Mr. Heine said the department initially rejected the exclusion "because we didn't think it was a big issue. What changed our position was that all the other states were allowing it and we started getting complaints about availability. We had to do this to make sure people got the other insurance coverages that they needed."

The New Jersey action drew the applause of Michael Koziol, senior director and counsel for the Des Plaines, Ill.-based National Association of Independent Insurers. Mr. Koziol, in a recent announcement reacting to the change, said it was in line with the basic principle of surplus lines as being the alternative market.

He said the NAII's Surplus Lines Committee had expressed concern that New Jersey was prohibiting mold exclusions by being the only state to apply form requirements on surplus lines insurers.

"Surplus lines insurance is meant to provide coverage that is unavailable in the standard market for unique risks or particular needs of consumers and businesses," Mr. Koziol said. "To achieve that purpose, surplus lines carriers must be free to exclude any coverage that otherwise would make insurance unavailable, which could well be the case for mold coverage."

NAII is a property-casualty insurance trade association with more than 690 member companies writing more than 33 percent of the p-c insurance in the nation.