Allstate halts new policies over mold decision

Posted: Friday, August 08, 2003

ANCHORAGE (AP) Allstate Insurance Co., among the state's largest providers of homeowners insurance, has stopped writing new policies while it battles the state Division of Insurance over how to limit its risk of mold-damage lawsuits.

Existing customers will still be covered, even if they buy a new house or need to renew a policy.

Homeowners insurance was never intended to cover mold damage resulting from maintenance issues like a leaky roof or pipe, said insurance company officials, only from accidents like water damage from firefighters dousing a blaze.

Juries have interpreted policies differently, however. One Texas homeowner was awarded $32 million, before a judge reduced the amount to $4 million.

To sidestep the lawsuit cost bubble, major insurance companies have asked state insurance regulators nationwide to cap the amount companies must pay for non-accident-related mold claims.

''We want to prevent opportunists from capitalizing on mold,'' Allstate spokesman Scott Richardson told the Anchorage Daily News. Most states Allstate serves have accepted the language, he said, or acceptance is pending.

Allstate wants Alaska to allow a limit too. The company has asked the Division of Insurance to let it set a $5,000 cap. It has been asking for a year and a half, Richardson said. Allstate said it quit writing new policies this week to ensure it will have the resources to cover claims by its current customers.

''I'm certainly disappointed an insurance company would take this action,'' said Linda Hall, the state's director of insurance. Hall said she had been absorbed in the legislative session and was unaware of Allstate's growing frustration. She said she planned to review the case personally Thursday afternoon. She also said her staff had been sending back Allstate's applications with questions and requests for changes.

Loan originator Jeff Stanford of Residential Mortgage in Anchorage said business was not slowed when State Farm Insurance quit writing new home insurance policies for a while last year.

Richardson said Allstate hopes for a quick resolution but does not know how long the matter will take.

Allstate said its inability to get its cap approved highlights the need for a more streamlined regulatory process in the state. Richardson hopes the matter can be resolved soon, acknowledging it is a hardship for agents.

Hall said she understands the insurance industry's desire to limit high-dollar claims, and the division is reviewing applications case by case.

Hall said the state also is reviewing its application process and talking to other state regulators to see whether it can be more efficient.

She also noted the state has granted other insurance companies mold caps, including Safeco's request for a $10,000 limit.

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