Thursday, May 30, 2002 | 11:08 a.m.
Nevada's second-largest provider of homeowners' insurance will no longer cover claims for damages that result from mold or other fungi.
On March 1, State Farm Fire and Casualty Co. began notifying its current Nevada homeowners and rental insurance policyholders of the change as their existing policies came up for renewal, said Gus Miranda, State Farm spokesman. The mold exclusions have been written into new policies since Jan. 1.
Miranda said State Farm's exclusions were prompted by its desire to reduce the cost of homeowners' coverage.
"Mold damages have exploded," Miranda said. "We're looking at insurance availability and affordability, so we wanted to make sure that the cost of coverage is affordable to our policyholders."
Following a series of high-profile claims in California, New York and Texas, mold damage has become one of the most worrisome issues facing insurers in the United States.
Robert Hartwig, chief economist for the Insurance Information Institute, last week projected mold damages could cost insurers in the United States billions in 2002. In Texas alone, a run of mold claims cost insurers between $400 million to $500 million last year.
If approved by regulators in individual states, Miranda said the mold exclusions would affect State Farm policyholders nationwide.
"We've filed for policy changes in all states," said Miranda, who added the changes have been approved in five of the six Western states his office oversees. New Mexico insurance regulators are still considering State Farm's request to exclude mold damages.
Miranda said State Farm has no plans to allow its policyholders to purchase mold protection for an additional charge.
The Bloomington, Ill.-based State Farm wrote more than $53 million in direct premiums in Nevada last year, or about 21 percent of the state's overall homeowners market, according to the Nevada Division of Insurance.
Fire Insurance Exchange, an affiliate of Los Angeles-based Farmers Group Inc., was Nevada's largest provider of homeowners insurance last year with nearly $55 million in direct premiums written.
Mary Flynn, spokeswoman for Farmers Group, said her company has excluded mold damages from its policies since May 2001.
"It's extraordinarily expensive," said Flynn, who added Farmers' average loss per mold claim nationwide was $32,000 last year.
Nevada's No. 3 provider of homeowners insurance, Allstate, in January changed the language in its policies to clarify that it does not cover mold damage, said Joe Gacioch, spokesman for the Northbrook, Ill.-based insurer.
Unlike State Farm and Farmers, however, Allstate will cover up to $5,000 in mold damages that result from a covered loss such as a broken pipe or leaking roof, Gacioch said.
In Nevada, Allstate wrote $34 million in direct premiums last year.
Janice Moskowitz, actuary for the state Insurance Division, said Wednesday many small insurers have adopted damage limits similar to Allstate's, or discontinued mold coverage altogether.
"It's a very legitimate issue for insurers," said Moskowitz, who said she's aware of at least one mold-related lawsuit awaiting settlement in Nevada.
Last month, Nevada Insurance Commissioner Alice A. Molasky-Arman said she believes claims of mold damage are likely to increase in Nevada, which could drive up the cost of insurance in the state.
archive
