by Dee DePass, Star Tribune
The Minnesota Department of Commerce has rescinded a controversial bulletin that would have forbidden insurance companies from putting limits on the few coverages for mold that still exist in homeowners policies.
The bulletin, which the department issued in March, ignited a fight with the Insurance Federation of Minnesota, an industry trade group. Two weeks ago, the 80-member group asked an administrative law judge to nullify the bulletin, saying that formal procedures had not been followed in issuing the new rule. The department had until this week to respond to the petition.
Mold is a risk excluded from most homeowner policies unless it results from another covered peril, such as a broken pipe or storm-damaged roof.
Minnesota insurers have seen mold claims skyrocket in California, New York and Texas and want to limit the amount they might have to pay in this state, group spokesman Mark Kulda said. The bulletin would have retroactively prevented such limits without first holding a public comment period, he said.
Kulda said that some companies already had permission from the Department of Commerce to put mold limits on their policies but that the bulletin demanded that insurers reapply for it.
Commerce spokesman Bruce Gordon said that he was not aware of any company that had received permission to limit its mold exposure. Requests to limit coverage will now be monitored on a case-by-case basis, Gordon said.
Kulda said the federation is pleased that state withdrew the rule. “It means that insurers now will have options. We are not looking for a total exclusion on mold. But we are looking for options that would allow them in some cases to put a limit on the amount of mold coverage included under those few exceptions.”
Commissioner Jim Bernstein added that in “my conversations with insurance companies to date, not one has provided any data that would indicate that mold has become a Minnesota problem. In fact, some insurers say they aren’t even keeping track of mold claims.”
While insurers have paid out $1.3 billion in mold claims nationwide, 70 percent were from Texas’ Gulf of Mexico region.
“We’re not Texas,” Bernstein said. “With the huge increases in Minnesota homeowner insurance rates, consumers should not be expected to swallow a reduction in coverage without some solid reason. This includes mold damage. . . . Under no circumstance will we ever approve a reduction in current coverage unless the insurance company either lowers its rates, or shows the department that the change is necessary because the coverage has cost the company significantly.”