Mold and the Insurance Mold and the Insurance Industry 2002:Industry 2002:

Mold Can Be ControlledMold Can Be Controlled

David GoldenDavid Golden

National Association of National Association of Independent InsurersIndependent Insurers

IntroductionIntroduction

Mold continues to grow as an Mold continues to grow as an insurance issue, but panic may be insurance issue, but panic may be lessening in the industry.lessening in the industry.

To lessen public unease, our To lessen public unease, our message must continue to be: message must continue to be: “Mold Can Be Controlled.”“Mold Can Be Controlled.”

Quickie Mold 101Quickie Mold 101

Mold is ubiquitous and ecologically Mold is ubiquitous and ecologically necessarynecessary

Mold helps break down dead organic Mold helps break down dead organic materialmaterial

Mold likes moisture, modern building Mold likes moisture, modern building materials and a temperature materials and a temperature between 40between 40oFoF and 100 and 100oFoF

Just like us!Just like us!

Quickie Mold 101Quickie Mold 101

Health effects of too much mold Health effects of too much mold are unprovenare unproven

Generally allergic reactionsGenerally allergic reactions Can be more serious for people Can be more serious for people

with compromised pulmonary with compromised pulmonary systemssystems

How Much is Too Much?How Much is Too Much?

No one knowsNo one knows Varies from person to personVaries from person to person Beware of junk science!Beware of junk science!

– Statistical associations don’t prove Statistical associations don’t prove causationcausation

– There are three kinds of lies: lies, damned lies, and statistics. - Benjamin Disraeli

Why Now?Why Now?

Modern buildings sealed to keep Modern buildings sealed to keep heat and a/c inheat and a/c in

Also keep mold and moisture inAlso keep mold and moisture in Mold loves to munch modern Mold loves to munch modern

materialsmaterials– Drywall paper, carpet, wallpaper Drywall paper, carpet, wallpaper

backings, particle board, etc.backings, particle board, etc. Ballard v. FarmersBallard v. Farmers - $32 million - $32 million

Insurance Lines at RiskInsurance Lines at Risk Homeowners - the early leadHomeowners - the early lead Commercial Property - running hardCommercial Property - running hard General Liability - “Where the Bucks Are”General Liability - “Where the Bucks Are”

– Premises and Products/Completed OpsPremises and Products/Completed Ops Workers Compensation - right behind GLWorkers Compensation - right behind GL Professional Liability - follows GLProfessional Liability - follows GL

– Doctors, Architects, Designers, Doctors, Architects, Designers, EngineersEngineers

Automobile - trying to hideAutomobile - trying to hide

Recent DevelopmentsRecent Developments

Media ModeratesMedia Moderates Insurers ImplementInsurers Implement Regulators RespondRegulators Respond Legislators LookLegislators Look Litigation LargeLitigation Large Internet InnovationInternet Innovation Feds FollowFeds Follow

MediaMedia

BallardBallard no longer news no longer news Less hype, but still show extreme casesLess hype, but still show extreme cases Still call it “toxic mold”Still call it “toxic mold” Admit no causal proofAdmit no causal proof Mention allergic reactions and Mention allergic reactions and

variabilityvariability Acknowledge importance of Acknowledge importance of

maintenance and quick responsemaintenance and quick response

Insurers / ReinsurersInsurers / Reinsurers

Clarify CoverageClarify Coverage Texas - “beefed-up” HO-ATexas - “beefed-up” HO-A ISO FilingsISO Filings

– All lines - similar definitionsAll lines - similar definitions– Options re: coverage/exclusionOptions re: coverage/exclusion– Revised GL additional insured endts.Revised GL additional insured endts.

Reinsurers Add Some ExclusionsReinsurers Add Some Exclusions

State RegulatorsState Regulators

Mostly approving mold form filingsMostly approving mold form filings TexasTexas

– Highest homeowner rates in U.S.Highest homeowner rates in U.S.– Commissioner’s rules for HO-BCommissioner’s rules for HO-B– Insurers respond with HO-AInsurers respond with HO-A– Banks/developers cry foulBanks/developers cry foul

LegislaturesLegislatures

About a dozen bills mid-March 2002About a dozen bills mid-March 2002 Most bills call for studies, disclosure, Most bills call for studies, disclosure,

etc.etc. No exposure standard bills (i.e. lead)No exposure standard bills (i.e. lead) Many mention exposure standards goalMany mention exposure standards goal California law - no funding for studyCalifornia law - no funding for study New York bill mirrors Cal. - pendingNew York bill mirrors Cal. - pending Indiana bill killedIndiana bill killed

