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Middle Market Insurers Could Be Hit Hard By Mold

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Jim Bartley

Senior Member
Jan 20, 2002
Professional Status
Certified Residential Appraiser
(COMTEX) B: Consultant: Middle-Market Insurers Could Be Hit Hard By Mold
B: Consultant: Middle-Market Insurers Could Be Hit Hard By Mold

OLDWICK, N.J., Jan 23, 2003, (A. M. Best via COMTEX) -- As concerns over mold
grow across the United States, industry experts say middle-market insurers are
more at risk than ever.

Mold is projected to cost the insurance industry $13 billion, said Barry Wells,
director in the financial and claims practice for Navigant Consulting, citing
insurance industry information.

Mid-size insurers don't have as many resources as larger insurers to manage the
overwhelming cost of remediating mold claims, especially those insurers that
already are experiencing significant costs from workers' compensation and
medical-malpractice problems, Wells said.

To address the problem, many insurers are developing special claim units and
providing additional training for their claims staff to better recognize mold
early and mitigate bad-faith claims, Wells said. Insurers also are evaluating
whether claims can be tracked back to them even after the policyholder has ended
coverage with the company.

In Southern and Southwestern states--such as Florida, Texas and California--mold
claims have continued to increase substantially. For instance, insurance
carriers in Texas are expecting to incur 50,000 to 60,000 mold claims through
the end of 2002, Wells said. Mold costs there were $854 million in 2001,
compared with $153 million in 2000. California is reported to have more than
2,000 litigated claims by the end of 2002.

Now, mold-claim activity is spreading to states farther north where they hadn't
been seen before, such as North Carolina and New Hampshire, Wells said. And
although states such as Louisiana, Mississippi, Georgia and Alabama have
experienced limited activity, it's expected to increase as the plaintiffs' bar
focuses more closely in those areas.

As the concern spreads through more and more states, commercial businesses such
as health clubs, nursing homes and apartment complexes are finding themselves at
risk, even when contractors are making efforts to prevent the problem. One
contracting company is researching the development of new materials and
practices to help prevent mold from forming, but it still has to cope with
potential problems in previously constructed buildings, Wells said. Mold could
substantially hurt the business.

Homeowners insurers have already become more proactive on mold claims. Last
year, the industry mounted a major initiative to address water claims quickly,
filed for policy revisions and turned to subrogation to recover claim costs in
response to billions of dollars in losses in homeowners insurance. In late
December, a Texas appeals court reduced the much ballyhooed $32 million mold
award in the case of Melinda Ballard vs. Fire Insurance Exchange--a unit of
Farmers Insurance Group--to $4 million (BestWire, Dec. 31, 2002).

(By Marie Suszynski, associate editor, BestWeek: [email protected])

Marie E Suszynski

Copyright © 2003 by A. M. Best Company, Inc.



*** end of story ***


Elite Member
Jan 15, 2002
Professional Status
Licensed Appraiser
Mold is only a small part of the Insurance woes coming in the next couple years ASK any builder (Whoops) reputible builder how much his insurance premium increased this year? Look at the BIG companies that have dropped contractors, look at who has dropped from an A rating. Latest being Kemper.

Jim Bartley

Senior Member
Jan 20, 2002
Professional Status
Certified Residential Appraiser

Seeing the same thing in just about every segment. My homeowners policy has doubled over the past 2 years. The other day I was appriasing a house with a small community owned lake. The owner who is on the HOA committee said they were notified that their insurance would be significantly higher due to liability of the lake.
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