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               THE ADVOCATE            (September, 2004)
                                                                                                        INSIDE THIS ISSUE:

                                                                                                     Save Big Bucks on        1
New Consumer-Friendly Insurance Products Hit Market.                                                 Insurance

         GREAT Prices on GREAT Coverage for POA Members.
                                                                                                     FEMA warns of mold       1

                                  ourselves on the same page       thorough medical screenings
                                  as nearly all Democratic         for artery/stroke, aortic aneu-   Neuro-damage             2
                                  candidates, legislators and      rysm, osteoporosis and pe-
                                  regulators. Frankly, our         ripheral arterial disease (all
                                                                                                     Linked to Mold
                                  members are sick and tired       the things that are above and
                                  of being abused with high        beyond normal screenings)         Double Whammy on         2
                                  rates, slashed coverage,         we are introducing dis-           Repair/Replacement
                                  lowballing, and wrongful         counted medical screenings
                                  denials of claims, not to men-   that could potentially save
                                  tion CLUE reporting , espe-      your life while saving you        Opinion: Political      2-3
Pigs have flown!!!!!              cially reporting of non-         hundreds of dollars. (see         Round-up
There’s now actually    quality   covered claims.                  page 4 for details)
insurance that pays.                Plus, by teaming up with         POA will also be sponsor-       Claims Form That         3
                                  another group that offers        ing, in the near future, long     Gets Claims Paid!
POA, along with various           nearly 55 million potential      term care. That is insurance
State Democratic Parties,         policyholders, we are able to    for folks who may one day
have teamed up to sponsor         negotiate juicy deals on pre-    need long term care and           How to Pick an           4
quality insurance and health      mium insurance products.         don’t want to burden their        Agent
related products for our                                           children with the expense.
                                     We’re going to get out of
members. We are gaining                                            The product is very well          A Special Health         4
                                  the gate with some health
access to these products                                           priced and we recommend it        Alert
                                  insurance and related prod-
through Marsh, the world's                                         for those members who are
                                  ucts. We will be sponsoring
largest insurance broker.                                          40+ or those who have family
                                  an affordable health care                                          Status on Bad Faith      5
                                  plan that potentially could      members who may need
  Why did POA team up with                                         care.
the Democratic Parties? It’s      save you thousands of dol-
really quite simple. The De-      lars. Individual premiums           And, last but not least, we
                                                                                                     Chronic Illness in       6
mocrats have, historically,       range from $93—$157 per          are moving forward with
                                  month while full families pay    superior homeowners and           Water Damaged
supported consumer issues                                                                            Buildings
while the Republicans seem        between $193—$343 per            auto coverage as well. We
to always support the insur-      month. The price varies de-      are in the process of negoti-
                                                                                                     Pediatric Update:        7
ance industry and dislike         pending on the package of        ating a deal for members that
                                  coverage desired. Business       offers great coverage for the     Water Damaged
levying penalties on insurers                                                                        Buildings
for their wrong-doing. That       owners who want to provide       best price. Stay tuned for
may be a generalization but,      benefits to employees while      more on that soon.                Water Damage            8-9
sadly it is true.                 trimming costs can enjoy
                                  super deals with these health                                      Causes = Cancella-
   Since POA is a consumer        plans too.                                                         tion
advocate and not an advo-
cate for the industry, we find      For those interested in                                          Homeowners Come       10-11
                                                                                                     Up Short on Insur-
FEMA WARNS FL HURRICANE VICTIMS ABOUT MOLD                                                ance
                                                                                                     Lung Development        11
 ORLANDO, Fla. -- The Fed-        alert and is asking people           "We have nobody to help
 eral Emergency Management        suffering from mold-related      us," Mallard said. "We just       and Pollution
 Agency is reporting a sharp      problems to call the Environ-    need a general contractor
 increase in the number of        mental Protection Agency         out here so we can get            The Case that Can       12
 mold cases in Central Florida    mold hotline at (800) 438-       started on fixing our house       Change YOUR Life
 in the last several days,        4318.                            before she (mother) has to
 according to Local 6 News.                                        evacuate from the mold."
                                     Local 6 News featured
      The lack of power and                                             Allstate Insurance said      Double-Dipping        13-16
                                  one family in Seminole
 recent thunderstorm flooding                                      they can't send anyone out
                                  County whose home is filled                                        Deductibles
 are preventing many proper-                                       to the Mallard house until
                                  with mold. Pam Mallard said
 ties from drying out, which is                                    September, Local 6 News
                                  she cannot find help to clean
 causing dangerous mold to                                         reported. And FEMA said its
                                  the mold and her elderly                                           When to Test Your      Back
 grow indoors.                                                     paperwork is in the mail.
                                  mother's life is in danger                                                               Cover
     FEMA has issued a mold       because of it.


Indoor mold exposure associated with neurobehavioral and pulmonary impairment.
Kilburn KH . University of Southern California, Keck School of Medicine. MedicineScLaboratory, Alhambra, California

Recently, patients who have been ex-                was used to measure various pulmonary
posed indoors to mixed molds, spores,                                                                   exposures were associated with neuro-
                                                    volumes and flows. Neurobehavioral
and mycotoxins have reported asthma,                                                                    behavioral and pulmonary impairments
                                                    comparisons were made after individual
airway irritation and bleeding, dizziness,                                                              that likely resulted from the presence of
                                                    measurements were adjusted for age,
and impaired memory and concentra-                                                                      mycotoxins, such as trichothecenes.
                                                    educational attainment, and sex. Signifi-
tion, all of which suggest the presence of          cant differences between groups were
pulmonary and neurobehavioral prob-                                                                     Publication Types:
                                                    assessed by analysis of variance; a p
lems.                                               value of less than 0.05 was used for all
                                                    statistical tests.
                                                                                                        •     Clinical Trial
The author evaluated whether such pa-
tients had measurable pulmonary and
neurobehavioral impairments by com-
                                                    The mold-exposed group exhibited de-
                                                    creased function for balance, reaction
                                                                                                        •     Controlled Clinical Trial
paring consecutive cases in a series vs. a
referent group. Sixty-five consecutive
                                                    time, blink-reflex latency, color discrimi-
                                                    nation, visual fields, and grip, compared
                                                                                                        •     Randomized Controlled Trial
outpatients exposed to mold in their                with referents. The exposed group's
respective homes in Arizona, California,            scores were reduced for the following               PMID: 15143851
and Texas were compared with 202                    tests: digit-symbol substitution, peg
community subjects who had no known                 placement, trail making, verbal recall,
mold or chemical exposures. Balance,                and picture completion. Twenty-one of
choice reaction time, color discrimina-             26 functions tested were abnormal. Air-
tion, blink reflex, visual fields, grip,            way obstructions were found, and vital
hearing, problem-solving, verbal recall,            capacities were reduced. Mood state
perceptual motor speed, and memory                  scores and symptom frequencies were
were measured. Medical histories, mood              elevated.
states, and symptom frequencies were
recorded with checklists, and spirometry            The author concluded that indoor mold

