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TOXIC MOLD: The Next Asbestos?

by David Hilgen

Stachybotrys. It's not exactly a household word. But it's a household problem that is giving homeowners insurers fits.

Stachybotrys is more commonly known as toxic mold. If not for the events of Sept. 11, it might well have been the biggest insurance story this year.

The first big mold news to send shock waves through the insurance industry came in June, when a Texas jury awarded Melinda Ballard and her family $32 million in their case against Farmers Insurance Group. The jurors found that Farmers improperly handled Ballard's water claim, allowing toxic mold to form and take over the family's $3 million home.

The mold problem continues to grow for the industry (see article in this months magazineBest Review Insurance Information "Mold A Growing Problem" and Restoration Environmental Contractors Website

" Texas will have an estimated 50,000 to 60,000 active mold claims by the end of this year.

" There are an estimated 2,000 plaintiffs in mold-related lawsuits in California.

" The mold-claim workload for GAB Robins' subsidiary Engineering & Fire Investigations Inc. rose from zero in 2000 to more than 200 a month in 2001.

The top three homeowner s (insurance policy) writers in Texas have placed a moratorium on writing policies that cover water-related claims, while the Texas Department of Insurance tries to determine how mold will be covered in the future. Two options being considered are capping basic coverage for mold at $5,000 or allowing policyholders to add mold coverage to their policies. A decision is expected this month.

Insurers support the latter proposal, said Jerry F. Johns, president of Southwestern Insurance Information Service, a trade group representing 85% of the auto and homeowners insurers in Texas and Oklahoma. Insurers in Texas can accurately underwrite and price additional coverage for mold, but a cap on coverage will mean rate hikes for all homeowners, he said.

Mold has put insurers in a crisis situation, Johns said. "Unless the issue is addressed, it certainly has the potential to become the next asbestosis or the next tobacco."

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