NAII Says 35 States Have Adopted ISO Mold Limitations
December 24, 2002
Thirty-five states have adopted an approved Insurance Services Office (ISO)
mold limitation for homeowners coverage, which allows insurers to exclude coverage
for loss caused by mold and wet or dry rot, unless the conditions result from
a covered peril. According to the National Association of Independent Insurers
(NAII), a separate limit for mold damage resulting from a covered peril may
be added by endorsement.
"These limitations, coupled with this week's reduction of damages by the
Texas appeals court in the Ballard case, could help introduce some stability
in the nation's homeowners market," said Dave Golden, director of commercial
lines for the NAII.
So far, 35 states have adopted ISO's mold endorsement: Alabama, Arizona, Colorado,
Delaware, Washington D.C., Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Massachusetts,
Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New
Jersey, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South
Carolina, South Dakota, Tennessee, Utah, Vermont, West Virginia, Wisconsin and
Wyoming.
Under the terms of the ISO endorsements, coverage for mold-related damages are
excluded unless they result from a covered peril of water damage such as accidental
discharge or overflow of water or steam or windstorm, and are covered under
policy limits.
ISO is endorsing new limitations and options for homeowners, including a basic
limit option of $10,000 on an annual aggregate basis for loss caused by fungi,
wet or dry rot or bacteria, including the cost of mold removal and expenses
involving tearing out and replacing any part of the property to gain access
to the mold.
"The ISO approach introduces a note of sanity on an issue that too frequently
is surrounded by misconception and bad science," Golden said. "The
fact that more than two-thirds of the states recognize these exclusions is an
encouraging sign that perhaps the mold panic is on the wane."
Golden pointed to this week's decision by a Texas appeals court to slash the
bad-faith lawsuit against Farmers Insurance that awarded Melinda Ballard $32
million last year in mold-related damages as an encouraging sign that the tide
may be turning against mold litigation. The court ruled that Farmers was only
responsible for actual damages in the case and eliminated the jury's award for
punitive damages.
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