Double Whammy on Lowball Pricing for Repairs and Replacement

Most insurers use a pricing program                 already woefully low Xactimate pricing.             distributed these memos in an attempt to
called Xactimate to arrive at their repair          In super secret memos obtained by                   “educate” adjusters about the new pric-
and/or replacement estimates. These                 POA, one “independent” adjusting com-               ing policies. The instructions to the
estimates are used as the basis from                pany, per the instructions from clients             adjusters: Use these new prices not
which payments are issued to policy-                like Travelers, reduced the estimates               other Xactimate prices.
holders. For example, if Xactimate pegs             even further by lowballing the already              That’s a double-whammy if there ever
plywood at $5 per sheet, and 5 sheets of            lowballed Xactimate prices.                         was one. And, who does this impact the
plywood are needed, then repairs are                The memos were distributed by Travel-               most? Hurricane victims in Florida.
pegged at $25.                                      ers when the insurance giant was at-                For more go to:
Insurance companies have found new                  tempting to hire adjusters to handle      
and creative (slimy) ways around the                hurricane claims in Florida. Travelers              ms_adjusters_on_xactimate_pricing.pdf

POLITICAL ROUND-UP: The Republican Insurance Scam
By Hochizen
If an insurance company promises to cover a         make it less likely that an insurance company       This is what the entire debate is about. The
loss or claim, why do the Republicans want          will have to pay money. The arbitrators will be     Democrats say that insurance companies
them to be able to break their promise? This is     hired by the insurance company....and even if       should not be able to break their promises to
the heart of the debate on the rights of patients   they are instead hired by the state, they will be   those they insure. The Republicans say they
to sue their HMOs. Presently, virtually every-      courted by the insurance companies much like        should be able to break their promises. Let us
one knows that insurance companies will, as a       the judges are nowadays. The insurance com-         examine the common Republican response to
matter of policy, deny claims or delay pay-         panies are HAPPY to pay massive sums for            this fact:
ments of claims which are valid. For the insur-     political campaigns... heck, if they give say $1
ance company, it makes all the sense in the         million to a governor, and he pushes through        1. "Well, if insurance companies have to
world. They get to keep the money, and earn         tort "reform" (which actually just means insur-     actually meet their obligations, they will
interest on it, and write policies against the      ance companies don't have to cover some             have to raise rates and millions of chil-
reserve. Maybe the claimant will die or just go     claims they did before) then they make out like     dren will be without health insurance"
away. The claims adjuster is pressured to not       bandits. Hmmm... insurance companies...
pay claims easily.                                  bandits... yeah, I can see the connection.
So the right to sue an insurance company is of      But I digress. If patients can sue the insurance
paramount importance. Without the right to          companies, the insurance companies will lose
sue, you will literally be at the mercy of the      some money because they will have to pay
insurance company to cover whatever it              claims they would otherwise refuse to pay.          Continued on page 3………………………………..
pleases. The idea of arbitration is of course to


Political Round-up continued….                                   This is an opinion piece and does not necessarily reflect the
opinion of POA. POA publishes many opinions that we find thought-provoking and give readers something to think about.

                                                to maximize their profit (and the salaries       whom are Republican).
This is the most common argument. It is         of their executives).
also utterly ridiculous. Insurance is valu-                                                      3. "Well, if we have a patient's bill of
                                                The multimillion dollar verdicts you read        rights, why not cap damages at
able only to the extent that it can be relied
                                                about are news because they are so               $500,000 to keep the juries from going
upon to cover a claim or a loss. If you have
                                                rare! For every big verdict, there are           hog wild?"
a health insurance policy that refuses to
pay for medical treatment, you are worse        literally thousands of smaller claims            Simple. In every case where the verdict
off than if you had no health insurance.        which will be thrown out or settled for a        is excessive, the insurance company has
See, you rely on the insurance in making        small sum. You do not hear about these
                                                                                                 the right to seek a decrease in the ver-
                                                claims because they are not news. Yes,
many decisions (how much cash to keep                                                            dict. The insurance company also has
                                                some lawyers will make money off of
on hand, whether or not to buy another                                                           the right of appeal to a higher court in the
                                                cases brought to force insurance compa-
policy that would cover the claim, and so                                                        event the verdict is not decreased. The
on). If you lose health insurance that does     nies to meet their obligations. Guess            caps then become relevant only in those
not cover claims, you are better off be-        what? The insurance companies will               most egregious cases where insurance
cause the insurance only provides an illu-                                                       companies have acted so horribly that a
sion of protection.                                                                              multimillion dollar verdict will be allowed
Also, if the premiums do in fact go up, then           A patient's bill of rights                to stand. Why should horrible conduct be
the "spreading of the risk," which is the                                                        protected?
philosophical basis for insurance, is merely         will cost our big campaign                  Another point to ponder: say insurance
meeting market demands. Those Republi-                                                           company liability will be capped at
can rascals do so love a free market...                  donating insurance                      $500,000. Let's say you get into a severe
except when it might make some of their                 companies and their                      accident and after surgeries, physical
donors lose money.                                                                               therapy, speech therapy, job retraining,
                                                     executives lots of money,                   and so on the bill will be in excess of $1
                                                                                                 million. Do you think your insurance
2. "The trial lawyers will make tons of                and they won't have as                    company will pay $1 million if its liability
money and the Democrats are in their                                                             is capped at $500,000? Especially when
pocket."                                                 much to give to the                     the $500,000 would have to be paid say
This argument is real fun! See, a lawyer                                                         two years from now, after a lengthy court
never awards a single dime in damages. A
                                                          Republicans' next                      battle? Trust me, they would not pay a
lawyer cannot award anything! The jury                                                           dime.
                                                    campaign if that happens."
awards money, and juries are made up of                                                          Finally, there is the REAL reason Repub-
American citizens. The Republicans and                                                           licans oppose a patient's bill of rights:
the insurance companies fear the citizen
jury, though, because in court, a multimil-     have their own lawyers too who will usu-         "A patient's bill of rights will cost our big
                                                ally make much more money than the               campaign donating insurance companies
lionaire is supposed to have the same
                                                plaintiffs lawyers.                              and their executives lots of money, and
rights as the poor person. The Republicans
                                                                                                 they won't have as much to give to the
thrive on being the ruling class; they do not   The jury system is a basic part of our
like the prospect of being subject to the                                                        Republicans' next campaign if that hap-
                                                system of government. Insurance com-
same rules as everyone else. The insur-                                                          pens."
                                                panies and Republicans hate it, because
ance companies accept trials as a part of       they do not want the average citizen to          Well at least it is the truth. You won't
doing business, but just as they are not        have any power over their conduct. That          ever hear a Republican admit it though!
subject to antitrust provisions, they like to   is why it is necessary for the Republi-
limit their liability wherever possible so as   cans to demonize lawyers (many of

Policyholder Claims Form Now Available
Adjusters have forms to fill out
when a claim is filed so, as always,                                                     useful to you because it documents what
POA evens the score and levels the                                                       the insurance company knew and when
playing field by creating our own                                                        they knew it.
claims form which should be filled                Do unto others as you
                                                                                           The “Policyholder Claim Form” is
out by the policyholder. It’s a sim-                would have them do                   available on our website at:
ple, helpful form that enables you,                                            
                                                           unto you.
the policyholder, to better organize
your claim, track it, log in informa-                  All-rightly-then.
tion and provide all such info back                                                         If you or a family member have a claim, be
to the insurance company.                                                                certain to print this form off the site. It will
   If and when the claim goes
south, this form will be extremely


