Wednesday, October 17, 2001

Both sides oppose mold plan at hearing

Homeowners oppose cap; insurers want exclusion from standard policy

AUSTIN - Texas homeowners and insurance industry officials squared off in Austin on Tuesday, with both sides opposing a state proposal that would cap mold damage coverage to $5,000 per house.
   At issue is whether mold coverage should remain in the standard homeowners' insurance policy in Texas. Homeowners want mold coverage, but insurance officials say the number of water-related claims in Texas has increased dramatically and they can no longer afford to cover such expenses.
   Mold damage is now covered under the standard homeowners' policy if it results from a water leak.
   "Mold in our homes is serious,'' said Delyn Archer, a Houston homeowner. "We are not out to make money. Please remember the families and children that have been put at risk.''
   More than 200 attend
   Archer was among more than 200 people who attended a public hearing on a Texas Department of Insurance staff proposal that would limit damage coverage to $5,000 per house. Currently, the only limit is that such claims cannot exceed the insured value of the home. Under the proposal, homeowners could buy extra mold coverage.
   Homeowners and insurance officials are at odds because homeowners don't want a cap on the damage coverage and they don't want to pay extra. But many insurance companies want to exclude mold coverage from the standard policy, which would require homeowners to pay more if they want that type of coverage.
   The Insurance Department has been examining the issue for months in hopes of finding a viable solution to the problem. Many insurance companies are not waiting.
   The three leading insurers in Texas - Allstate, Farmers and State Farm - are no longer selling comprehensive policies that include water and mold coverage to new customers. State Farm, the largest property insurer, is not selling any kind of homeowners' policy in Texas.
   Tuesday's daylong hearing was the final one before Texas Insurance Commissioner Jose Montemayor decides on the staff's recommendation. He will make a decision after Oct. 29, which is the last day the agency will accept written comments.
   The Department of Insurance held three public meetings - including one in Corpus Christi - before the staff made its recommendation.
   'Balanced proposal'
   The staff plan is "a balanced proposal'' and "a viable compromise,'' said Marilyn Hamilton, the agency's associate commissioner for property and casualty. But she added that "the proposal does not please all the interested parties.''
   Some homeowners snickered and made derogatory remarks among themselves as Hamilton made her presentation.
   Hamilton said Texas homeowners are facing a 40 percent to 60 percent increase in insurance rates if officials don't modify the current standard policy. "There will be double-digit increases for the next several years,'' she said.
   Richard Geiger, legal counsel for the Insurance Council of Texas, urged Montemayor to "seek a more aggressive and comprehensive regulatory solution.
   "The staff proposal is a temporary patch on the problem,'' said Geiger, whose council represents the insurance industry. "It does nothing to solve the current problem. In fact, it makes it worse.''

Truan

   State Sen. Carlos Truan, D-Corpus Christi, drew the loudest applause when he criticized the insurance industry. "The insurance industry is engaging in its usual blackmail,'' Truan said. "We might as well call it what it is.''
   Truan said Insurance Department officials should not allow companies to bully them by claiming that they will no longer sell insurance in Texas.
   Doubts about boycott
   "I strongly urge you to call the insurance industry's bluff,'' Truan told Montemayor. "It is highly unlikely that they will be able to sustain a boycott of the Texas insurance market. If they try, homeowners, the building industry, and the mortgage banking industry will leave them out of any solution that evolves.''
   Montemayor spoke briefly to the audience about the difficulty of the task before him. "This current issue ranks up there with the toughest assignments I've been confronted with,'' said Montemayor, who served in the U.S. Air Force and has been insurance commissioner since 1999. "I intend to make a fair and balanced decision. This will not be an easy decision and it will not please everybody.''
   Meanwhile, two consumer groups on Tuesday urged the Insurance Department to provide a sunset clause in any proposal, which means provisions would expire one year after they are adopted. This would allow officials to review the impact of the proposal on consumers.
   Consumers Union and Texas Watch also recommend increasing the proposed cap of $5,000 for mold coverage in all homeowners policies to $15,000 because the average mold claim is about $17,000.
   "Five thousand dollars is woefully inadequate,'' said Dan Lambe, executive director of Texas Watch.
  
  

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Ty Meighan is chief of the Scripps Howard Austin Bureau. You can reach him by phone at (512) 334-6640 or by email at meighant@scripps.com.

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