Plaintiff’s Bar Tracking Mold

Depending on whom you talk to, mold is either the end of the insurance industry or just a lot of media hype.

This issue focuses on the homeowners market and it’s current mold dilemma with three features. “Mold: California’s Ticking Time Bomb?” by Dave Thomas, our senior writer, explores the current market condition and what impact mold is having on it. Ken Nitz, a broker with Swett & Crawford, discusses the challenges facing homeowners, agents and underwriters in the California market. Finally, Nicole Mahrt, public affairs director, Western region, of the AIA, examines the need for a sound scientific basis for toxic mold measurement and remediation.

Whether mold is real or not, one thing is for sure: a deluge of lawsuits is flooding the courts in Texas and California.

The mold litigation frequency appears to track the lawyer population. Mold lawsuits are the next installment of the Lawyers Full Employment Act. If you want to know what the next insurance industry segment destined for meltdown is, just get a copy of the American Bar Association Journal and look at the ads for seminars. You will see advertisements saying something like, ” Mold Class Actions Made Simple” or “How To Make Big Money In Mold Cases.” Seminars are big business in the legal profession and many lawyers are anxious to pass along their expertise at suing insurance companies to their brethren—for a price. Today it’s mold, last year it was convalescent hospitals.

The industry then reacts by raising premiums, limiting coverage and finally leaving the market entirely. That’s when the politicians get into the act and go after the industry for being so arbitrary and capricious. It’s a bit like kids in a classroom. One hits another, that kid yells and gets sent to the principal’s office for disturbing the class. The principal puts the kid on probation for being a troublemaker and thus shows his constituents that he is really taking dramatic action.

Politicians are caught between the three main pressure groups of insurance legislation: the insurance industry, unions and the plaintiff’s bar.

They can’t afford to give up the donations from any one group. So usually they do nothing. Senate Bill 1763, Deborah Ortiz (D-Sacramento), is a good example. The Ortiz bill essentially says, ‘Ok, let’s pass a law telling the insurance companies they can’t exclude mold coverage,’ hardly a sophisticated reaction to the problem. It’s not that simple, Debbie.

The answer does have to come from the legislature. But a practical, effective answer will only come from an enlightened legislature, so don’t hold your breath.

Topics California Market