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How Texas is coping
with the mold menace

A Growing Concern

Mold has been around for millions of years, but it has captured the attention of most Texans only in the last few. It's crept into the public consciousness mainly because the cost of removing or preventing it can run into the millions of dollars.

It's not known exactly how many species of mold exist, but the estimates of scientists and microbiologists generally place the number at around 100,000. Some species of mold are neither toxic nor harmful to humans, and some are actually beneficial. However, all molds produce spores when they reproduce, and some of those spores produce mycotoxins, or poison. In order to live, these spores must have a source of moisture and organic material upon which to feed.

Why now?
According to Washington D.C.-based Kiplinger Forecasts, about 75 percent of all insurance claims related to toxic mold come from Texas. The Insurance Institute of America has called Texas a hotbed of toxic mold activity, saying Texas has the perfect climate for mold--warm with plenty of humidity.

Mold may be found in many structures--homes, apartments, office buildings and schools--and knows no economic boundaries. Poor construction, poor air circulation and suspect building materials are on a growing list of factors that contribute to mold growth.

There are no standards for determining what levels of mold exposure are safe and what levels are hazardous because different people are able to withstand different levels of contamination. Dr. Quade Stahl of the Texas Department of Health says mold concerns are so new, conclusive medical studies have not been made. Still, he suggests avoiding mold growth and mycotoxins.

Homeowners in several states complain of extreme illness in humans and pets, according to the Washington State Department of Health.

Costly growth
Texas homeowners pay insurance premiums that average more than $875 per year, a figure 83 percent higher than the national average according to the Texas Department of Insurance (TDI). Toxic mold is blamed as the catalyst in Texas insurers' calls for sizeable increases in premiums. Major insurers warned TDI at October 2001 public hearings that unless mold coverage can be excluded, within two years homeowners insurance premiums could rise by as much as 60 percent.

Insurance industry estimates place potential water and mold damage claims in Texas in 2001 at more than $780 million, an increase of 60 percent over 2000. Farmers Insurance alone reports that mold and water damage losses increased 158 percent from August 2000 to August 2001, and expects claim losses to exceed $200 million in 2001.

TDI received only two complaints on toxic mold cases in the 1990s, but has had more than 100 in 2001, 21 coming in the aftermath of Tropical Storm Allison. Not only has the number of claims risen, the cost per claim has climbed as well, from a $3,000 average in the first quarter of 2000 to $38,000 now, according to the Texas House Research Organization.

Mold claims and their potential impact on insurance coverage are expected to have a slight impact on single-family houseing starts in Texas. According to Texas Comptroller Carole Keeton Rylander, the final number of home starts in 2001 is expected to drop 1.5 percent from the 2000 total of 116,500.

"Next year we expect things to be fairly close to this year, if not slightly higher," said Gary Preuss of the Comptroller's Revenue Estimating Division. "After that it may be down slightly for a year or two before getting back on the rise in 2005."

Clean up is not a breeze
Household bleach and water are usually enough to handle minor mold problems, but wet, porous building materials can allow mold spores to multiply at will. Stachybotrys chartarum is probably the most recognized form of toxic mold in Texas. Commonly called "black mold," it releases mycotoxins into the air that then can be carried along by closed ventilation systems and even by people's shoes or clothing.

Remediation of a mold problem can displace residents of a household for months at a time, adding emotional tolls to the physical and economic impact of such an event. Work within the structure could range anywhere from the simple replacement of carpet to the complete removal of entire walls.

Furthering the dilemma, reported problems of toxic mold are increasing quickly and remediation companies are springing up to handle consumer requests, yet there are no legal guidelines for such companies to follow.

The Texas Department of Health (TDH) provides information on remediation through its Web site, along with the disclaimer that listed companies can be neither verified nor endorsed. At the request of TDI Commissioner Jose Montemayor, the Attorney General's Office is investigating possible price gouging by some businesses that provide mold remediation.

Targets everywhere
The Texas Gulf Coast, East Texas and Central Texas are all conducive to the growth of mold. But mold does not limit itself to geographic or economic boundaries.

Hill Elementary School in Austin was closed for mold remediation in March 2000. Teachers had complained of suspect air quality since the beginning of the school year in 1999. The Austin Independent School District spent about $5 million repairing the mold problem at Hill Elementary before it re-opened.

At least 19 families were temporarily displaced in Lubbock due to mold problems, and mold was also found in the county sheriff's office in April 2001. Some of the home repair bills in Lubbock were as high as $58,000.

Rowlett, Texas, is located just east of Dallas. The town's 18-year-old central fire station had to be closed following the discovery of a mold problem, possibly resulting from a history of roof leaks at the facility. The cleanup and repairs took almost two months and cost nearly $75,000, and firefighters were forced to abandon the station dormitory and stay in an adjacent construction trailer. Larry Wright, fire chief for Rowlett Fire and Rescue, says when signs of mold showed up at some of the city's fire stations he suggested immediate testing.

"The firefighters were very cooperative and understood the necessity for the inconvenience," says Wright. "We had no related illnesses from the mold in the station. I think that our proactive response to this issue was the key to mitigating it without incident. We have visually examined our other fire stations and have found no evidence of mold that would lead to a suspicion of stachybotrys."

Insurance woes
Several Texas companies stopped offering comprehensive homeowners policies to new customers following a June, 2001 verdict in a Travis County court case. In that suit, a Dripping Springs family was awarded $32 million after claiming a company's delay in expediting repairs from a water leak led to the spread of toxic mold through their 22-room home.

Four companies--Farmers, State Farm, Allstate and Safeco--stopped selling new property insurance policies in Texas following the release of a TDI proposal to cap losses for mold damage at $5,000. Those four companies are responsible for more than half of the homeowners policies in Texas. The cutoff in the sale of property insurance also slowed home sales because prospective buyers could not obtain the necessary insurance.

In November 2001, Farmers announced it would no longer renew homeowners policies that provide what the company refers to as "coverage on an all-risk basis." Homeowners insurance policies would still be offered, but on a named-perils basis with limited coverage for water damage.

According to Farmers Insurance, the company handled 12 mold-related claims in 1999. That number grew to 499, in 2000 and through September 2001 it had received 8,000 claims for mold, about 1,500 in September alone.

"Farmers wants to provide a broad homeowners policy to the insurance market in Texas, but we must address the severe loss situation we are facing in a fashion which protects the financial stability of our company," says John Hageman, executive director of Farmers Insurance of Texas. "Farmers cannot ignore the losses it has suffered, and therefore decided we could no longer renew the so-called "all-risk" policy. We must limit our exposure from foundation, water and mold claims."

In late November, Montemayor rejected the proposed $5,000 cap, and revised the state's policy on mold coverage in insurance policies. The revision removed the cost of testing, treating, containing or disposing of mold that had spread beyond the area of initial damage. Coverage is included for damage resulting from a leak, an overflow or a sudden water discharge that is accidental.

"It gives Texas homeowners basic protection plus the ability to purchase additional coverage if they so choose," said Montemayor. "This decision protects consumer choice and insurance availability, and addresses insurance cost drivers to help keep policies affordable."

Montemayor has indicated he will present an extensive package of recommendations to the 2003 Legislature regarding the mold-related problems facing insurers in Texas--problems that are only likely to grow.

Diane Thomas and
Clint Shields