State Farm passes on mold

by Cara Buckley
Posted on Sat, Dec. 21, 2002

One-fifth of Florida's condo associations faces rate hikes of 132 percent and will no longer have mold coverage, marking the latest chapter in insurers' efforts to head off an explosion in mold-related claims.

State Farm, Florida's largest insurer, has hammered out a two-pronged deal with the Florida Department of Insurance that allows it to exclude mold coverage from its condo association policies and jack up rates by at least 70 percent.

The rate increases, however, will probably be higher: Under Florida law, insurers can negotiate higher rates with individual commercial clients and deny coverage if they refuse. State Farm began pushing for a rate hike of 132 percent last April, but the Department of Insurance in June said a maximum hike of 65 percent to 70 percent was justified.

The Department signed off on a 70 percent hike Thursday, but State Farm said it would charge condo associations 132 percent.

''We've seen a rise in claims, both in frequency and severity,'' said Tom Hagerty, a spokesman for State Farm Florida, which is based in Winter Haven. ``For every dollar we're collecting in premiums, we're paying out $2.''

State Farm insures 3,900 of Florida's condo associations, about 18 percent of the market. Condo association insurance covers common areas like roofs, lobbies and laundry rooms. Individual condo owners' insurance rates will not be affected by the decision.

Mold, meanwhile, has become a hot-button issue for insurance companies. Florida agencies are fighting to prevent a repeat of the multimillion-dollar settlements that were meted out in Texas and California to people said to be sickened by mold. The payouts reportedly caused some homeowners' rates to double.

''It's become a gold mine for certain people and attorneys, and a burden around the necks of the average insurance holder who's having to pay for this stuff,'' said Sam Miller, spokesman for the Florida Insurance Council.

In Florida, State Farm saw mold claims jump from 90 in 2000 to 337 last year. The insurance giant is one of 238 companies petitioning the Department of Insurance to allow it to drop or limit mold coverage.

Thursday's agreement may force condo owners to seek coverage from secondary insurance providers, which charge higher rates and are not regulated by the state. One of the possible providers is Citizens Property Insurance Corp., the state's insurer of last resort, which was created after Hurricane Andrew.

On Jan. 13, State Farm will go to court in an effort to drop mold coverage from its homeowners' insurance.

Earlier this week, the Department of Insurance allowed the Florida Farm Bureau Insurance Co. to limit mold coverage in residential homeowner policies to one-time payouts of $10,000 with a maximum of $20,000 starting March 1, 2003.