HOW TO PICK AN AGENT: Get someone who will go to the mat for you
So you are in the market for insurance        Why is that important? Because if a       ble.
and you comb through the phone book         problem occurs and you are at odds            The independent agents, on the other
or consult with your                                   with the insurance company,      hand, seem far less fearful of reprisals.
neighbor who happens                                   you want your agent to be        If one carrier gets mad at them for advo-
to be an agent.                                        your advocate. If his or her     cating for the policyholder, the agent
 Not so fast!                                          income stream is contingent      can take on a competing line.
                                                       on one company, he or she is
  POA recommends                                       far less likely to go toe-to-      POA has asked a number of captive
independent agents,                                    toe with the carrier for you     agents associations to step up to the
not “captive agents”.                                  or anyone else.                  plate and serve as advocates. Thus far,
Don’t know the differ-                                                                  they have refused and cite the potential
ence? Don’t feel left                                      We see it daily. POA re-     loss of income as the reason.
                                                         ceives thousands of calls
out; few do.                                                                              Remember that when you’re shopping
                                                         each year from agents —
  A captive agent can                                    both captive and independent   for insurance. In the end, picking the
only sell one “brand”                                    agents. The captive agents     “right” agent may be more important
of insurance like State                                  typically tell us that their   than picking the right insurance com-
Farm, Allstate or                                        company is not following the   pany.
Farmers. Independent agents sell a vari-    laws governing claims handling but
ety of competing insurance products         cannot take on the insurance company
and are not beholding to any one com-       for fear of reprisal. These agents must,
pany.                                       after all, put food on their family’s ta-

                  HEALTH ALERT: Special Price for Medical Screenings

Most HMOS and health plans don't                                                        Cost? These screenings can cost more
                                            Stroke is America's third leading killer
cover medical screenings for stroke and                                                 than $1,000 in a hospital. YOU CAN
                                            and the number one cause of nursing
other critical illnesses because it costs                                               GET ALL FOUR SCREENINGS DONE
                                            home admissions. Unfortunately, half of     FOR $125; get the three vascular
them too much money. The cost is usu-       all stroke victims have no warning signs
ally the responsibility of the policy-                                                  screenings for just $99. Have your
                                            before a stroke occurs.
holder, so many are left unaware of                                                     credit card ready and call this number to
their illnesses and don't seek treatment.                                               set up the appointment with Life Line
                                            Fortunately, Life Line Screening, the       Screening: 1-800-697-9701.
                                            nation's largest provider of mobile vas-
What you don't know CAN hurt you!
                                            cular screening services can help you
POA wants you to know if you have                                                       Please take advantage of the discounts
                                            prevent a stroke in ten minutes. I did it
health problems BEFORE it's too late!                                                   POA has negotiated for you and your
                                            and even had my parents screened. It
                                                                                        loved ones!
                                            saved a life. All 4 ultrasound tests are
At a special price available to POA         quick, painless and non-invasive!
members and their families, you can be
screened for potentially life threatening
diseases like:
                                                   Half of all stroke                   Melinda Ballard
          •     Stroke                               victims have                       Policyholders of America
          •     Peripheral Arterial
                                                   no warning signs
                Disease                             before a stroke                     P.S. Just a heads up for those over 50!
                                                        occurs.                         These screenings are most beneficial for
          •     Abdominal Aortic                                                        you. Also, feel free to pass this informa-
                Aneurysm                                                                tion on to your friends and family so
          •     Osteoporosis                                                            they too can take advantage of your
                                                                                        involvement in POA.


        Bad Faith in First Party Property Claims By: Everette Lee Herndon, Jr.
                                              i.e. you can sue an insurance company
The insurance industry has recognized         for Bad Faith in some states but not in
the concept of “Bad Faith” for many           others. However, each lawsuit that goes
years and has acknowledged that an            to trial could change the state’s view on
insurance policy carries with it a cove-      Bad Faith.
nant of good faith and fair dealing.

  The Fire, Casualty & Surety Bulletins,         At heart, bad faith is the
an insurance industry publication recog-        intentional failure by an insurer
nized nationwide by insurance compa-            to perform the duty of good
nies, says that:                                faith and fair dealing implied at
                                                law. Generally, an insurer may
                                                be acting in bad faith when it
  At heart, bad faith is the intentional
                                                refuses to pay a claim and (1)
failure by an insurer to perform the duty
                                                has no reasonable basis for                     Find out where your state
of good faith and fair dealing implied at
                                                refusing to pay and has actual                  stands on bad faith:
law. Generally, an insurer may be act-                                                
                                                knowledge of that fact, or (2)
ing in bad faith when it refuses to pay a                                                       newchart.asp
                                                has intentionally failed to
claim and (1) has no reasonable basis
                                                determine whether it had a
for refusing to pay and has actual
                                                reasonable basis for so
knowledge of that fact, or (2) has inten-
tionally failed to determine whether it         refusing.
                                                                                            In Texas, the case of Universal Life
had a reasonable basis for so refusing.                                                    Ins. Co v Giles, A.W. 2nd 48 (1997)
                                                                                           refined the Texas standard to say that an
                                                                                           insurer acts in Bad Faith when it denies
   The courts in various states have rec-
                                                For a quick summary of where your          or delays payment of a claim after it
ognized the concept of a covenant of
                                              state may stand on Bad Faith as a cause      should have become reasonably clear
good faith and fair dealing between the
                                              of action, either tort or contract, check    that the claim was covered.
insurance company and the insured. A
breach of this implied covenant or duty       out the Zurich Reinsurance (now Con-
is a violation of the insurance policy        verium)            web - s i t e       a t
                                              Recovery of damages for Bad Faith
itself and of good claims handling prac-                                                   lawsuits also varies from state to state.
tices. This breach may (or may not) be        hart.asp for a chart covering the 50
                                              states. For definite information on your     Some states allow punitive damages
recognized by a state as a cause of ac-                                                    (above and beyond the policy limits),
tion entitling the insured to sue the in-     state, consult a local attorney as laws
                                                                                           while other states restrict damages to
surance company for Bad Faith.                change frequently.
                                                                                           actual policy coverage or contract dam-
  Bad Faith is more than ordinary negli-        One of the earlier cases allowing a
gence or breach of contract.                  Bad Faith claim against an insurer was
                                                                                             Check with your local attorney to
                                              the California case of Gruenberg v.
                                                                                           determine what causes of action (if any)
                                              Aetna Ins. Co., 510 P.2d 1032 (1973).
                                              In Gruenberg, the court allowed the          are allowed in your state and what types
  Mike Johnston, a trial lawyer from
                                              insured to pursue a first party Bad Faith    of damages are recoverable.
Oklahoma, has developed a list of his
"Top 40" types of acts of Bad Faith by        action when the insurer failed to deal
insurance companies. Recognition of           fairly and in good faith by refusing,
these acts or types of acts as Bad Faith      without proper cause, to compensate its
will depend on your local state court.        insured for a covered loss.
Mr. Johnston’s list can be found at:
htm                                             An Arizona court, in the case of Haw-
                                              kins v. Allstate Ins. Co., 733 P.2d 1073       Everette Lee Herndon, Jr. is a bad
                                              (1987), stated that first party Bad Faith    faith expert and authors articles in legal
  The actual implementation of the            actions are allowed if insurer intention-    and claims publications. His website is:
concept of Bad Faith varies from state        ally denied a claim without a reasonable
to state. Some states recognize Bad           basis.
Faith as either a tort or contract cause of
action (or both); others states do not -

