Mold and the Insurance Industry 2002: Mold Can Be Controlled David Golden National Association of Independent Insurers

Introduction Mold continues to grow as an insurance issue, but panic may be lessening in the industry. To lessen public unease, our message must continue to be: “Mold Can Be Controlled.”

Quickie Mold 101 n Mold is ubiquitous and ecologically necessary n Mold helps break down dead organic material n Mold likes moisture, modern building materials and a temperature between 40 oF and 100 oF n Just like us!

Quickie Mold 101 n Health effects of too much mold are unproven n Generally allergic reactions n Can be more serious for people with compromised pulmonary systems

How Much is Too Much? n No one knows n Varies from person to person n Beware of junk science! –Statistical associations don’t prove causation – –There are three kinds of lies: lies, damned lies, and statistics. - Benjamin DisraeliBenjamin Disraeli

Why Now? n Modern buildings sealed to keep heat and a/c in n Also keep mold and moisture in n Mold loves to munch modern materials –Drywall paper, carpet, wallpaper backings, particle board, etc. n Ballard v. Farmers - $32 million

Insurance Lines at Risk n Homeowners - the early lead n Commercial Property - running hard n General Liability - “Where the Bucks Are” –Premises and Products/Completed Ops n Workers Compensation - right behind GL n Professional Liability - follows GL –Doctors, Architects, Designers, Engineers n Automobile - trying to hide

Recent Developments n Media Moderates n Insurers Implement n Regulators Respond n Legislators Look n Litigation Large n Internet Innovation n Feds Follow

Media n Ballard no longer news n Less hype, but still show extreme cases n Still call it “toxic mold” n Admit no causal proof n Mention allergic reactions and variability n Acknowledge importance of maintenance and quick response

Insurers / Reinsurers n Clarify Coverage n Texas - “beefed-up” HO-A n ISO Filings –All lines - similar definitions –Options re: coverage/exclusion –Revised GL additional insured endts. n Reinsurers Add Some Exclusions

State Regulators n Mostly approving mold form filings n Texas –Highest homeowner rates in U.S. –Commissioner’s rules for HO-B –Insurers respond with HO-A –Banks/developers cry foul

Legislatures n About a dozen bills mid-March 2002 n Most bills call for studies, disclosure, etc. n No exposure standard bills (i.e. lead) n Many mention exposure standards goal n California law - no funding for study n New York bill mirrors Cal. - pending n Indiana bill killed

Litigation n Ballard v. Farmers - money talks –Claim Handling –Coverage Dispute n Landlord/Tenant n Products/Completed Operations n Additional Insureds - multiple limits n Bowers v. Farmers - marijuana mold n Class actions - UC-Berkley students

Internet and the Mold Economy n Mold “Information” Sites n Attorneys n Expert Witnesses n Remediation “Experts” n Mold Testing n “Public” Adjusters

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Feds Enter the Fray n Housing and Urban Development n Health and Human Services n Environmental Protection Agency n Department of Energy n NAII Part of Interagency Task Force

Moving Forward n Media - Don’t seek, but manage n Insurers –Underwrite - evaluate risk/coverage/rate –Manage claim process –Appropriate loss prevention –Policyholder education

Moving Forward n Regulators & Legislators –Education - separate facts from hype –Hearings - we have a message –Forms/rates - must be appropriate to risk –Reinforce competition

Moving Forward n Litigation –Watch for trends & precedents –Tort reforms, esp. jurisdiction shopping –Judicial education –Minimize plaintiff advantages –Cooper v. American Family - insurers can win

Internet n Awareness - know thine enemy n Debunk bad information –It’s mold, it’s not asbestos n Offer quality information n Insurers can provide tools to agents

Federal n Work with the process –The bureaucracy has the power n Offer reasonable alternatives n Remember that regulations are the main way bureaucrats show value

Guard Against Junk Science n “Studies” are analyses, not science n Statistics are associations, not science n Science requires experimentation n Scientific Method –Suspicion  Hypothesis  Theory  Law n Science can be replicated n Remember the “three kinds of lies”

Guard Against Junk Science n Demand that attorneys and advocates show proof –They can’t –Hold the high ground n n “A lie gets halfway around the world before the truth has a chance to get its pants on.” - Sir Winston ChurchillSir Winston Churchill

Choose: Another Radon or Another Asbestos n “Those who cannot remember the past are condemned to repeat it.” - George Santayana n Manage the issue –Separate fact from fiction –Work with allied business groups –Align with our customers - policyholders

The National Association of Independent Insurers: Mold Can Be Controlled Thank you! Questions?