The problem of mold claims in Texas cannot be explained by changes in weather, population growth or expansion in the stock of housing, Gordon Stewart, president of the New York-based Insurance Information Institute, said at a recent U.S. House of Representatives hearing on mold.

“What has changed is the legal climate dominated by some who see mold as a huge moneymaker and use mass marketing and media to advertise for clients and class action participants, as well as to instill fear in the public,” Mr. Stewart told the Subcommittee on Oversight and Investigations of the House Financial Services Committee.

He said that, nationally, insurers face more claims without any effective federal or state standards on exposure levels.

Insurers face increased costs per average claim, Mr. Stewart said, driven by remediators who lack formal training or professional certification. In addition, he said, there are a growing number of court cases charging severe and permanent health damage without any peer-reviewed scientific research that establishes a link between mold and serious health consequences.

Partly because of the uncertainty surrounding mold, he said, the costs of homeowners insurance nationally is likely to rise 10 percent this year on average, but some states will see far bigger hikes. “Potential rate increases, driven in part by the unprecedented surge in mold claims, threaten to make home insurance coverage unaffordable for some and unavailable for others,” he said.

Melinda Ballard, the Texas homeowner who won a $32 million judgment against Farmers Insurance Group over a mold claim, and who founded an association called Policyholders of America, called for establishment of a government pool for mold claims, modeled after the flood insurance program managed by the Federal Emergency Management Administration. Establishment of such a pool, she said, which would shift the burden of mold cleanup from insurance companies to the new entity, should lead to lower insurance prices that reflect the new coverage liabilities.

Rep. John Conyers, D-Mich., has introduced legislation, H.R. 5040, that would create a mold pool.

“POA is not in favor of a government handout, but is a huge supporter of a self-funded government pool much like flood insurance,” Ms. Ballard said. The homeowner, she said, can choose whether to purchase mold coverage.

“The real benefit is allowing homeowners the opportunity to purchase a safety net because their insurer is not going to be there when they need them the most,” she said.

Insurers, she said, have successfully excluded, capped or limited coverage for mold, even when it is the result of a covered peril, such as a broken water heater. “In a few years, there will be little if any coverage for this massive problem,” she said. “This leaves millions of Americans not covered against this catastrophic loss.”

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, August 12, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.