Insurers may exclude mold claims
New Md. commissioner reverses Larsen’s ruling; ‘I just have a different opinion’; Industry blames coverage for cost increases.
By Trif Alatzas
Sun Staff, Sunspot Business, www.sunspot.net
July 3, 2003
Insurance companies may exclude mold damage claims from their Maryland policies, Alfred W. Redmer Jr., the state’s new insurance commissioner, has ruled.
The decision reversed a March ruling by then-Commissioner Steven B. Larsen, who decided that insurers could not deny mold coverage. Larson did say payouts could be limited to $15,000 for removal and $50,000 for liability.
“I just have a different opinion,” Redmer said yesterday.
The question of what to do about rapidly mounting numbers of insurance claims for mold cleanup has been an issue across the nation in recent years. Maryland joins at least 38 other states that have recently allowed the exclusion of mold coverage. Insurance industry experts say mold claims have sharply increased their costs of operations at a time when their income from stock market investments has been in decline.
The industry has responded by increasing premiums generally and limiting mold coverage, where possible. Consumers are expected to pay 9 percent more for homeowners’ insurance this year, or an average of $603 a year, nationally.
Some experts said that homeowners’ lack of awareness about the need to rid their homes of moisture has allowed toxic mold to grow unchecked in some homes and that it poses dangers to individuals with allergies or other conditions.
Insurance companies complain that the mold cleanup industry is charging too much to remove mold that poses no health threat.
The mold claims and other rising costs – including court-mandated payments to policyholders who said their mold claims were not handled properly – have prompted some insurance companies to stop issuing new policies in some areas.
The Maryland Insurance Administration held a hearing on the mold issue in November after receiving more than 300 requests from insurance companies to limit or exclude mold coverage in this state.
Industry critics have said that allowing companies to deny the coverage will hurt consumers by eliminating protection for a wide variety of water-related damage claims. They also argue that it will raise costs for homeowners who want insurance protection from mold troubles.
But Redmer said requests from the industry and concerns from consumers who could not secure coverage because their homes face high water-damage risks prompted him to make the decision. He said Maryland law does not allow his office to force insurers to cover mold.
Insurers must petition the insurance administration for formal authorization if they decide to issue new policies excluding mold coverage. Homeowners who are now covered must be notified of the policy change when their policies are renewed, Redmer said.
“It was my opinion that I don’t have the authority to mandate what is covered,” he said. “That authority rests only with the Maryland General Assembly.”
Those who argued against the right to exclude mold said they were disappointed with the ruling. “I’m worried that my members are not going to be able to find mold liability coverage for a good price,” said Jim Caffey, executive vice president for the Maryland Multi-Housing Association Inc., which represents residential rental properties in the state. “And when they do find it, it’s going to be more expensive.”
Redmer said mold had not been a major problem for insurers in Maryland.
“Most of the concern over mold in Maryland – this is my personal opinion – has more to do with fear than it does with the actual claims that have been generated,” he said.
The commissioner predicted that the marketplace would provide safeguards for consumers.
“Because Maryland is a competitive market, some insurers will decide to offer this coverage, and some insurers will decide to exclude this coverage,” Redmer wrote in his order Friday. “Based on those decisions, insurers will price their products accordingly. Policyholders are then free to decide which insurer’s product best meets the policyholder’s needs.”
The decision marks the first major move by Redmer, a former state delegate who took over last month after being appointed by Gov. Robert L. Ehrlich Jr.
