likely tobe present." This, he said, would be the case whenever a claim isfiled since molds are present in indoor and outdoorenvironments.

The Alliance of American Insurers said it lobbied extensivelyagainst the passage of the bill, and that "Ortiz's unusual move ofpulling it from consideration is gratifying."

Although the sponsor stated she will reintroduce the bill nextyear, the Downers Grove, Ill.-based Alliance said, the bill maylack the support necessary for passage "as new information isgathered and changes in the market occur." The Alliance said itwould continue its strong opposition to such bills.

Mark Sektnan, American Insurance Association assistant vicepresident, western region said the bill had the potential to"jeopardize the entire insurance marketplace in California."

The measure, he said, "would have mandated mold coverage in allliability policies sold in California" and would have impactedbusinesses that buy general liability coverage, which would result"in higher rates for all California businesses."

Auto bill SB 1427 would extend the state's experimental low-costauto insurance program and could cause an increase in the number ofunderinsured motorists in the state, according to the NAII.

The bill, NAII said, would change the program's eligibilitycriteria from 150 percent to 250 percent of the federal povertylevel, while decreasing the annual premium for participants of theprogram from $450 to $347 in Los Angeles and from $410 to $314 inSan Francisco.

Mr. Sorich said the bill "would encourage motorists to buy alower policy with less coverage." He said the bill also would makeit more difficult for injured accident victims to recover fulldamages.

Senate Bill 1648 would ban an insurance company from owning orinvesting in auto body repair shops, which NAII said "violates aconstitutional right for businesses to make investments and acquireproperty."

The bill would require insurers that currently invest in autobody repair shops to divest their interests within eight years ofthe bill's effective date, and would prohibit any new insurerinvestments in auto body repair shops.

NAII said it will continue its opposition to SB 1427 and SB1648.