Post Number: 336
|Posted on Tuesday, June 11, 2002 - 9:17 am: |
Here is an email which I received this morning from a cat adjuster who wishes to remain anonymous with their thoughts after reading the FWUA "Mold Strategy."
What this proposal is getting down to is that FWUA wants to take a hands off approach to the mold issue until they can get time to deny it in house. The field adjuster needs to mail or fax a non waiver and reservation of rights to the insured before the appointment for inspection is even made not to protect the FWUA but to protect his E/O carrier. If it takes 30 days to do an inspectin in a Cat 4 or 5 hurricane and the mold is growing like crazy because the roof is off the house and no contractors available, I can see the FWUA going to the adjuster for the remedy. The fact that every adjuster is going to carry $1,000,000 in E/O is a statement that the Adjuster is going to become the insurer of last resort not the wind pool.
Just my thoughts.
Anonymous to Protect the Cat Adjuster
Post Number: 335
|Posted on Tuesday, June 11, 2002 - 9:13 am: |
Posted herein is a copy of the FWUA "Mold Strategy" which I received yesterday from the Public Affairs Manager of FWUA. This vital information is posted for every adjuster's reading, contemplation, and protection, as well as any comments from CADO readers.
CLAIMS DEPARTMENT P R O P O S A L
For the Handling of
Presented: August 21, 2001
PROPOSAL FOR THE HANDLING OF MOLD CLAIMS
Mold/Fungi claims have become extremely prevalent throughout the country in recent years. The development of mold/fungi can present a significant risk to an insured if the same is not appropriately detected and removed. However, and at this time, the FWUA policy specifically excludes coverage for the development and removal of mold/fungi. Courts in other states have held similar exclusions ambiguous even though most people’s reading of these exclusions are straight forward. Several insurance companies are considering changing their stance with respect to the interpretation of the mold exclusions within their policies. In this regard, the Claims Department believes that FWUA would be better able to serve the interests of the insured by examining and reapplying certain procedures throughout the claim handling process. We have listed below several of these considerations for your review. In making these recommendations, we still believe that mold/fungi is specifically excluded under the terms of the current policy, but realize that the Courts of Appeal may well view these issues differently.
1. Independent Adjusters (IA) and their Qualifications
At this point, FWUA requires that each IA company provide proof of their licensure qualifications, attend certain certification seminars and pass a written examination provided by FWUA. FWUA also requires that each IA company obtain and have in full force and effect an E/O policy as well as general liability policies of insurance. However, FWUA does not currently require any minimum levels of coverage or restrict the amount of deductible carried.
We would suggest that FWUA enter into written contracts or Memorandums of Understanding with the IA companies to better memorialize the requirements listed above as well as adding certain other requirements as listed below.
First, the written contract should contain an indemnity, hold harmless and duty to defend clauses which would require IA’s to provide these protections to the FWUA should an adjuster make a mistake in the adjustment of a claim, which injures the insured or another party. In this regard, and to the extent that the IA or adjusting company fails to properly detect the presence of mold/fungi during the course of an inspection, the initial layer of liability would fall upon the entity responsible for the mistake.
Second, and to ensure the adequate protection of FWUA and its insureds, we should require minimum/mandatory levels of insurance within the E/O and general liability policies carried by the IA companies. At this time, we believe that a policy limit of $1,000,000.00 would provide the appropriate level of protection. Generally, a deductible of $10,000.00 would be appropriate for such a policy.
Lastly, we believe that each company should provide some training regarding the detection of mold. The current adjusting guidelines require that adjusters obtain the appropriate certifications, but do not require any specialized training with regard to mold/fungi.
2. Handling of Mold/Fungi Claims
Despite the fact that the current policy of insurance does not provide coverage for mold/fungi, we believe that FWUA should develop a specialized system for the handling of claims when the same has been detected. Based upon our research, it is clear that several other insurance companies have developed new guidelines with respect to the handling of mold claims. As such, we believe it is incumbent upon FWUA to make certain changes within its claims handling process to protect the company and the insureds.
First, a claims adjuster should become intimately familiar with the situations which are more conducive to the development of mold/fungi. If the adjuster identifies any situation which is likely to lead to the development of mold/fungi (or if the development has already begun), FWUA should be immediately placed on notice of this potential development. This further stresses the importance of ensuring that IA companies are required to participate in or conduct mold/fungi seminars.
From that point forward, FWUA should issue a Reservation of Rights (ROR) letter with respect to the coverage language contained within the subject policy. The letter should place the insured on notice with respect to the presence, potential development and coverage for mold/fungi within the subject property.
The letter should also provide the insured specific instructions with respect to the appropriate actions to prevent the development of mold/fungi in the future. This portion of the letter should be developed based upon the circumstances present at the location and should offer to provide monetary assistance (advance payments), if financially necessary to protect the property. For example, if the air conditioning system is not properly working in the home and several areas of carpeting have been damaged by water, the insured should be immediately notified to make every effort to dry the carpeting and provide adequate ventilation to prevent the development of mold/fungi.
After identifying a covered water damage event, the company should also consider making payments for emergency services to extract any water damage and dry the dwelling. This process will also be aided with the prompt and expeditious adjustment of wind / water claims, to the extent that the size of a storm event will allow the same to occur.
To the extent that mold/fungi has been discovered on the property, the insured should again be placed on immediate notice of this problem. The adjuster should attempt to determine if the mold/fungi developed as a result of a covered event. For example, determination should be made of whether a portion of the roof damaged by the direct force of wind allowed water to enter through that opening, causing water damage in the area were the mold developed. The adjustment should contain:
- well-documented photographs and diagrams depicting the locations and breadth of the mold/fungi;
- statements from insured and research of claims history with respect to prior claims and water damage, including homeowner and flood carriers;
- scope of damage and detailed repair estimate;
- advise insured of importance of providing protection from further harm;
- determine if ALE claim would be appropriate based upon the type and breadth of mold/fungi damage;
- determine if mold developed as a result of covered loss, only after taking each of the steps referenced above;
- contact FWUA Claims Department immediately so that the appropriate experts can be retained for this claim, if appropriate;
- determine if FWUA would agree to waive any coverage defenses in return for complete general release and offer of payment to remediate and repair.
Based upon the current trend in the adjustment of claims, it appears that more and more insurance companies are modifying their positions with respect to the adjustment and coverage of mold related claims. In addition, FWUA staff remains abreast of ISO announcements and bulletins on this matter. Staff anticipates ISO may implement by announcement in December of this year, HO 2000 policy changes. These HO 2000 changes may more explicitly express mold and fungi are not covered. Additionally, FWUA is aware that ISO is studying the mold issue and may seek changes to provide some form of coverage by the end of September of this year. This issue would be provided by endorsement to the ISO residential and/or commercial policies. These types of changes may also result in a loss cost impact, which would be referred to the FWUA Actuary Committee for consideration and recommendation. However, and until such time that the FWUA policy has been amended, we believe that the foregoing measures will best protect the company and its insureds from proliferated claims for damages to property as a result of mold/fungi claims.