California Assembly Panel Told Of Mold Impact
By Gary S. Mogel
NU Online News Service, Feb. 10, 3:36 p.m. EST?Mold claims are impacting not just personal lines but commercial lines of insurance as well, a trade group representative told state legislators last week.
The remarks came as the American Insurance Association and the Association of California Insurance Companies gave testimony to the California Assembly Insurance Committee on the impact of mold claims on the insurance marketplace.
Mark Sektnan, AIA assistant vice president for the western region, told the committee "the lack of sound scientific standards for mold exposure and remediation is causing significant consequences for commercial lines insurers operating in California."
Mold has caused increased claims activity not only in personal lines, but in commercial lines such as general liability and workers' compensation, Mr. Sektnan pointed out. He cited the experience of one unidentified insurer, which has had 1,500 general liability claims related to mold, for which the insurer estimates it will have to pay $15 million in indemnity and $13 million in loss adjustment expenses.
Stressing the severity of the mold problem for insurers in California, Mr. Sektnan added that the insurer expects to pay only about half that indemnity amount in the other 49 states combined.
"Media hype has many homeowners believing mold is overtaking their homes and attacking their families," noted Janine Gibford, ACIC government affairs advocate.
Ms. Gibford also pointed out that water-related claims paid by California homeowners insurers represented by ACIC totaled $206 million in 1997 and $431 million in 2001, a 110 percent increase. She attributed the increase to "so-called environmental experts" who make "expensive and unnecessary" mold-related inspections.
Industry-wide mold loss data remains difficult to obtain because insurance companies have just recently started coding the mold portion of water damage claims separately, Mr. Sektnan said.
He also noted that insurers did not include potential mold losses in their previous rate calculations because mold claims and litigation were minimal at the time the rates were promulgated.
"Commercial insurers need the ability to exclude coverage for mold in order to maintain a viable liability insurance market," Mr. Sektnan told the Assembly committee.
"Builders in California have indicated that they are willing to accept mold exclusions in their general liability policies as long as other events the policies were intended to insure are covered," Mr. Sektnan said in an interview with the National Underwriter.
According to Mr. Sektnan, the California Insurance Department's position is that personal and commercial lines mold exclusions are permissible and that the department will review such exclusions only to see if rates are or should be impacted.
The California legislature has passed a bill (S.B. 732) to study the mold issue and develop exposure standards.
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