Houston, TX – For the last two months, Bob and Kathy McCord have been suburban refugees. They were forced out of their four-bedroom house in Dallas because of toxic mold, which they say has been festering under the floors and walls since a water pipe burst this spring. “The mold got so bad,” said Mr. McCord, 52, president of a Web site development company, “that as soon as you walked in that place it burned your eyes and nose.”
After leaving their house, the McCords spent the first few weeks at a local Summerfield Suites hotel, where they said they met seven other families in similar ordeals. But with the mold removal not yet complete, and negotiations continuing with their insurer over what work still needs to be done, they recently decided to sign a 90-day apartment lease. Stories about toxic mold creeping through homes, schools and other buildings, sickening and displacing their occupants, have become more common in recent years, particularly in regions with warm, wet climates, like Florida and parts of Texas and California. Of course, mold has always been around.
Most of it, though unattractive, is harmless, like the kind you might find growing in the shower stall. But more serious strains of slimy greenish-black fungus have been appearing lately, including Stachybotrys atra, Aspergillus and Penicillium, which produce toxic substances that can cause respiratory problems in some people.
Many scientists believe that today’s more tightly sealed, energy-efficient homes are more susceptible to mold growth. They are also looking into the role that powerful air-conditioning systems may play in spreading mold spores throughout a house or building, as well as changes in the formula for some drywall, which some believe may also be a contributing factor in mold growth. Whatever the reasons, some insurance experts say the problem threatens to become as serious financially as asbestos has been: a potential health hazard that could cost the industry billions of dollars.
While the number of claims has risen, so have mold-related lawsuits, driven in part by a few large jury awards of late. (More than 5,000 mold-related lawsuits are pending in state courts against insurers by disgruntled policy holders, according to the Insurance Information Institute in New York.) No hard data is available, but insurance companies estimate that more than 10,000 families nationwide have been forced out of their homes because of toxic mold the last two years.
In Texas alone, insurers paid $1.2 billion in mold claims last year, while a family from the Austin suburb of Dripping Springs won a $32 million judgment against their homeowner insurance company, Farmers Insurance, for mold-related damages to their 22-room house. The judgment included punitive and legal fees as well as about $6 million for repairs, though the state court would not consider the family’s medical claims. Insurers say average bills for most mold claims run from $30,000 to $50,000.
Though taxing for the insurers, the consumer may ultimately have to pay a good part of the price for combating mold – through diminished coverage and higher premiums. Across the country, annual homeowner policy premiums have already risen 7 to 8 percent this year from last year, to around $500, on average, according to Robert P. Hartwig, chief economist for the Insurance Information Institute. He blamed mold claims for a large portion of the increase and said premiums were expected to rise a few more percentage points next year as more claims are expected.
In Texas, which has the nation’s highest average homeowners premium – just under $1,000 a year – residents can expect premiums to increase, on average, by 40 to 60 percent this year, according to the Texas Department of Insurance. People with previous water damage claims, and mold problems, may face even higher rates. Some insurers, though, have been trying to get out of mold coverage altogether. Over the last six months, major companies – from Allstate to Nationwide to State Farm – have been petitioning state insurance regulatory agencies to let them exclude mold from homeowners policies. So far, 35 states have approved some sort of mold exclusions, like eliminating coverage for water problems caused by a lack of maintenance on the part of homeowners.
Louisiana, for example, has eliminated all mold coverage, while North Carolina has put a $5,000 cap on mold-related payouts. Legislators in some states are trying to add protection for consumers. California recently passed the Toxic Mold Protection Act, which forces insurers to offer mold coverage and mandates that homeowners disclose previous water or mold problems when selling a house. New York is considering similar legislation, while Maryland and New Jersey passed bills this year to study health risks associated with mold. Last fall, the Texas Department of Insurance allowed carriers to phase out coverage for mold for all new homeowner policies. But in January, it allowed carriers to offer “enhanced water coverage,” which essentially sells back the excluded protection, at an average annual cost of $2,000.
Under the new policies, Texas homeowners can expect insurers to pay for the actual removal of mold and the replacement of rotted walls, floors, and furniture, but not for testing or the expense of living in a hotel while work is done. Consumer advocates advise all homeowners to check their policies regularly, understanding fully what is and isn’t covered, and to keep abreast of the insurance regulations in their states. Consumers are learning that it takes vigilance to ensure that mold claims are paid and cleanup work is thorough. In most cases, only “sudden or accidental” discharges of water are covered in claims.
MARGARET CRUZ, 67, of Bedford, Tex., says she has spent more than two months in negotiations with her insurance company over the cleanup of her home, which was contaminated with mold after a plumbing backup. Now living in a local hotel, she is still unsure about what repairs are covered. Mr. McCord, whose current homeowner policy still covers certain water damage, said: “It’s been a battle every step of the way. You have to follow this thing step by step, inch by inch, if you want it to be handled right.” He said he has had to prove that a burst pipe, not lack of maintenance, was responsible for the water problems in his home and subsequent mold growth. Paul Berry, a spokesman for USAA, the McCords’ insurer, said he could not comment directly on their case. He said, however, that his company responds promptly to all mold and water claims and thoroughly investigates them. Insurers say they have been trying to educate consumers about mold. “What we do is help our customers with a rapid-response team” as soon as water damage is reported to the company, said Ray Baray, another USAA spokesman. “This is a challenge for the entire industry.” But, he added, “there is a lack of standards with mold, and the science just isn’t there.” Obviously, the best way to deal with mold is to stop it early. That means promptly addressing any water problems, by keeping dry all furniture and the areas under carpets, along baseboards and behind appliances. And if you’re buying a home, have it inspected for mold.
Most medical experts agree that brief exposure to toxic molds can make eyes itchy but usually does not seriously affect health. Long-term exposure, they say, could lead to respiratory problems. Consumer groups say that affected homeowners should try to choose their own contractors for the mold cleanup after they file their insurance claims, and they recommend regular testing. If your insurer will not pay for tests, they suggest hiring a testing company on your own. It can be expensive: on-site testing can run $600 to $3,000.
Last week, Mr. McCord had his home tested for a third time and, again, it showed unsatisfactory levels of Aspergillus and Penicillium. He and his wife had hoped to reclaim their house this summer, but they are growing more doubtful. These days, each time he visits his house to check the cleanup, he dons a $25 biohazard respirator. “We’re hoping for the best,” he said, “preparing for the worst.”