SACRAMENTO — California insurance companies are predicting everything from sky-high homeowner insurance rates to a slowdown in the housing market if legislation aimed at protecting policyholders against mold damage becomes law.
Senate Bill 1763 would mandate that insurers pay for mold damage caused by a covered loss such as a burst water pipe unless their policies specifically excluded it.
The measure, by state Sen. Deborah Ortiz (D-Sacramento), would also require insurers to tell property owners when an incident for which a claim is filed is likely to spawn mold.
The state Senate passed the bill 21 to 11 last month, sending it to the Assembly, where it awaits debate in the Insurance Committee.
Ortiz said that she wrote the measure after learning that insurance companies were seeking to limit or exclude mold coverage from their policies.
State Insurance Commissioner Harry Low told the Senate Insurance Committee in April that he had received more than 200 such requests from insurers in 18 months.
All of those requests were granted, said Low's spokeswoman Nanci Kramer, because the commissioner does not have the authority to control what insurance companies cover, only how much they charge.
Since the mold exclusions kicked in, the insurers have dropped homeowners' rates 1% to 7%, depending on the policy and the carrier, she said.
Ortiz accused insurers of acting rashly in limiting their coverage.
"They triggered this legislation by rushing to the commissioner," Ortiz said.
No federal or state laws or regulations define unsafe levels of mold exposure or how to remove mold. Another Ortiz bill, last year's SB 732, ordered the state Department of Health Services to study mold and set health standards by July 1, 2003.
Although Gov. Gray Davis signed the bill into law, he did not include money in his 2002-03 budget proposal to pay for it, and funding remains uncertain as legislators craft a budget compromise.
The insurance lobby started making overtures to the Assembly last week for a compromise: The insurers would pay for a state mold study if Ortiz would rewrite or pull back SB 1763.
"We're willing to pay our fair share," said Dan Dunmoyer of the Personal Insurance Federation of California, an insurance industry trade group. "We want to figure out the science of mold. People have been living with it for a couple of millennia, so we can wait for a few months before we jump off the cliff."
