When it comes to major insurance problems, Texas has two: toxic mold and unlicensed health plans.
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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.) Complaints of exorbitant home insurance rate hikes — some as high as 300 percent — are
pushing Texas consumers to their financial limits.
Texas
is a hotbed for mold claims because state insurance law has had a
liberal view of mold damage coverage that is the direct result of a
"covered peril," such as a burst water pipe. This is not true of most
other states. A standard home insurance policy typically does not cover
losses caused by rust, rot, mold, or other fungi. Most insurers
consider mold a "home maintenance" problem, not an insurance claim. Texas home insurance policies have historically offered
more liberal coverage because the state "gets a little bit of
everything" when it comes to severe weather that can damage homes,
according to Rod Bordelon, executive director of the Office of Public
Insurance Counsel. In addition to the occasional ice or snowstorm,
Bordelon says, "Texas has hail, tornadoes, severe thunderstorms,
hurricanes, and high winds. Consumers in Texas have come to expect a
certain level of coverage."
This liberal coverage has come
at a high price. Because state law exempts insurers now writing 95
percent of the home insurance sold in Texas from any kind of rate
regulation, prices for home insurance have soared and home insurers
have either reduced or cut out their coverage of mold damage
altogether. Read Why most Texas home insurers can charge whatever they like.
Mold
is not the state's only insidious insurance problem. Three unlicensed
health insurers have been ordered to stop selling health insurance in
Texas in the past 12 months. American Benefit Plans, Employers Mutual
LLC, and SAI Plus all drew sanctions from the Texas Department of
Insurance, as well as the ire of Texas Insurance Commissioner Jose
Montemayor. "These plans bypass the normal licensing process for a
reason and it's not a good one," says Montemayor. "Invariably,
unlicensed health plans stop paying claims and leave their members with
stacks of unpaid medical bills." See How to spot an unlicensed insurer.
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