Southern homeowners group harried over mold

8/1/02

A grass roots homeowners’ movement in Texas is trying to take on the state’s insurance industry’s practices in handling mold-related homeowner insurance claims. Policyholders of America has issued a series of alleged problems and proposed solutions on which it wants the state legislature to take action. The organizer, headed up by mold activist, Melinda Ballard, said in a statement that the group’s “legislative agenda for Texas lawmakers” is intended to address alleged “rate abuse” on the part of homeowner insurance issuers in the state.

“Rate abuse has gotten so out of control in Texas that it has become the hottest issue in this campaign season. Homeowners are up-in-arms, real estate closings are being thwarted, homeowners who have put a claim in are being targeted and punished, and all of this has taken its toll on the already unstable Texas economy,” said Ballard. The group claims that Texas lawmakers accidentally created a legal “loophole” that allows certain insurers to escape regulatory controls. “Nearly 95 percent of the insurers operating in Texas today have used this loophole to dodge regulation and reporting of requested claims information and underwriting data,” according to the group’s statement. The group wants lawmakers to close the loophole and require state approval of all insurance rate increases.

The group alleges that insurer fraud and bad faith are on the rise and that some insurers can be categorized as “habitual” offenders. The group wants the state to implement a plan that would bar any insurer “found by a jury of Texas citizens to have committed fraud/bad faith three times within a three year period” from doing business in the state. The group dislikes policy language that prohibits homeowners from beginning repairs until after the insurer has concluded its investigation of a claim. The group believes homeowners should be allowed to make repairs immediately in cases of water damage to prevent mold. The group wants insurers to adopt certain internal claims handling policies designed to discourage mold.

Homeowners who begins repairs before the claim is investigated would be required to “store removed materials” for the insurer’s purposes. The group alleges that insurers are canceling policies while claim are pending and “black-balling” homeowners and properties that have made water damage claims. The group believes insurers should be prohibited from canceling coverage until a claim is resolved and that insurers should be required to continue coverage with capped rate increases for at least three years after a water damage claim. The group accuses insurers of causing mold infestation in homes through wrongful delays, denials and disputes over claims. “These expensive mold claims could have been repaired very inexpensively if the insurer would have properly handled the claim when it was filed,” the group stated.

The proposed solutions include an industry-wide investigation of price gouging practices with “significant fines” and consumer rebates on tap for the “guilty parties.” Policyholders of America also wants penalties for alleged “discriminatory practices in claims handling” that supposedly benefit “powerful” homeowners. It wants governmental oversight of the dispute resolution process, a requirement that the process be voluntary instead of mandated by the homeowner policy and public disclosure of all dispute resolution awards. The group also wants to restrict insurance companies’ use of credit reports in property insurance underwriting.  Time will tell if the group will actually do anything of determination but everyone remains optimistic.