Abstract: Changes in VEGF, MMP9 and leptin correlate with acute and chronic illness symptoms and visual contrast
sensitivity in patients from water damaged buildings: Indicators of complex physiologic disturbances in Sick Building
Syndrome Authors: Ritchie C. Shoemaker¹, Dennis House¹ ¹Center for Research on Biotoxin Associated Illnesses, Pocomoke, Md


A 5-step repetitive exposure protocol         formed consent. Exposure to tobacco        DISCUSSION:
provides a mechanism to document              smoke, IgE, pulmonary function testing
causation of illness in symptomatic           results before and after interventions
patients exposed to in door environ-          and HLA DR genotypes were recorded.        Use of symptoms, VCS, leptin, VEGF
ments of water-damaged buildings                                                         and MMP9 gives the treating physician
(WDB). By demonstrating benefits of                                                      biomarkers useful in case identification
treatment with cholestyramine (CSM)                                                      and assessment of efficacy of therapy.
of affected patients, with stability off                                                 Changes in biomarkers suggest patho-
medication away from exposure and                                                        physiologic abnormalities acquired
then documenting changes in symptoms                                                     following exposure to water damaged
and biomarkers prospectively with re-                                                    buildings. These biomarkers change
exposure, followed by correction with                                                    hyperacutely in each step, with clinical
re-treatment, we have previously shown                                                   stability in chronic conditions. The di-
that the physiologic disturbances under-           “Changes in biomarkers                rect physiologic effects of toxic ele-
lying illness in Sick Building Syndrome                                                  ments from indoor buildings can be
are identical to those of a chronic bio-
                                                   suggest pathophysiologic
                                                                                         assessed clinically and used in prospec-
toxin associated illness. We present                abnormalities acquired               tive studies that can assign causation. A
data here to support use of leptin, vascu-                                               double blinded, placebo controlled
lar endothelial growth factor (VEGF)             following exposure to water             clinical trial designed to further define
and matrix metalloproteinase-9                                                           these results is underway.
(MMP9) as biochemical markers for                    damaged buildings.”
both acute and chronic illness adjunc-
tive to recording of symptoms and vis-
ual contrast sensitivity (VCS). We again
present data on unique genotypes of
HLA DR, analyzed by PCR, previously
reported to be associated with a genetic
basis of susceptibility to neurotoxic                                                             “Each affected
illness caused by exposure to resident
indoor toxigenic fungi. The unique
grouping of symptoms found in these           RESULTS:
                                                                                                  patient showed
patients, including fatigue, neurologic,
respiratory and rheumatologic symp-                                                          clinical improvement
toms match changes of biomarkers with         Each affected patient showed clinical
treatment and re-exposure.                    improvement following treatment with
                                              CSM and was stable off drug, away
                                                                                              following treatment
                                              from exposure to the known affected
METHODS:                                      building. Each patient relapsed within 3         with CSM and was
                                              days of re-exposure to the contaminated
26 consecutive patients exposed to
                                              building off CSM, with improvement             stable off drug, away
                                              following re-treatment. Change in clini-
buildings with growth of identified           cal course was paralleled by symptoms,
toxigenic fungi attending a private           VCS, leptin, MMP9 and VEGF. Im-
                                                                                              from exposure to the
clinic for diagnosis and treatment of         provement in PFT testing was noted.
chronic fatiguing illness refractory to all   HLA DR genotypes previously noted to                known affected
prior modalities of therapy agreed to         confer susceptibility were again demon-
participate in an IRB approved, multiple      strated. Tobacco smoke was not a rele-                 building.”
intervention, longitudinal clinical treat-    vant clinical parameter. Symptom ros-
ment trial using CSM to assess the ef-        ters showed multiple organ system ill-
fect of exposure, treatment, re-exposure      ness, with fatigue, chronic pain and
and re-treatment on multiple simultane-       cognitive problems most commonly
ously measured clinical and laboratory        identified.
parameters. Each patient provided in-


       Identifying markers for chronic illness in pediatric patients exposed to water damaged buildings:
Linkage disequilibrium of HLA DR, MSH, MMP9 and autoantibodies Authors: Ritchie C. Shoemaker¹, Courtney Holt¹, Dennis House¹, HK
Hudnell² ¹Center for Research on Biotoxin Associated Illnesses, Pocomoke, Md; ²US EPA NHEERL, Research Triangle Park, NC


                                                              We have seen an increased inci-                              Control populations have mark-
No studies have previously iden-                                                                                           edly different HLA DR genotype
tified biomarkers adequate to                                 dence of antibodies to gliadin,
                                                              cardiolipin and myelin basic pro-                            distributions from cases, with
create a case definition of illness                                                                                        relative risks for illness identi-
associated with exposure to wa-                               tein in adults with chronic illness
                                                              following exposure to WDB.                                   fied for the same genotypes as
ter damaged buildings (WDB) in                                                                                             reported previously in adults.
pediatric patients.      Previous                             Here we present data supporting
                                                              a pediatric case definition using                            Affected patients had lower lev-
work from this facility has pre-                                                                                           els of MSH and MMP9 than
sented a case definition of illness                           multiple biomarkers from 66
                                                              patients with illness following                              controls. Marked increase in
in adults that includes exposure,                                                                                          incidence of antibodies to an-
symptoms and absence of con-                                  exposure to WDB.
                                                                                                                           tigliadin IgG, anticardiolipin
                                                                                                                           IgM and myelin basic protein
          Specific genetic,                                   Methods:                                                     antibodies was found in affected
                                                                                                                           patients compared to controls.
          physiologic and                                                                                                  Taken together, the combination
                                                              Patients under age 19 coming for                             of potential for exposure, ab-
         neurotoxicologic                                     treatment of chronic illness at a                            sence of confounding diagnoses,
                                                              specialized medical clinic pro-                              presence of distinctive groupings
            factors can be
                                                              vided informed consent for                                   of symptoms, including fatigue
    identified in pediatric                                   evaluation and blood testing                                 and cognitive problems identi-
                                                              prior to initiation of definitive                            fied over 85% of cases. Adding
     patients that identify                                   therapy for presumptive chronic,                             HLA DR, MSH deficiency,
                                                              biotoxin associated illness.                                 AGA-IgG and ACLA-IgM in-
   cases of chronic illness                                   Symptoms were recorded and                                   creased the case detection rate to
                                                              blood was sent to national high                              100%. For patients with MMP9
        due to exposure to                                    complexity labs for analysis of                              over 400, HLA DR and MSH
          water damaged                                       HLA DR genotype, MSH,                                        deficiency alone identified all
                                                              MMP9, anticardiolipins                                       cases.
                buildings.                                    (ACLA), antigliadins (AGA)
                                                              and myelin basic protein (MBP)
                                                              antibodies. Lab parameters were                               Conclusion: Specific genetic,
founders, together with bio-                                  compared to in-house registries                              physiologic and neurotoxi-
markers HLA DR genotypes of                                   of control patients and published                            cologic factors can be identified
the immune response genes; de-                                registries. Following treatment                              in pediatric patients that identify
ficiency of the hypothalamic                                  and confirmation of diagnosis,                               cases of chronic illness due to
immunomodulatory hormone,                                     cases were then analyzed by bio-                             exposure to WDB. Physiologic
alpha melanocyte stimulating                                  marker to identify unique diag-                              mechanisms associated with in-
hormone (MSH); excess pro-                                    nostic features.                                             creased production of particular
inflammatory cytokine re-                                                                                                  autoantibodies will require fur-
sponses, represented by matrix                                                                                             ther study.
metalloproteinase-9 (MMP9),
deficits in visual contrast and
pituitary hormone dysregulation.


