California closely follows Texas in mold-related claims, according to the Insurance Information Institute, and last year a jury awarded $18.5 million in damages to a California homeowner, of which $18 million was punitive damages. In another highly publicized case in Texas, a homeowner received $32 million.
If current trends continue, and a mold exclusion is not passed by the Department of Insurance, major insurance companies may consider not selling new homeowner policies in California as they already have in Texas because of the substantial number of mold-related claims that have been made in that state, according to Elkins/Jones. This could have a disastrous affect on the California economy and the livelihoods of homebuilders, realtors, escrow companies and others.
A more likely possibility is that premiums will escalate significantly. One insurance company says premiums could increase as much as 40% to handle the volume of claims stemming from mold.
Owners of commercial properties, already reeling from insurance premium increases due to 9/11, face even more increases due to mold concerns, according to Elkins/Jones. The company's clients are seeing rate increases from 10% to 50%, Elkins/Jones reports.
Jones advises homeowners and commercial property owners to keep a close eye out for water build-up or damage and get it repaired quickly before mold starts growing and spreading. A prudent property owner should repair the damage immediately and concurrently notify the insurer to determine coverage, according to Jones. Mold claims are only covered if the homeowner can prove the mold is the result of a "covered peril." In most cases, the only "covered peril" is damage resulting from a leaking pipe inside the house, Elkins/Jones notes.
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