Md. Reportedly Takes Steps to Improve Homeowners Market

July 2, 2003

Maryland has reportedly revised its attitude toward insurer mold coverage filings to the overall benefit of the state’s homeowners market, according to the Alliance of American Insurers.

A new order issued last week by the Maryland Insurance Administration rescinds a previous order that mandated insurers offer mold coverage, although it permitted dollar limits. The new order now allows insurers to exclude such coverage. In fact, new filings will be processed on an expedited basis and filing fees will be waived for a period of 60 days after June 27. Filings currently under review may be modified without the need to submit new filings.

“The Alliance welcomes the Insurance Administration’s new, more flexible stance on mold coverage,” said Neil Malady, manager of the Alliance’s Mid-Atlantic Region. “Our association always opposes such mandates because they require coverage that was never contemplated in the initial policy contract. Mandating its coverage only creates financial instability for insurers and availability and affordability problems for consumers. By allowing insurers to offer a variety of coverages at a range of prices, consumers will be allowed to choose the coverage they need at a price they can afford.”

Kirk Hansen, Alliance director of claims, noted that wherever mold coverage has been mandated, it has resulted in higher claims costs that have led to higher insurance premiums. “Texas’ experience serves as an excellent example as to why no state should mandate coverage for mold,” he said. “Because Texas in the past mandated use of a homeowners policy that did not require water discharge to be sudden and accidental, as required by standard policies in most other states, it had the dubious honor of having the highest homeowners premiums in the nation.”

Hansen added that a majority of states have reportedly seen the wisdom of the approach Maryland is now taking. Insurance departments in 39 states and the District of Columbia having approved homeowners exclusions for mold. “The insurance industry functions best when free-market forces are allowed to operate,” he said. “Consumers are best served when the free market is allowed to decide what coverages should be offered and for what price.”

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