Mold Remediation Bill Advances in General Assembly

A bill to limit what insurance companies would have to pay for certain household mold clean-ups cleared the Virginia Senate by a nose this week.

Mold remediation, the industry’s term for the process, has become an increasingly contentious, widespread and expensive issue in recent years.

Insurance policies have long excluded mold damage as a payable claim unless it is caused by a “covered peril,” such as a burst pipe or storm damage. Mold caused by chronically damp conditions in a basement would not be covered.

But in recent years, judges and juries have held insurers liable for such damage despite the language in their policies. This has led to rising homeowners insurance rates and in some cases caused insurers such as State Farm to suspend writing new policies for a period of time.

Senate Bill 1328, which cleared the chamber by a razor-thin, nonpartisan 20-19-1 vote, would limit insurers’ liability to $10,000 for mold cleanups not caused by a covered peril. It would apply to new policies and renewals written on or after Oct. 1. Insurers would be required to offer property owners the option of greater coverage for an increased premium.

In testimony before the Senate’s Commerce and Labor Committee, Larry Wilson, a representative of State Farm Insurance, said claims for mold in Texas climbed from 167 in 2000 to 27,000 just a year later. He cited a similar trend in Virginia, with claims climbing 178 percent in 2003 and another 20 percent in 2004.

Jeff Williams, representing Allstate Insurance, said the limitation is needed to prevent Virginia from “becoming a target of mold cleanup artists.”

Groups representing insurance agents opposed the measure, however, saying there is no evidence of abuse of mold coverage, blaming the recent surge in claims on hurricane damage across the state. They also noted that $10,000 would not cover a typical mold cleanup.

According to the Insurance Information Institute in Washington, insurers on their own are now inserting clarifying language in their homeowners policies. Some companies may decide to cover all mold claims and price the policy accordingly. Others may exclude mold, but offer an attachment to the policy, called an endorsement, that allows you to add the coverage. Still other companies may provide a tighter definition of what is and isn’t covered.

Insurance experts say that, left unchecked, mold remediation costs, even those generally allowed under most policies, could contribute to rates so high that coverage becomes unaffordable for some and unavailable for others. Given the emergence of mold as a health threat, cleanups need to be more thorough than ever.

By RICHARD AMRHINE