Alabama, one of several states grappling with the problem of toxic mold, has approved a home insurance policy that will allow insurers to cap claims payments for toxic mold damage.

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The Alabama Department of Insurance has approved an Insurance Services Office Inc. (ISO) filing of a standard home insurance policy endorsement that limits the amount an insurer pays for property damage and liability claims related to fungi, wet or dry rot, and bacterial damage.

The ISO endorsement allows homeowners to choose limits of $10,000, $25,000, or $50,000 per year for mold-related property damage and liability coverage limits of either $50,000 or $100,000.

The ISO has filed its mold endorsement with insurance regulators in all 50 states, and so far 21 states have approved its use in the wake of high-profile toxic mold cases in Texas. Ever since June 2001 when a jury awarded a Texas family $32 million in a highly publicized toxic mold lawsuit against Farmers Insurance Group, the Texas home insurance market has been in upheaval. See Killer mold is nothing to sneeze at.