News
Commercial Law
Aug. 1, 2002
Toxic Fungus Is Spreading Among Us
Forum Coulmn - By Christine Spagnoli - Mold fear is gripping homeowners, spreading as quickly as the toxic spores themselves. And insurance carriers such as State Farm are responding to the threat in a way that harms California residents. State Farm has stopped selling new homeowners' policies in California this spring. The company claims it is because of the number of mold claims that have been filed. And other insurance companies are stating in their policies that mold damage is not covered.
Forum Column
By Christine Spagnoli
Mold fear is gripping homeowners, spreading as quickly as the toxic spores themselves. And insurance carriers such as State Farm are responding to the threat in a way that harms California residents. State Farm has stopped selling new homeowners' policies in California this spring. The company claims it is because of the number of mold claims that have been filed. And other insurance companies are stating in their policies that mold damage is not covered. SB1763, however, would reverse this trend and force insurance companies to shoulder their part of the mold burden.
In 1999, USA Today estimated that as many as 50 percent of the homes in certain areas in California may be harboring potentially poisonous microorganisms. Mold problems are not getting worse because spores suddenly have become more risky or new strains have evolved. They are getting worse because of shoddy construction techniques and inadequate seals on surfaces where water is present, such as shower tubs, sinks and bathroom tile.
Insurance companies are largely to blame for the mess. In an effort to save money, insurers have been denying homeowners' legitimate mold and water damage claims in record numbers. Mold damage can be minimized if acted on quickly. But insurers' slow response and rejection of claims creates the perfect environment for mold to thrive, which has exacerbated the crisis.
Recently, legislation that would have eased the problem by preventing insurers from excluding justified mold claims was killed in the committee stage in Sacramento. State Sen. Deborah Ortiz, who subsequently introduced SB1763, which is pending in the Assembly Insurance Committee, vowed to renew her efforts to protect people from mold's dangers during the next legislative session.
SB1763 would prohibit insurance companies from refusing to cover mold damage that resulted from a covered act. It also would require insurance companies to inform insureds about the presence of mold and whether it is covered by a policy provision.
To sidestep its role in creating mold panic and justify sharp rate hikes, the insurance industry would have people believe that it is losing money because of an "explosion in claims" and lawsuits. But the underlying cause for premium increases and coverage denial is that it wants to recoup its losses on stock market investments and other bad business decisions it's made recently.
Insurers are in a down economic cycle. They rely on Wall Street yields for revenue. When the market slumped, so did their profits. Furthermore, insurance companies are paying the price for aggressive strategies they followed over the past decade, like writing money-losing policies to steal customers away from rivals. To pump up profits, insurers raise prices and cut costs, including the cost of paying out on claims.
Prompt repairs of damaged, leaky pipes are crucial to avoid the growth of mold. Homeowners rightly expect insurers to cover the damage done by these pipe emergencies. Most often, the insurer stalls and denies the claim while mold develops, spreads and escalates, along with the costs of fixing the problem. If an insurer does approve a claim, very often the repairs are inadequate.
Mold can result in moderate to serious health problems. Allergic reactions, asthma and other respiratory complaints are the most common potential health problems associated with mold exposure, according to the Environmental Protection Agency. More severe illnesses, including cancer, central nervous damage and memory loss, have been reported by people living and working in places with dangerously high levels of mold.
Insurers' response to mold is highly reminiscent of its post-Northridge earthquake reaction. As soon as claims needed to be paid, they withdrew earthquake protection from the public.
It did not fly then, and it should not now. Mold continues to be discovered in homes, schools, public buildings and offices. SB1763 would help the problem by forcing insurance companies to treat policyholders fairly and act promptly and responsibly to consumers.
Christine Spagnoli is a partner at Greene, Broillet, Panish & Wheeler of Santa Monica and the president of the Consumer Attorneys Association of Los Angeles.
By Christine Spagnoli
Mold fear is gripping homeowners, spreading as quickly as the toxic spores themselves. And insurance carriers such as State Farm are responding to the threat in a way that harms California residents. State Farm has stopped selling new homeowners' policies in California this spring. The company claims it is because of the number of mold claims that have been filed. And other insurance companies are stating in their policies that mold damage is not covered. SB1763, however, would reverse this trend and force insurance companies to shoulder their part of the mold burden.
In 1999, USA Today estimated that as many as 50 percent of the homes in certain areas in California may be harboring potentially poisonous microorganisms. Mold problems are not getting worse because spores suddenly have become more risky or new strains have evolved. They are getting worse because of shoddy construction techniques and inadequate seals on surfaces where water is present, such as shower tubs, sinks and bathroom tile.
Insurance companies are largely to blame for the mess. In an effort to save money, insurers have been denying homeowners' legitimate mold and water damage claims in record numbers. Mold damage can be minimized if acted on quickly. But insurers' slow response and rejection of claims creates the perfect environment for mold to thrive, which has exacerbated the crisis.
Recently, legislation that would have eased the problem by preventing insurers from excluding justified mold claims was killed in the committee stage in Sacramento. State Sen. Deborah Ortiz, who subsequently introduced SB1763, which is pending in the Assembly Insurance Committee, vowed to renew her efforts to protect people from mold's dangers during the next legislative session.
SB1763 would prohibit insurance companies from refusing to cover mold damage that resulted from a covered act. It also would require insurance companies to inform insureds about the presence of mold and whether it is covered by a policy provision.
To sidestep its role in creating mold panic and justify sharp rate hikes, the insurance industry would have people believe that it is losing money because of an "explosion in claims" and lawsuits. But the underlying cause for premium increases and coverage denial is that it wants to recoup its losses on stock market investments and other bad business decisions it's made recently.
Insurers are in a down economic cycle. They rely on Wall Street yields for revenue. When the market slumped, so did their profits. Furthermore, insurance companies are paying the price for aggressive strategies they followed over the past decade, like writing money-losing policies to steal customers away from rivals. To pump up profits, insurers raise prices and cut costs, including the cost of paying out on claims.
Prompt repairs of damaged, leaky pipes are crucial to avoid the growth of mold. Homeowners rightly expect insurers to cover the damage done by these pipe emergencies. Most often, the insurer stalls and denies the claim while mold develops, spreads and escalates, along with the costs of fixing the problem. If an insurer does approve a claim, very often the repairs are inadequate.
Mold can result in moderate to serious health problems. Allergic reactions, asthma and other respiratory complaints are the most common potential health problems associated with mold exposure, according to the Environmental Protection Agency. More severe illnesses, including cancer, central nervous damage and memory loss, have been reported by people living and working in places with dangerously high levels of mold.
Insurers' response to mold is highly reminiscent of its post-Northridge earthquake reaction. As soon as claims needed to be paid, they withdrew earthquake protection from the public.
It did not fly then, and it should not now. Mold continues to be discovered in homes, schools, public buildings and offices. SB1763 would help the problem by forcing insurance companies to treat policyholders fairly and act promptly and responsibly to consumers.
Christine Spagnoli is a partner at Greene, Broillet, Panish & Wheeler of Santa Monica and the president of the Consumer Attorneys Association of Los Angeles.
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