Water-damage claims cause a flood of canceled coverage                                                         By: Carol Lloyd, Inman

                                              upper unit, which seemed to have           quired three mold inspections, the cou-
" ome see what an uninsurable prop-           leaked water into the bedroom of their     ple found a furnished apartment for
erty looks like," Mark Christiansen           daughter, Chloe, below. But when water     $4,000, to be paid for by the insurance
laughed. The 37-year-old graphic artist       was sheeting down the walls again after    company.
and his wife, Amy Lodato, were in a           a storm, the couple filed a claim with     Again, Christiansen and Lodato didn't
mad scramble to get insurance for their       their insurance company and called the     fully understand how this kind of expen-
1940 Russo-style duplex in San Fran-          roofing company to return to redo the
                                                                                         diture might damage their ability to get
cisco's Lone Mountain neighborhood.           work, which carried a five-year war-
                                                                                         insurance in the future. But, looking
                                              ranty.                                     back, Christiansen now realizes the
Uninsurable? Images run rampant
through my mind: A mildewed shack,            Soon after, their upstairs tenant fell     insurance company must have been
teeming with rats, perched atop a cliff.      asleep with the shower running, flood-     racking up the bills. The construction
A burned-out hovel inhabited by squat-        ing the bathroom and saturating some       company had turned the apartment into
ters on the edge of a brush-fire zone. A      of the walls downstairs. The next day, a   a hazmat site, sealing the back of the
straw-bale house in a flood zone.             claims adjuster came to check on the       house in plastic, creating a "clean room"
                                              work that was already being done on        for workers to change in and out of
What I don't imagine is the property I        the initial leak and ended up writing up   "contaminated" clothes, running nega-
saw upon arriving at Christiansen and         a second claim for the new damage. He      tive air machines 24 hours a day. In
Lodato's home one blustery afternoon:         also asked Christiansen and Lodato to      retrospect, the couple seem to think
well-maintained old construction and          have part of a wall removed to see how     many of the precautions were overkill,
finely crafted remodeled details, gleam-      extensive the damage was; the owners       to protect the insurer's liability. "It was
ing hardwood floors, new paint and a          found little dots of mildew on the wood.   insane," Lodato said. "They were all
pristine backyard. As carefully groomed                                                  wearing hazmat suits and using [high-
as a Pacific Heights poodle, this house       Had Christiansen and Lodato known
                                                                                         efficiency particulate-air vacuum clean-
embodied that old real estate bromide         anything about the current workings of
                                              homeowner's insurance, they would          ers] to clean all of our belongings that
"pride in ownership."                                                                    didn't have to be discarded. We had to
                                              have known that their house was al-
It may seem strange, but this is exactly                                                 throw everything away that was soft –
                                              ready marked by bad insurance karma.
what uninsurable property looks like in       Because leaks can lead to mold and         Chloe's toys, mattresses, everything."
2004, when homeowner's insurance in           mold can lead to multimillion-dollar       While their daughter's room was being
California is fast becoming a nightmare       claims and lawsuits, some insurance        "fixed," heavy rains led to more leaks
of Kafka-esque proportions. Since the         companies now simply drop any clients      and the contractor discovered that wa-
rise of exorbitant mold claims, Sept.         who make a water claim of any kind.        ter was coming in through nail holes
11's blow to the insurance industry, the      But making two water claims within a       behind the metal siding; the adjuster
recent erosion of the stock market, and       month and finding mold – well, this        wrote this up as a third claim. Still wor-
the fact that homeowner's insurance           policy was fast becoming an insurer's      rying about an additional $1,000 de-
has been a relatively unprofitable busi-      black hole.                                ductible, Christiansen and Lodato ar-
ness for some time, insurance compa-                                                     gued that it was really the same claim,
nies are busy tightening their belts –        "At first, they'd told us it would be
                                              about an $1,800 job to sand down the       which had been mishandled.
generally around the throats of unsus-
pecting consumers.                            wet beams and put in new drywall,"         "Up until then, [the adjuster] had been
                                              said Christiansen. "But it seemed like a   very friendly – and, suddenly, he ex-
Like so many stories of first-time home-      switch flipped when they saw the           ploded, 'How would you like to lose
owners in San Francisco, Christiansen         mold."                                     your insurance?'" said Christiansen.
and Lodato's started with a feeling of                                                   "Basically, he threatened us with exactly
good fortune. They bought the building        At that time, the couple were still hop-
                                              ing to recover their $1,000 deductible     what happened to us."
in 1999, when anyone who could still
afford to live in San Francisco at all felt   from one or both of the guilty parties     Nine months later, after putting the
lucky. Their plan was to buy the duplex,      (their tenant and the roofing company),    upper unit on the market, the couple
condo-ize it and sell the upper unit to       so they were disappointed to learn from    accepted an offer from a buyer, but she
help subsidize their occupancy of the         the adjuster that, as landlords, they      soon discovered she couldn't get insur-
lower one, a two-bedroom, one-bath            were responsible for keeping the drains    ance to satisfy her loan. When
apartment on a busy street. Eager to          clear enough that a bathtub or shower      Christiansen called the couple's USAA
protect themselves from any unpredict-        could run in perpetuity. At that time,     agent, he was told he and his wife were
able catastrophes, the couple bought a        however, the adjuster still gave the       being blacklisted and that their claims
complete insurance package from USAA          couple reason to believe they had a        history was so egregious that no
Casualty Insurance Co. with water-            case against the roofers.
damage and liability insurance, as well       The insurance company aggressively
as basic fire coverage.                       went about remediating the small patch
Two and a half years later, on the verge      of mold Christiansen and Lodato had
of condo-izing, they hired a roofing          discovered. Learning that the construc-
company to resurface the deck on the          tion would continue for at least six to
                                              eight weeks to accommodate the re-                         continued on page 9….
WATER DAMAGE CLAIMS continued…….                      effectively mechanized the insuring process,        epitome of high-risk roulette: investing in
                                                      leading some homeowners to lose their insur-        WorldCom, Enron, Adelphia, Global Crossing
                                                      ance over trifling or even nonexistent claims.      and Tyco.
"regular" insurance company would work with
                                                      Kramer recalls one first-time homeowner who         Industry representatives tend to downplay the
them or their building. When Christiansen asked
                                                      was turned down by 45 insurance companies           stock market "crime wave" losses, pointing to
why no one had ever told him and his wife they
                                                      before calling the Department of Insurance for      the pernicious growth of mold claims instead.
were jeopardizing coverage by making too
many claims, another USAA employee told him           help.                                               Perkins, however, said that so far, his office
it's considered a "conflict of interest" to caution   "We asked him if he'd gotten a copy of his          hasn't been able to isolate mold as a primary
                                                      CLUE report, and he'd never heard of it,"           cause. "Despite what the insurance companies
clients about their claims.
                                                                                                          say, we still don't have any evidence that mold
"It was like trying to get health insurance if you    Kramer said. "How are you supposed to inquire
                                                                                                          is a significant loss factor in California," he said.
have a really serious illness," said Christiansen.    about something that you don't know exists?"
                                                                                                          Whatever the causes, the facts for ordinary
"No one would consider us."                           When the man got his report, he discovered he
                                                                                                          homeowners remain formidable. Last month,
