Plans to Drop Home Insurance

Revised: 09/22/2006

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Chicago Tribune
Farmers Plans to Drop Home Insurance
By Associated Press

November 10, 2001, 12:02 PM CST

AUSTIN, Texas -- Citing mold claims, Farmers Insurance Group said it won't renew almost any homeowners insurance policies in Texas next year, effectively putting it out of the market.

The company, the state's second largest insurer, had already decided in August to stop selling new comprehensive home policies.

The Los Angeles-based company said the mold coverage threatens its financial stability.

"Farmers cannot ignore the losses it has suffered," said John Hageman, executive director of Farmers in Texas. "... However, we are investigating other alternatives and are hopeful a solution will eventually emerge which will allow us to again offer broad coverage."

Agents were told Friday of the decision to end renewals as of Dec. 30 on the most common type of homeowners insurance for its 600,000 customers.

Farmers was the first major company in Texas to end renewals. The state's other two largest insurers, State Farm and Allstate, have also stopped selling comprehensive policies to new customers because of the rising mold claims.

The Farmers move came as state Insurance Commissioner Jose Montemayor considered new rules that would sharply limit mold coverage for Texas homes, as insurers want.

"We're looking into this to see if there is anything we can do," said Mark Hanna, an Insurance Department spokesman.

An industry representative faulted Montemayor for not doing enough to help insurers.

"Competition, not artificial control of products, keeps insurance available and affordable in Texas," Southwestern Insurance Information Service President Jerry Johns said Saturday.

The comprehensive policies -- so-called HO-B policies -- provide full coverage on a home, including mold damage. About 96 percent of insured homeowners in the state have such protection.

Consumer groups criticized the Farmers decision.

"This is one more move in their effort to have their way on the mold issue and other important insurance issues," said Dan Lambe of Texas Watch.

Farmers reported Friday that its water and mold losses increased 158 percent from August 2000 to August of this year. In 1999, the company had 12 mold claims in Texas. Last year it had 499, and already this year it has been hit with nearly 8,000 -- including 1,500 in September.

Farmers also has been hit with numerous homeowner lawsuits, including one that resulted in a $32 million jury award earlier this year for an Austin-area family whose home became uninhabitable because of infestation by toxic mold. A state judge recently upheld the award.

Montemayor is considering a mold policy that would limit such claims to $5,000 per year, with extra protection available for an additional premium. He also is considering a plan that would leave unlimited mold coverage in comprehensive policies, but allow homeowners to opt out of such coverage in exchange for a reduced premium.

Experts are divided on why there has been a surge in mold claims, but they note increased public concern over toxic molds such as stachybotrys, the so-called black mold blamed for a variety of health problems.

An online information service of the United Farmers Agents Association, Inc.