LitigationLitigation

Ballard v. FarmersBallard v. Farmers - money talks - money talks– Claim HandlingClaim Handling– Coverage DisputeCoverage Dispute

Landlord/TenantLandlord/Tenant Products/Completed OperationsProducts/Completed Operations Additional Insureds - multiple limitsAdditional Insureds - multiple limits Bowers v. FarmersBowers v. Farmers - marijuana mold - marijuana mold Class actions - UC-Berkley studentsClass actions - UC-Berkley students

Internet and the Mold Internet and the Mold EconomyEconomy

Mold “Information” SitesMold “Information” Sites AttorneysAttorneys Expert WitnessesExpert Witnesses Remediation “Experts”Remediation “Experts” Mold TestingMold Testing ““Public” AdjustersPublic” Adjusters

Remember This Guy?Remember This Guy?

•From www.toxicmoldinfocenter.com

Feds Enter the FrayFeds Enter the Fray

Housing and Urban DevelopmentHousing and Urban Development Health and Human ServicesHealth and Human Services Environmental Protection AgencyEnvironmental Protection Agency Department of EnergyDepartment of Energy NAII Part of Interagency Task ForceNAII Part of Interagency Task Force

Moving ForwardMoving Forward

Media - Don’t seek, but manageMedia - Don’t seek, but manage InsurersInsurers

– Underwrite - evaluate Underwrite - evaluate risk/coverage/raterisk/coverage/rate

– Manage claim processManage claim process– Appropriate loss preventionAppropriate loss prevention– Policyholder educationPolicyholder education

Moving ForwardMoving Forward

Regulators & LegislatorsRegulators & Legislators– Education - separate facts from hypeEducation - separate facts from hype– Hearings - we have a messageHearings - we have a message– Forms/rates - must be appropriate to Forms/rates - must be appropriate to

riskrisk– Reinforce competitionReinforce competition

Moving ForwardMoving Forward

LitigationLitigation– Watch for trends & precedentsWatch for trends & precedents– Tort reforms, esp. jurisdiction Tort reforms, esp. jurisdiction

shoppingshopping– Judicial educationJudicial education– Minimize plaintiff advantagesMinimize plaintiff advantages– Cooper v. American Family Cooper v. American Family - insurers - insurers

can wincan win

InternetInternet

Awareness - know thine enemyAwareness - know thine enemy Debunk bad informationDebunk bad information

– It’s mold, it’s not asbestosIt’s mold, it’s not asbestos Offer quality informationOffer quality information Insurers can provide tools to Insurers can provide tools to

agentsagents

FederalFederal

Work with the processWork with the process– The bureaucracy has the powerThe bureaucracy has the power

Offer reasonable alternativesOffer reasonable alternatives Remember that regulations are the Remember that regulations are the

main way bureaucrats show valuemain way bureaucrats show value

Guard Against Junk Guard Against Junk ScienceScience

““Studies” are analyses, not scienceStudies” are analyses, not science Statistics are associations, not scienceStatistics are associations, not science Science requires experimentationScience requires experimentation Scientific MethodScientific Method

– Suspicion Suspicion Hypothesis Hypothesis Theory Theory Law Law Science can be replicatedScience can be replicated Remember the “three kinds of lies”Remember the “three kinds of lies”

Guard Against Junk Guard Against Junk ScienceScience

Demand that attorneys and Demand that attorneys and advocates show proofadvocates show proof– They can’tThey can’t– Hold the high groundHold the high ground

“A lie gets halfway around the world before the truth has a chance to get its pants on.”- Sir Winston Churchill

Choose: Another Radon or Choose: Another Radon or Another AsbestosAnother Asbestos

““Those who cannot remember the Those who cannot remember the past are condemned to repeat it.” - past are condemned to repeat it.” - George SantayanaGeorge Santayana

Manage the issueManage the issue– Separate fact from fictionSeparate fact from fiction

– Work with allied business groupsWork with allied business groups

– Align with our customers - Align with our customers - policyholderspolicyholders

The National Association The National Association of Independent Insurers:of Independent Insurers:

Mold Can Be ControlledMold Can Be Controlled

Thank you!Thank you!

Questions?Questions?