The couple applied to the California Fair Access      had a record as having made a water claim
                                                                                                          Speier's office introduced a "homeowner's bill of
to Insurance Requirements (FAIR) program, a           because there had been a claim on the building
                                                                                                          rights," a Senate bill that would penalize insur-
federally funded, industry-financed plan origi-       where he'd previously lived as a renter.
                                                                                                          ers for recording inquiries as claims and force
nally created for certain homes deemed unin-          Similarly absurd mistakes have occurred when        them to offer all homeowner's insurance except
surable after the Watts riots. They also tried to     people have simply called their agent to inquire    in extreme circumstances. Also, the California
get a temporary policy with a "high risk" com-        about a claim and the agent records the inquiry     Department of Insurance's Web site offers sim-
pany called Admiral, which would cost $3,000          as a claim in the CLUE database. This practice      ple advice in shopping for a new policy: Shop
for a single month of basic fire insurance. When      came under fire at hearings spearheaded by          around, and get your CLUE report.
neither policy came through in time, they ended       state Sen. Jackie Speier, (D-Hillsborough), who
                                                      chairs the California state Senate's Committee      In the meantime, for those with insurance, we
up releasing their buyer from escrow.
                                                      on Insurance. During the hearing, representa-       are left contemplating the mysteries of this
Eventually they finally got basic fire insurance                                                          absurd industry. Since we don't know what
from FAIR. (Other homeowners in similar pre-          tives of the insurance industry claimed – much
                                                                                                          making a claim might mean for our coverage,
dicaments have bought liability insurance from        to the frustration of industry watchdogs – that
                                                                                                          and because inquiring about the coverage may
                                                      California law requires them to record any in-
Lloyds of London, a company that typically                                                                end up being as damaging as actually filing a
insures high-risk properties such as oil tankers.)    quiry as if it is a claim.
                                                                                                          claim, it's tempting to imagine getting a friend
In retrospect, Christiansen says had he known         "Many carriers are changing the standard that       to call your insurance company and ask a lot of
then what he knows now, he would never have           they apply to the customer, and it's catching       hypothetical questions.
made a claim in the first place. "We could have       people unaware," said Brian Perkins, the com-
                                                                                                          Unfortunately, insurance companies have
dealt with it on our own," he said. "We just          mittee's staff director. "The most outraged
assumed that that was why we were paying for          people we see are people who have been pay-         armed themselves against this bit of trickery.
                                                      ing their premiums for 10, 15 years, and they       Because of a fact that makes the workings of
                                                                                                          Kafka's castle seem rational and transparent,
"It's frustrating," added Lodato. "You have to        suddenly find themselves unwanted."
                                                                                                          there's no way to do hypothetical research
buy it, but you're not supposed to use it."           To illustrate the problem, Perkins told me about    about an insurance company's underwriting
                                                      a man who lost his insurance after simply in-       policies.
Does their experience seem like an anomaly?
Not if the reaction of Nanci Kramer, a spokes-        quiring whether the loss of a wedding ring
                                                                                                          "The rules are secret for underwriting guide-
woman for the California Department of Insur-         would be covered under the clause about
                                                                                                          lines," explained Brian Perkins of the state Sen-
ance, gives any indication. When I begin to tell      "mysterious disappearances" on his personal-
                                                                                                          ate's Committee on Insurance. "They're consid-
                                                      property coverage. "He never filed a claim and
her about this couple who have been deemed                                                                ered a trade secret. If an agent tells you any-
                                                      never thought about it again, until he heard
uninsurable, she finishes my sentence: "Don't                                                             thing about his company's policies that don't
tell me – they had water coverage and dared to        that he'd been dropped."
                                                                                                          pertain to your own policy, he's breaking the
use it. The nerve, huh?"                              Perkins said the insurance industry's trend to-     law."
                                                      ward "cherry picking" only low-risk clients has
Kramer has been ringing the alarm bell about                                                              Christensen and Lodato may have been naive
trends in homeowner's insurance for some time,        come about from a number of causes.
                                                                                                          about the damage wrought by fully using their
adding that the industry is now "trending to-         "The cost of reinsurance for homeowners is          coverage but in the end, they would have
ward a crisis." The state Department of Insur-        higher, and so companies are passing along
ance has been receiving complaints from out-          costs to consumers," he said. "Construction
                                                                                                                Get a CLUE! Find out what your
raged consumers, as well as reports from real         costs are also higher. Some companies lost a lot
estate agents about homes falling out of es-          of money in last few years in the stock market.           insurance company is secretly
crow. In the past year, according to Kramer,          Some companies were using [their profits in]              reporting about you and your
applications for the FAIR plan have soared from       the stock market to cross-subsidize home-                 property. They may have deval-
an average of 100 a week to 300 a day.                owner's insurance, which in general hasn't been           ued your biggest asset without
"Water claims are the scarlet letter of insur-        a very profitable business."                              your knowledge.
ance," she said. But though water claims are          No one is disputing the fact that business has
the most common route by which people turn            been lousy for homeowner's insurance. In
                                                                                                                  See if you or your property has
themselves into modern-day Hester Prynnes of          Texas, where there was a $32 million mold-                been deemed “uninsurable” by
homeowner's insurance, the practice of black-         related lawsuit, Farmers, State Farm and                  calling the very people who re-
listing homes and homeowners can happen in            Allstate, three of the state's biggest insurers,          cord the data for your insurance
many ways.                                            have stopped writing new policies. State Farm             company, ChoicePoint. Their
                                                      has now widened its moratorium to include
In part, it's because of the growing use of a                                                                   number is: 866-527-2600. Your
database called CLUE (Claims Loss Underwriting        California as well.
                                                                                                                report will cost you about $13.
Exchange), originally used as an antifraud tool       In 2002, The Wall Street Journal reported that
to help insurance companies spot people who           the insurance industry had losses of $9 billion
file identical claims with multiple companies.        on homeowner's insurance in 2001, and, ac-          bumped up against this idiotic paradox anyway.
Now, however, it's commonly used to gauge             cording to the Foundation for Taxpayer and          So, how do you know when to use your insur-
potential risk. Owned by ChoicePoint, a publicly      Consumer Rights in Santa Monica, Calif., the        ance and when to stay quiet and pay up?
traded credit-history-reporting company, CLUE         state's top 10 property-insurance and casualty-
compiles information about the insurance his-         insurance companies collectively lost a quarter     "There's no one in the world that can answer
tory of buildings and their owners. CLUE has          of a billion dollars in what turned out to be the   that question," answered Perkins in a low voice.


