State Farm passes on mold
BY CARA BUCKLEY
One-fifth of Florida's condo associations faces rate hikes of 132 percent
and will no longer have mold coverage, marking the latest chapter in insurers'
efforts to head off an explosion in mold-related claims.
State Farm, Florida's largest insurer, has hammered out a two-pronged deal
with the Florida Department of Insurance that allows it to exclude mold coverage
from its condo association policies and jack up rates by at least 70 percent.
The rate increases, however, will probably be higher: Under Florida law, insurers
can negotiate higher rates with individual commercial clients and deny coverage
if they refuse. State Farm began pushing for a rate hike of 132 percent last
April, but the Department of Insurance in June said a maximum hike of 65 percent
to 70 percent was justified.
The Department signed off on a 70 percent hike Thursday, but State Farm said
it would charge condo associations 132 percent.
''We've seen a rise in claims, both in frequency and severity,'' said Tom
Hagerty, a spokesman for State Farm Florida, which is based in Winter Haven.
``For every dollar we're collecting in premiums, we're paying out $2.''
State Farm insures 3,900 of Florida's condo associations, about 18 percent
of the market. Condo association insurance covers common areas like roofs, lobbies
and laundry rooms. Individual condo owners' insurance rates will not be affected
by the decision.
Mold, meanwhile, has become a hot-button issue for insurance companies. Florida
agencies are fighting to prevent a repeat of the multimillion-dollar settlements
that were meted out in Texas and California to people said to be sickened by
mold. The payouts reportedly caused some homeowners' rates to double.
''It's become a gold mine for certain people and attorneys, and a burden around
the necks of the average insurance holder who's having to pay for this stuff,''
said Sam Miller, spokesman for the Florida Insurance Council.
In Florida, State Farm saw mold claims jump from 90 in 2000 to 337 last year.
The insurance giant is one of 238 companies petitioning the Department of Insurance
to allow it to drop or limit mold coverage.
Thursday's agreement may force condo owners to seek coverage from secondary
insurance providers, which charge higher rates and are not regulated by the
state. One of the possible providers is Citizens Property Insurance Corp., the
state's insurer of last resort, which was created after Hurricane Andrew.
On Jan. 13, State Farm will go to court in an effort to drop mold coverage
from its homeowners' insurance.
Earlier this week, the Department of Insurance allowed the Florida Farm Bureau
Insurance Co. to limit mold coverage in residential homeowner policies to one-time
payouts of $10,000 with a maximum of $20,000 starting March 1, 2003.
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