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Higher homeowners premiums? Blame it on the mold

Mold, the source of penicillin, also has an evil side: It's taking over homes, sickening their occupants and creating havoc in the homeowners insurance industry.

A Texas family bulldozed its 22-room mansion rather than face it. In Oregon, a family saw how much eradicating mold would cost and opted instead to have the fire department burn their house down. Mold even killed Ed McMahon's dog, the entertainer alleges in a lawsuit.

Mold has always been around, but modern building techniques have made it worse. Homes are more airtight than they used to be, which means any liquid that gets inside stays trapped inside, allowing mold to grow -- and sicken people who breathe it in.

Health issues
The health consequences of exposure to mold can vary widely, depending on a person's health and sensitivity. The most common symptoms are similar to hay fever or other allergies, according to the Centers for Disease Control.

If you're prone to allergies or have a weakened immune system or respiratory problems, you're more likely to feel the effects of mold.

There are thousands of different kinds of mold, and the stuff is everywhere, the CDC says. Any place you combine heat and water, you're going to have mold.

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Indoors, it's most often found in spots where water accumulates, such as bathrooms and basements. So, the basic prevention is that if you see it or smell it, clean it up with a diluted bleach solution.

The biggest problems occur when there's water damage, such as a toilet cracking or a pipe that leaks inside a wall, which soaks the surrounding building materials and doesn't get dried out. The only way to fix the problem is to rip out the walls or floors and replace them, which can cost thousands of dollars.

McMahon and his wife filed suit recently, seeking more than $10 million in damages as the result of toxic mold that sprouted in their California home after a pipe burst and flooded their den.

During the subsequent clean up, the McMahons started getting sick and their dog died, the suit says.

The McMahons are hardly the only homeowners crying foul. As an insurance issue, mold is huge. Jury awards and insurance claim payouts have included an $18.5 million jury award in California, a $4 million award in Virginia, and more than $118 million in mold-related insurance claims -- in a single month -- in Texas.

Already, homeowners in Texas and California are feeling the impact with higher homeowners insurance premiums and cancellation notices. Bo Gilbert, director of governmental relations for the Independent Insurance Agents of Texas, says the state's top homeowners insurance providers announced they would stop writing new policies because of the growth in mold-related claims until they can start using a different form that will exclude claims for water-related damage.

With insurers backing off on writing new policies, home buyers who need proof of insurance to get a mortgage have a problem. The Texas Department of Insurance has reported complaints from consumers who were held up on getting a loan, and the state's bankers association is concerned that it could push mortgage interest rates higher as lenders have trouble getting national resellers to buy Texas loans.

"The biggest obstacle here is consumers will have to be educated in the differences in policy forms, and then there has to be a shift in mindset," Gilbert says. "Everybody had this Cadillac coverage. People will have to understand that's no longer readily available. It will still be offered, but they'll pay for it.

"The other issue we need to understand is the losses have still not stabilized, and the insurers are still uncertain how to predict future losses. These losses keep growing every month. Companies don't know what to do on the pricing. It's unknown territory."

Anyone who's had a water-related damage claim in the last three years may be hard-pressed to find homeowners insurance at any price, says Jenny Jones, president of Elkins/Jones, a major property-insurance broker in Los Angeles.

"We've already heard that insurance companies will go back and re-underwrite their book of business," Jones says. "Any house that's had a major water damage claim in the last three years, they'll non-renew. Not because it has mold, but it might."

Better construction, more mold
Part of the reason for the recent rise in claims has to do with construction techniques that have become standard in the last two decades, says Joe Lstiburek, an internationally recognized expert in moisture-related building problems and indoor air quality.

In the old days, Lstiburek says, mold wasn't a problem even though houses leaked because they were built in a way that allowed them to dry out after they got wet.

But with the emphasis on building more tightly sealed houses for energy efficiency, once water is trapped inside, it takes much longer to dry. That gives mold a chance to form, particularly if the builder tried to save money by using lower-cost materials for roof decking, floors and interior walls.

"What we have now is nothing compared to what's coming," he says. "I'm talking about mold extraordinaire. As water control starts to fail, the cost of litigation will go through the roof."

Two ways to reduce the cost of homeowners insurance are to take higher deductibles or to get a policy that doesn't cover water damage, Jones says. You can also analyze your homeowners insurance to see if there's any coverage you have that you can do without.

"You have to be creative," she says. "That's the biggest thing."

You can also show your insurance company that you're on the ball about reducing the risk of mold-related damage. Click here for tips on keeping mold from growing in your home.

Pat Curry is a contributing editor based in Georgia.

-- Posted: Sept. 23, 2003

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