Texas homeowners are really starting to feel the squeeze now that Allstate and SAFECO have joined State Farm Lloyds and Farmers Insurance Group in a moratorium on new home insurance policies.

"There is now an availability problem," says Rod Bordelon, executive director of the Texas Office of Public Insurance Counsel. "I believe it will be short-lived and insurers will come back to the market once the commissioner has promulgated new regulations."

For insurers, policyholders, "remediation experts," and attorneys, it's a portentous four-letter word -- mold.

There are few federal or state guidelines defining good mold from potentially hazardous mold. There are no government regulations at any level stipulating how alleged mold damage should be handled.

With a cascade of conflicting information about the health effects of mold, an unregulated industry -- "mold remediation" -- has been spawned. Now, Texas is attempting to gain a grasp on the mold dilemma as two of its largest home insurance corporations, Allstate and SAFECO have left the industry.

Insurers and the construction industry, facing a Pandora's box of mold-related litigation, are justifiably concerned about their potential liability, especially when much of the science regarding the health effects of mold and the credentials of "remediators" who assess and address mold damage are in dispute.

Many insurance companies fear compensating policyholders for mold damage will only open the floodgates to more claims which, in volume, cost, and legal ramifications, will rival if not exceed more than a quarter-century of asbestos-related litigation.

The Texas legislature and state Department of Insurance have struggled to create guidelines to address the widespread problem of mold as homeowners insurance rates continue to rise. The Texas Legislature is considering several other bills relating to mold issues from the insurance perspective. H.B. 113 and H.B. 123 require that adjusters who handle claims involving water or mold damage successfully complete a specialized training program proscribed by the Texas Department of Insurance. H.B. 113 contains many other provisions regarding residential property insurance, while H.B. 123 speaks only to adjuster training. S.B. 127 seeks to induce the insurance companies to provide more efficient and prompt handling and processing of water damage claims under residential homeowners policies, including claims that may include mold losses, by outlining procedures for handling such claims. The bill requires insurance companies to address water damage claims within 24 hours by providing the homeowner with advice about mold prevention and qualified specialists to assist in remediation efforts.

Florida hurricanes left mold damage in their wake

Florida policyholders, like those in Texas, are caught in the middle. Florida policyholders whose homes and businesses have been damaged by a succession of hurricanes are left to pick up the pieces of shattered homes, but often are also dealing with mold damage.

A state senator will introduce legislation in Tallahassee this winter that, if passed, will make Florida one of the nation's first states to regulate the mold remediation industry and establish a reliable baseline for insurers and policyholders.

"What we have is an unbelievable mess," Sen. Mike Bennett, R-Brandenton, said. "We have too many people holding themselves out as mold experts. They don't know any more about mold than you and I do."

Bennett sponsored a bill last year that outlined uniform standards, training and certifications for mold remediators, but it never made it beyond committee level.

However, with Florida reeling from the effects of four hurricanes, a mounting backlog of insurance claims that often include disputed mold-damage assessments is stressing the necessity of a common criterion applicable to all companies and individuals who offer mold-remediation services.

"It's badly needed, very badly needed," said H. Darryl Miller an environmental engineer and microbiologist with HDM Co. in Punta Gorda Isles.

"I'm running into more and more companies becoming involved in mold remediation," he continued. "There is a question whether they have experience and are properly schooled."

The filings range from total exclusions to coverage at a capped amount, such as $5,000 to $10,000, when mold results from sudden and accidental water damage.

"Maybe there should be" caps on mold-damage claims, Bennett said. "The problem is, we don't know because we don't have any experts in the field."

California's mold experience similar

In California, the state legislature passed the Toxic Mold Protection Act of 2001. The act required the state's health department to establish permissible exposure levels for mold and make recommendations on standards, which are still being formulated.

The Texas insurance industry has been in chaos since a family was awarded $32 million because mold, created by a leaky pipe, forced them out of their home.

Many insurers stopped writing policies that provide coverage for water-related damage in Texas. Others issued moratoriums on writing new homeowners policies and dramatically increased premiums statewide.

Mold claims are more frequent in Texas than Florida because the state makes insurers pay for water damage caused by maintenance problems. However, the state allows insurers to cap damages at $5,000.

In Florida, insurers pay to remove mold if spores are created by "a covered peril," such as a broken pipe or burst dishwasher hose. If caused by a maintenance problem such as a leaky roof, insurers don't pay.

"Mold wasn't a problem in Texas and California until there were several multimillion-dollar lawsuits," said FIC Vice President Sam Miller in the group's white paper report on mold. "If it becomes a covered peril, the rates are going to go crazy."