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NAII Says 35 States Have Adopted ISO Mold Limitations
December 24, 2002

Thirty-five states have adopted an approved Insurance Services Office (ISO) mold limitation for homeowners coverage, which allows insurers to exclude coverage for loss caused by mold and wet or dry rot, unless the conditions result from a covered peril. According to the National Association of Independent Insurers (NAII), a separate limit for mold damage resulting from a covered peril may be added by endorsement.

"These limitations, coupled with this week's reduction of damages by the Texas appeals court in the Ballard case, could help introduce some stability in the nation's homeowners market," said Dave Golden, director of commercial lines for the NAII.

So far, 35 states have adopted ISO's mold endorsement: Alabama, Arizona, Colorado, Delaware, Washington D.C., Idaho, Indiana, Iowa, Kansas, Kentucky, Maine, Massachusetts, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Utah, Vermont, West Virginia, Wisconsin and Wyoming.

Under the terms of the ISO endorsements, coverage for mold-related damages are excluded unless they result from a covered peril of water damage such as accidental discharge or overflow of water or steam or windstorm, and are covered under policy limits.

ISO is endorsing new limitations and options for homeowners, including a basic limit option of $10,000 on an annual aggregate basis for loss caused by fungi, wet or dry rot or bacteria, including the cost of mold removal and expenses involving tearing out and replacing any part of the property to gain access to the mold.

"The ISO approach introduces a note of sanity on an issue that too frequently is surrounded by misconception and bad science," Golden said. "The fact that more than two-thirds of the states recognize these exclusions is an encouraging sign that perhaps the mold panic is on the wane."

Golden pointed to this week's decision by a Texas appeals court to slash the bad-faith lawsuit against Farmers Insurance that awarded Melinda Ballard $32 million last year in mold-related damages as an encouraging sign that the tide may be turning against mold litigation. The court ruled that Farmers was only responsible for actual damages in the case and eliminated the jury's award for punitive damages.

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