Homeowners Come Up Short on Insurance By JOSEPH B. TREASTER, NY Times
                                                 their house replaced. They get money up        them were underinsured.
                                                 to the set limits plus the extended 20
L CAJON, Calif. - Karla and Bruce Car-                                                          Consumer advocates and industry ex-
                                                 percent or 25 percent."                        ecutives expect similar problems for the
roll remember the sheriff on his bullhorn
ordering residents to evacuate and, min-         Marshall & Swift/Boeckh, a Los Angeles         victims of Hurricane Charley in Florida as
utes later, hearing the roar of monstrous        company that most insurers rely on for         they begin working through their claims.
flames arcing toward their modest home           help in calculating the value of houses,       "The problem is everywhere,'' Mr. Hart-
here in the hills above San Diego.               estimates that 64 percent of American          wig said. "The disasters simply expose
                                                 homes are underinsured by an average
Mrs. Carroll grabbed a family photo al-                                                         it.''
                                                 of 27 percent, with some homes underin-
bum as they ran to safety; Mr. Carroll                                                          George Kehrer, a lawyer and building
                                                 sured by 60 percent or more.
started to gather his fishing rods. But she                                                     contractor who founded Community
hustled him along. "Don't worry about            Another insurance industry company,
                                                                                                Assisting Recovery in Los Angeles more
those things,'' she recalls saying at the        AIR Worldwide in Boston, estimates that
                                                                                                than a decade ago to help people with
time. "We've got insurance."                     many upper-income homes in New Eng-
                                                                                                insurance claims after disasters, said he
                                                 land are underinsured by 30 percent to         had spoken to 1,200 people who lost
But, the Carrolls say, the insurance they
                                                 40 percent.                                    homes in the California fires.
bought from State Farm, the nation's
largest property insurer, has left them at       "The underinsurance problem lies just          "About a dozen of them,'' he said, "were
least $100,000 short of the cost of re-          beneath the surface all across the coun-
                                                                                                adequately insured."
building their home. Today, nearly a year        try,'' said Robert P. Hartwig, the chief
later, they are still wrangling with their       economist for the Insurance Information        No single factor is entirely to blame for
insurer and living in a 29-foot-long house       Institute, a trade group in New York.          the underinsurance, consumer advo-
trailer on the land where their three-                                                          cates and industry executives say.
                                              The insurance gap has been worsened
bedroom home once stood, overlooking                                                            Homeowners, they say, need to recog-
                                              by the nationwide housing boom that has
a spectacular sweep of                                                                          nize their own responsibility.
                                                                  been rapidly driving
ridges and canyons.                                               up the cost of lum-           But under pressure to make sales, Mr.
Their woeful shortfall in                                         ber, bricks, cement           Garamendi and consumer advocates
insurance coverage,                                               and other construc-           explain, insurance companies and their
experts say, is a plight                                          tion materials, in-           agents often aim low in valuing houses.
shared unknowingly by                                             dustry     executives         The goal, they say, is to keep premiums
millions of American                                              say. And in South-            down to keep customers from going to
homeowners. It has             "If they quote a realistic         ern California, re-           competitors, and sometimes even a few
been fed largely by a          replacement cost, the price        building       costs          dollars can make a difference.
shift in the way property      of the policy goes up, so          soared even higher            "If they quote a realistic replacement
insurance has been sold                                           as the demand for             cost, the price of the policy goes up," Mr.
in recent years.
                               they are motivated to keep         contractors      and          Garamendi said, "so they are motivated
                               the replacement cost               building     supplies         to keep the replacement cost down."
In a move to cut costs                                            suddenly      jumped
from claims, insurance         down."
                                                                  after the Carrolls'           Insurance industry executives argue that
companies began in the                                            home and several              it would make no sense to undervalue
late 1990's to phase out                                          thousand       others         homes intentionally. The higher the in-
coverage that guaran-                                             were destroyed in             surance coverage, the higher the pre-
teed the replacement of                                                                         mium, they point out.
                                                                  wildfires over a few
a destroyed home, re-
                                                                  days last October.            But Mr. Garamendi disagrees. "You want
gardless of the expense
to the insurer. In place of that unlimited                             But such explana-        the sale first," he said. "O.K., you can get
coverage, which had become nearly                tions do not satisfy the industry's critics,   a little more premium if you give full cov-
universal, insurers substituted a similar-       who say insurers have shifted the burden       erage. But you lose the sale."
sounding policy with a crucial difference:       of such mistakes onto homeowners.              Mr. Hunter, the consumer advocate, said
it pays only the amount stated on the            "Most people go to their insurance agent       agents often lacked the training to as-
policy plus, typically, an additional 20         to buy coverage and figure they're fully       sess accurately the value of a home,
percent to 25 percent.                           covered," said J. Robert Hunter, the           usually done these days with the help of
For their part, insurers insist that it is the   director for insurance at the Consumer         a computer program. Rarely do the
consumer's responsibility to acquire             Federation of America. "But often they're      agents leave their offices to assess a
adequate coverage.                               not."                                          house personally, agents and industry
                                                                                                executives said.
The old policy was called a guaranteed           The issue of underinsurance has not
replacement policy. The new one, which           attracted much attention because, of the
most Americans now have, is called an            millions of insurance claims every year,
extended replacement policy.                     fewer than 2 percent are for the total loss
                                                 of a house. But the wildfires here last fall              continued on page 11…….
"People look at this and it says                 came as a jolt. They quickly incinerated
'replacement' and they think, 'That's            more than 3,700 homes and, Mr. Gara-
good, I get my house replaced,' " said           mendi said, "a very large proportion" of
John Garamendi, the insurance commis-
sioner in California. "But they don't get


