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| | 1/5/2009 9:28:57 PM |
July 19, 2002 - A Minnesota bulletin limiting insurers' ability to exclude coverage for mold loss or damage has been rescinded by the state insurance commissioner.
Bulletin 2002-3, which restricted an insurer's ability to exclude coverage for loss or damage caused by mold, was issued in March and provided guidelines for property/casualty companies for rates and policy provisions regarding mold.
Industry trade groups filed a petition July 5, asking the Office of Administrative Hearings to have the bulletin classified as an "unadopted rule," saying the Administrative Procedures Act hadn't been followed (BestWire, July 11, 2002).
"Apparently there was some confusion, and that is certainly not what we wanted," Minnesota Commerce Commissioner Jim Bernstein said in a statement. "Therefore, after review by department staff, I have decided to withdraw Bulletin 2002-3."
"There were indications from the department that they were going to begin enforcement on the bulletin and they had no plans for public hearings," Bill Schroeder, vice president of the Alliance of American Insurers' Midwest region, told BestWire. "What the industry did was make sure we were protecting our customers and make sure the commissioner followed the administrative procedures act."
"The bulletin may be gone, but our legal responsibility to consumers remains intact," Bernstein said. "Consumers should know that under no circumstance will we ever approve a reduction in current coverage unless the insurance company either lowers its rates, or shows the department that the change is necessary because the coverage has cost the company significantly more than it expected when it set its rates."
In conversations with insurance companies, not one has provided any data that would indicate that mold has become a Minnesota problem, with some insurers not even keeping track of mold claims, Bernstein said. With huge increases in Minnesota homeowners insurance rates, consumers shouldn't be expected to swallow a reduction in coverage without some solid reason, he said.
This includes mold damage caused by any peril currently covered by most homeowners policies, Bernstein said.
The department hadn't yet begun enforcing the bulletin, but it could have become part of a market conduct review or become part of filings, Schroeder said. The Administrative Procedures Act sets forth specific procedures to be followed before a rule takes effect, and those procedures weren't being followed, he said. If the department wants to promulgate a rule, it should go through the procedures and let the public and the industry have input. he said.
Any filings for changes in homeowners rates or coverage are reviewed on a case-by-case basis, Bruce Gordon, a spokesman for the department, told BestWire. If companies provide documentation to back up their requests, they are given appropriate consideration, he said.
What the commerce department intended to do in the bulletin was to advise the insurance industry that "here is the position we have taken on mold" and to put in writing some of the conversations with companies in the state, Bernstein said when the trade groups filed their request with the Office of Administrative Hearings. He said the trade groups construed that action as rule making. The department issues bulletins because that's what the industry wants, Bernstein said. When insurance companies receive a bulletin, it's common for the department to receive calls asking for additional clarification, and if there are questions or additional clarification needed, the department can make amendments, he said (BestWire, July 11, 2002).
"The insurance industry claims that the sky is falling and it's covered with mold," Bernstein said. "I'm not buying it. I've seen no facts to back it up."
The top five writers of homeowners coverage in Minnesota in 2001, based on A.M. Best state/line information, were State Farm Group, with a 22% market share; American Family Insurance Group, with a 15.7% share; Zurich/Farmers Group, with a 14.5% share; Allstate Insurance Group, with a 4.2% share, and MetLife Auto & Home Group, with a 3.5% share.
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