Major Insurers Drop Coverage for Mold

Homeowners seeking insurance coverage for mold damage may find it increasingly hard to come by.

State Farm, the nation’s largest home insurer, recently announced it has eliminated coverage for mold damage in 33 states, not including California.

Even in cases in which the mold resulted from damage covered by the insured’s policy, the company will no longer pay to eliminate the fungus.

The action is the result of the $1.3 billion the insurance industry paid last year to remove mold and repair mold damage in households nationwide.

State Farm, after losing more than $5 billion last year, also has declared a moratorium on new homeowners policies in 17 states, including California.

“Mold, and especially water, have had a dramatic impact on homeowners’ claims across the board,” said Candysse Miller, executive director of Insurance Information Network, an insurance-industry trade association.

“We’ve seen these claims multiply exponentially over the last five years. That has resulted in about $2 billion worth of water-related claims in California alone, which is larger than most natural, declared disasters.”

Allstate, the nation’s second-largest carrier, has added language to homeowner policies clarifying that it does not cover mold and other related fungal problems unless the problems arise from events already covered by the policy.

Under that scenario, coverage will be limited to $5,000, an amount far smaller than most current mold claims.

The California insurance department already has approved 247 mold-exclusion filings that will allow insurers to drop or limit mold coverage on new policies.