Proposed Rules on Mold Assessment Cause Concern
Two rules proposed by the Department of Business and Professional Regulation are prompting concerns among property insurers over their potential impact on water damage claims. One of the most prevalent questions in the property insurance arena current is whether insurance rates are going down commensurate with reductions in reinsurance prices in recent years. Declining reinsurance costs certainly have helped reduce premiums, but these reductions are offset to some degree by other market forces. One of these forces has been the substantial number of water damage claims that property insurers face.
The Department of Business and Professional Regulation has proposed administrative rule 61-31.701 “Minimum Standards and Practices for Mold Assessors” and rule 61-31.702 “Minimum Standards and Practices for Mold Remediators.” The rules seem innocuous enough on the surface. As their names suggest, the rules would establish standards to be followed in the evaluating the presence of mold and in remedying a mold condition. The concern arises, however, in how the proposed rules would relate to water damage claims. If the new standards apply to water damage claims that currently are not subject to mold assessment and remediation procedures, the cost of claims will go up. Considering the prevalence of water damage claims, this could cause a significant increase in insurers’ non-hurricane losses. Ultimately, the increased costs would be reflected in insurers’ rate bases.
From an insurance perspective, the key issue is to ensure that meritorious standards for mold remediation and assessment are followed for claims that warrant that evaluation, but not to incur the added costs when the nature or magnitude of a reported water loss does not warrant the evaluation. Assuming a hearing is requested on the proposed rules, the department will hold a public hearing to allow interested parties to discuss the rules.