What’s the best way to get rid of mold? The insurance industry has an answer: Exclude it
Los Angeles, CA – State Farm Mutual Automobile Insurance, the largest home insurer, has eliminated coverage for mold in 33 states, including South Carolina. Even if the mold is the result of storm damage covered by a State Farm policy, the company won’t pay to eliminate it.
In its most widely used policy, No. 2 home insurer Allstate has added language to clarify it doesn’t cover “mold, fungus, wet rot, dry rot or bacteria” unless the problems arise from events already covered by the policy. In those cases, cleanup costs are now limited to $5,000 – an amount likely to fall short of most claims. Both companies began limiting coverage last year but in recent months have sharply curtailed the number of states where they provide mold coverage.
Other insurers are seeking approval from regulators to impose similar restrictions. Hartford Financial Services Group and American International Group want to drop mold coverage in dozens of states. Already, the California insurance department has approved 247 mold-exclusion filings that will allow insurers to drop or limit mold coverage on new policies. It has 115 more filings pending.
The problem has gotten so dire the federal government may step in. Rep. John Conyers, D- Mich., has drafted a bill that would create a federal insurance fund for homeowners whose insurance policies don’t cover mold claims. And last month, a House subcommittee held a hearing on mold, focusing on scientific research of the problem and the economic impact of mold claims and litigation.
For homeowners, the mold exclusions are the latest in a series of changes making it progressively harder for people to use their insurance when they need it most. Insurers have been dropping homeowners they view as undesirable risks while also raising premiums and deductibles. In some instances, consumers who file a single water-damage claim risk having their policy not renewed. Some companies have instituted policies under which holders who file two or more claims within a few years lose coverage. Hit by dwindling investment returns and big claims from a series of major storms, the industry says the moves are necessary to stem losses.
Two years ago, mold was barely on insurance-company radar screens. Then health concerns about some types of mold surfaced, ranging from severe allergic reactions to potential neurological damage. Homeowners filed an avalanche of claims. Last year, the industry paid $1.3 billion to remove mold and repair its damage.
Insurance companies contend the spike in mold claims is fueled by trial lawyers and the media. “There isn’t more mold today than there was 20 years ago or 30 years ago,” says Bob Hartwig of the Insurance Information Institute, a trade group.
But some scientists and companies who specialize in getting rid of mold say construction techniques have increased the amount of mold in homes. “Today’s construction techniques make a house like a Tupperware container,” says Michael Thompson of Engineering & Fire Investigations, which specializes in mold claim investigations.
Central heating in winter helps keep mold alive. Air conditioners that provide additional humidity give mold an extra food source. And the paste used in drywall, Thompson says, is one of the best forms of food for mold.
What can consumers do? “More than ever, you need to shop around – call two or three agents to see if you can find broader coverage and lower prices,” Lambe says. Independent agents, who have access to more than one insurance company, can be helpful in finding companies that still cover mold claims.
A few, smaller carriers make the coverage available, including Automobile Club of California.
Other companies vary in how high a cap they put on mold claims.
While Allstate has a $5,000 cap on claims, Safeco Corp.’s is $10,000. And higher caps are available, at a price, from many companies.