The Devil Is Always In The Details

Discuss this on our boards!

The Devil Is Always In The Details
by Linda A. Prussen-Razzano, Dallas Bureau Chief

August 19, 2002

"Candidly Yours"

Linda A. Prussen-Razzano You may have heard the expression that "a lie spreads halfway around the world before the truth makes it off the front porch." Most lies, particularly election year lies, come in tidy, zinging one-liners, while the truth often takes several paragraphs to explain. As a result, what does the average voter remember? The lie, of course.

Now, I’m not calling Tony Sanchez, the Democrat candidate for Governor of Texas, a liar; but he’s sadly misinformed. Mr. Sanchez’s current attack against Governor Rick Perry over the spiraling cost of homeowners insurance is a prime example of the tidy, patently false, one-liner. I hate to be the bearer of bad tidings, Mr. Sanchez, but campaign contributions have absolutely nothing to do with the homeowners’ rates, no matter how many times you imply otherwise.

So what does?

First, insurance policies regularly contain exclusionary language to protect carriers from paying for acts of war, malicious intent, and other potentially industry-crippling liabilities. Usually, insurance carriers write these exclusions in the most expansive language possible to cover every conceivable contingency. Between 1998 and 2000, the Louisiana State Supreme Court issued two separate decisions that hammered the insurance industry and exposed them to innumerable lawsuits. Specifically, Doerr et. al vs. Mobil Oil Corporation (No. 00-CC-0947) and Ducote vs. Koch (98-C-0942) found that because the exclusion language was too general, it worked against the insurance company. Both of these cases dealt with exposure to toxic substances.

While the insurance industry braced itself for the onslaught and sent underwriters scurrying to examine policies, the trial lawyers and toxicologists braced themselves for the victims, and lawsuits, to come.

Second, Texas, in comparison to most other states, has a higher rate of black mold. Many speculate why, but having seen my house being built from scratch, I can offer a few personal observations. The heavy clay texture of our soil is drastically different from the loose, grainy dirt in other areas; hence, foundations are primarily pier and beam or concrete slabs. The water and utility pipes are encased directly into or under the foundation. When the clay shifts, as it eventually does, pipe ruptures may remain undetected for a significant period of time.

Further, the paper-to-wood composition is noticeably higher in Texas. The vast majority of Texas homes are not meant to withstand sustained freezing temperatures or many inches of snow on the roof; they are designed to expel heat. This lighter construction makes them more affordable, comfortable in the oppressively hot summer months, but may also contribute to the rise in black mold.

Third, according to my sources in the industry, carriers are receiving between 3 to 5 black mold claims each per week, with an average settlement amount of $70,000. Let’s do the math, shall we? On the low side, that amounts to approximately $11 million, every year, per carrier, in unanticipated claims. In 2001 alone, Texas carriers estimated they lost $780 million in mold and water claims. Several insurance carriers stopped writing new policies because their losses were "staggering." For every $100 in premiums, they were paying $113 in claims.

Fourth, carriers are being punished severely by juries if they attempt to deny a black mold claim. Recent awards from other parts of the country top $3,000,000 for a single homeowner.

What are the insurance carriers to do? A number of them have already downsized, cut back on coverage, offered alternative policies, merged, etc. The last thing to do was raise rates. It came as no surprise to me when my homeowner’s insurance nearly doubled this year, even though I didn’t have a single claim against it.

When the Texas Department of Insurance floated a trial balloon last year about restricting settlement amounts for black mold claims and allowing carriers to offer cheaper policies that specifically excluded black mold, several "watch dog" groups cried foul. Instead of addressing the problem last year, it spilled over to this year, with more claims, as meetings were held to rehash the issue.

Contrary to Mr. Sanchez’s claim, Governor Perry did not have direct control over the weather, the soil conditions, the Louisiana State Supreme Court, the structure of homes, the condition of hidden pipes, panicked homeowners, evidence indicating potential insurance fraud, the lack of solid industry mold standards, conflicting research on mold, or the trial lawyers. All of these contributed to the black mold syndrome seizing Texas, culminating in massive payouts to scrub houses and restore buildings. Further, all of them were pre-existing conditions to Mr. Perry’s appointment as Governor.

If Mr. Sanchez actually believes Governor Perry did have the ability to control all of these things, he should be getting down on his knees in prayer. Only God Almighty had the power to control part of that list, and it’s never a wise choice to run against God. ***

The author spent several years working as a Research Associate for an electrical engineering consulting firm, assisting adjusters, independent adjusters, and law firms on electronic equipment claims. She now works for a non-profit association in an unrelated field.

Photo of Linda Prussen-Razzano courtesy of staff files