Mold Exclusions/Limitations Property & Casualty Insurance

Department of Business Regulation

1511 Pontiac Avenue

Cranston, RI 02920

Insurance Bulletin Number 2003-2

Mold Exclusions/Limitations

Property & Casualty Insurance

The Rhode Island Insurance Department has received numerous form and

rate/loss costs filings relating to mold coverage which propose to exclude, restrict

and/or limit existing property & liability coverage. The filings are intended to

control the financial impact of mold related claims on consumers, insurance

pricing and the marketplace.

The Department has approved the following ISO loss costs and related forms,

rules and endorsements filings:

H 2001 RLCFG

DP 2001 RLCFG

DL 2001 RLCFG

CF 2002 RLCMO

Non-ISO affiliated companies, as well as ISO member companies who choose to

non-adopt the ISO filings, may seek approval for independent mold related form,

rule and rate filings. These filings will be reviewed based upon the following

guidelines:

Personal Lines:

1. Except as provided in guideline #3 below, mold limitation endorsements will

provide a minimum $10,000 aggregate all damages sub-limit for Property

coverages, without a mold related increased rate modification.

2. Except as provided in guideline #3 below, mold limitations endorsements will

provide a minimum $50,000 aggregate sub-limit for Liability coverages,

without a mold related increased rate modification.

3. Any filer that proposes to deviate from the above criteria in 1-2 must

demonstrate the necessity of such deviation with sound actuarial data to

support such filing.

4. Companies are encouraged to offer insureds higher limit options for mold

related claims in conjunction with supported rates /rule filings.

for Liability coverages,

without a mold related increased rate modification.

3. Any filer that proposes to deviate from the above criteria in 1-2 must

demonstrate the necessity of such deviation with sound actuarial data to

support such filing.

4. Companies are encouraged to offer insureds higher limit options for mold

related claims in conjunction with supported rates /rule filings.

5. Mold limitation endorsements will not apply to the fire or lightning perils.

Mold losses following one of these events must be covered with no sub-limit

limitation.

6. The filing may not propose to unreasonably restrict the time period for

reporting a mold claim. All policies currently include a provision for timely

reporting of a loss. A policy may not require a mold claim to be reported

within a specified number of days following a covered loss. A policy may not

require that a loss due to mold be reported during the policy period in which

the original covered loss which gave rise to the mold claim occurs.

7. The insurer must comply with 230-RICR-20-05-14 where applicable.

All insurers, rating and advisory organizations must withdraw and refile by May

12, 2003 any previously approved forms, rates or rules that do not conform to

these guidelines. Any proposed filing relating to mold must be accompanied by a

statement sworn to by an appropriate company official stating that the filing meets

the requirements contained in this Bulletin and is in compliance with all

applicable Rhode Island insurance laws and regulations now in effect.

Commercial Lines:

1. The minimum sub-limit applicable to the limitation endorsements for

Commercial Property is $15,000 aggregate, without a mold related increased

rate modification.

2. Any filer that proposes to deviate from the above criteria must demonstrate

the necessity of such deviation with sound actuarial data to support such

filing.

3

aws and regulations now in effect.

Commercial Lines:

1. The minimum sub-limit applicable to the limitation endorsements for

Commercial Property is $15,000 aggregate, without a mold related increased

rate modification.

2. Any filer that proposes to deviate from the above criteria must demonstrate

the necessity of such deviation with sound actuarial data to support such

filing.

3. A policy may include, exclude or limit coverage for Commercial Liability

coverage arising out of mold.

4. Companies are encouraged to offer insureds higher limit options for mold

related claims in conjunction with supported rates /rule filings.

5. Mold limitation endorsements will not apply to the fire or lightning perils.

Mold losses following one of these events must continue to be covered with

no sub-limit limitation.

6. These guidelines are not applicable to any class of business that is exempt

from regulatory review under R.I. Gen. Laws §27-65-1 eq seq.

7. The filing may not propose to unreasonably restrict the time period for

reporting a mold claim. All policies currently include a provision for timely

reporting of a loss. A policy may not require a mold claim to be reported

within a specified number of days following a covered loss. A policy may not

require that a loss due to mold be reported during the policy period in which

the original covered loss which gave rise to the mold claim occurs.

8. The insurer must comply with 230-RICR-20-20-1 where applicable.

All insurers, rating and advisory organizations must withdraw and refile by May

12, 2003 any previously approved forms, rates or rules that do not conform to

these guidelines. Any proposed filing relating to mold must be accompanied by a

statement sworn to by an appropriate company official stating that the filing meets

the requirements contained in this Bulletin and is in compliance with all

applicable Rhode Island insurance laws and regulations

draw and refile by May

12, 2003 any previously approved forms, rates or rules that do not conform to

these guidelines. Any proposed filing relating to mold must be accompanied by a

statement sworn to by an appropriate company official stating that the filing meets

the requirements contained in this Bulletin and is in compliance with all

applicable Rhode Island insurance laws and regulations.

In an effort to reduce costs and lower claims associated with mold, insurers

should respond promptly to water related claims. Pursuant to R.I. Gen. Laws

§27-9.1-1 et. seq. and 230-RICR-20-40-2, insurers must adopt and implement

reasonable standards for the prompt investigation and settlement of claims arising

under its policies. Insurers should review claims handling practices in an effort to

facilitate expediency in handling claims relating to water damage to avoid

potential mold related losses. Insurers should also educate insureds on ways to

mitigate losses when water damage is reported.

Marilyn Shannon McConaghy

Director, Department of Business Regulation

Issued – January 24, 2003

Amended - March 6, 2003