HOMEOWNERS COME UP SHORT                                   Two years later, she said, she checked                     the Carrolls estimate their policy will pay
continued…                                                 back with the agent to make sure she                       them about $222,000. But Mrs. Carroll
                                                           had enough coverage and increased the                      said a contractor hired by State Farm
                                                           coverage for possible additional costs as                  estimated that replacing their losses, not
Mr. Garamendi said some agents inad-                       a result of changes in building codes.                     including their clothing and other per-
vertently undervalued homes by using a                                                                                sonal things, would cost nearly
                                                           "I said, 'Are you sure this is enough to
computer shortcut to obtain what is                        replace the house?' and she said, 'Oh,                     $400,000.
known as a "quick quote." Then, when a                     that's plenty of coverage,' " Mrs. Carroll                 Bill Sirola, a spokesman for State Farm,
customer decides to buy coverage, the                      recalled. "She had me convinced my                         said it was not clear whether the Carrolls
agent fails to add details like designer                   house could burn or fall down in the                       were underinsured. "We are working with
cabinets and fixtures that tend to in-                     canyon under heavy rains and, yeah, it's                   that family," Mr. Sirola said. "We are
crease the replacement estimate and the                    covered."                                                  working with other builders on their be-
cost of the insurance.                                                                                                half to get other estimates of their re-
While most insurance policies include a                      Many homeowners burned                                   building costs."
built-in escalator to keep pace with gen-                    out by last year's fires say                             As the insurance companies see it, if
eral inflation, the costs of building sup-                                                                            people are underinsured it is primarily
plies and paying for construction crews
                                                             they made clear they wanted
                                                                                                                      their own fault.
have been rising at a faster pace, in                        to be able to replace their
many cases widening the gap between                          homes. In interviews, they                               "It's the homeowner's responsibility to
the amount a house is insured for and                                                                                 see that his home is properly insured,"
                                                             said they had no way of                                  said Mr. Hartwig of the Insurance Infor-
what it will cost to rebuild it.
                                                             knowing how much insurance                               mation Institute.
Another factor in the insurance gap has                      they needed and relied on the
been a failure by some homeowners to                                                                                  Insurers say the terms of coverage are
increase coverage after the spurt in
                                                             agent to set the proper value                            clearly spelled out in their policies. In
home improvements, from new kitchens                         and charge the appropriate                               California, insurers are also required to
to extra bedrooms, as millions of Ameri-                     price. Many say they would                               mail a statement annually specifying the
cans have used cheap money from mort-                                                                                 terms of coverage along with renewal
                                                             have been willing to pay more                            notices.
gage refinancings in recent years to
upgrade their homes.
                                                             to assure themselves that                                But many homeowners burned out by
                                                             their losses would be fully                              last year's fires say they made clear they
Still, in dozens of interviews over several
days this month, owners of the homes in                      covered.                                                 wanted to be able to replace their
Southern California that were destroyed                                                                               homes. In interviews, they said they had
said repeatedly that they had been led to                                                                             no way of knowing how much insurance
                                                           At the time of the fire, the Carrolls' house               they needed and relied on the agent to
believe they had bought enough cover-                      was insured by State Farm for $126,000,
age to rebuild their homes and were                                                                                   set the proper value and charge the
                                                           which, following standard practice, did                    appropriate price. Many say they would
stunned to find out they were wrong.                       not reflect the value of the land. Their                   have been willing to pay more to assure
Mrs. Carroll said she first bought her                     annual premium was $730.                                   themselves that their losses would be
insurance from State Farm in 1998                          With 20 percent in extended replacement                    fully covered.
shortly after she and her husband ac-                      coverage and other standard features
quired their home for $172,500.                                                                                       "They're the experts," said Donald
                                                           including a built-in adjustment for infla-                 McCormick, a high school math teacher,
"I told them I wanted full coverage for my                 tion and coverage on their two-car ga-                     who lost his home in the Scripps Ranch
house," she said. "I've lived in this area                 rage, fences and driveway as well as an                    section of San Diego. "I don't go to the
most of my life, and I knew there was a                    additional 25 percent for anticipated                      doctor and tell him how to do surgery."
huge fire risk here. I had been evacuated                  building code changes - upgraded by
for fires three times as a child."                         Mrs. Carroll from the usual 10 percent -

         ABSTRACT: The Effect of Air Pollution on Lung Development from 10 to 18 Years of Age
W. James Gauderman, Ph.D., Edward Avol, M.S., Frank Gilliland, M.D., Ph.D., Hita Vora, M.S., Duncan Thomas, Ph.D., Kiros Berhane, Ph.D., Rob McConnell, M.D., Nino Kuenzli,
                         M.D., Fred Lurmann, M.S., Edward Rappaport, M.S., Helene Margolis, Ph.D., David Bates, M.D., and John Peters, M.D.

Background Whether exposure to air pollution adversely af-
                                                                                          and elemental carbon (P=0.007), even after adjustment for
fects the growth of lung function during the period of rapid lung
                                                                                          several potential confounders and effect modifiers. Associa-
development that occurs between the ages of 10 and 18 years
                                                                                          tions were also observed for other spirometric measures.
is unknown.
                                                                                          Exposure to pollutants was associated with clinically and
  Methods In this prospective study, we recruited 1759 chil-                              statistically significant deficits in the FEV1 attained at the age
dren (average age, 10 years) from schools in 12 southern                                  of 18 years. For example, the estimated proportion of 18-
California communities and measured lung function annually                                year-old subjects with a low FEV1 (defined as a ratio of ob-
for eight years. The rate of attrition was approximately 10                               served to expected FEV1 of less percent) was 4.9 times as
percent per year. The communities represented a wide range                                great at the highest level of exposure to PM2.5 as at the low-
of ambient exposures to ozone, acid vapor, nitrogen dioxide,                              est level of exposure (7.9 percent vs. 1.6 percent, P=0.002).
and particulate matter. Linear regression was used to examine
                                                                                            Conclusions The results of this study indicate that current
the relationship of air pollution to the forced expiratory volume
                                                                                          levels of air pollution have chronic, adverse effects on lung
in one second (FEV1) and other spirometric measures.
                                                                                          development in children from the age of 10 to 18 years,
 Results Over the eight-year period, deficits in the growth of                            leading to clinically significant deficits in attained FEV1 as
FEV1 were associated with exposure to nitrogen dioxide                                    children reach adulthood.
(P=0.005), acid vapor (P=0.004), particulate matter with an
aerodynamic diameter of less than 2.5 µm (PM2.5) (P=0.04),

                                                 case, known as Fiess v. State Farm, has       policy and paid on claims, albeit, they
A Case That Can                                  major consequences that few appreciate.       rarely paid sufficient sums for proper
                                                 The Reader’s Digest version of the case is:   repairs.
Decide Your Future                               The Fiess family submitted a water damage       Just weeks before oral arguments before
                                                 claim and that water damage turned into a     the 5th Circuit occurred, Amicus Briefs
                                                 mold problem costing thousands to cure.
In   2000 and 2001, the major insurance
                                                 Their policy specifically allowed coverage
                                                                                               were submitted. The Texas Department of
companies claimed they had billions of                                                         Insurance and POA took the side of the
                                                 for mold if it was an ensuing loss (the       Fiess family and asked the 5th Circuit to
dollars in “mold claims”. Not surprisingly,
                                                 result of a covered peril). The Fiess         uphold the language of the policy (a
regulators and legislators didn’t read the
                                                 attorney was young and inexperienced and      contract) and apply coverage as stated in
footnotes on all of the insurer-submitted        did not properly argue the ensuing loss
loss calculations. The footnotes clearly                                                       the policy. The Texas Department of
                                                 aspect of mold and a lower court magistrate   Insurance even threw in a few juicy lines
stated that amounts paid were for ALL
water damage claims, not just “mold                                                            about State Farm’s own testimony before
related” claims.                                                                               the regulatory agency.
   Insurance rates, by law, must be set in a                                                      True to form, other insurers weighed in
forward-looking fashion. Insurance                                                             with Amicus Briefs supporting State
actuaries make predictions about                                                               Farm’s position that mold is NOT covered.
hurricanes, tornados, vandalism, freezes,                                                      This is ironic given that the same insurers
and other occurrences and carefully                                                            provided their boring testimony before
calculate anticipated losses. If actuaries are                                                 state insurance departments about how
dead wrong and underestimate the losses,                                                       mold was going to put them into the poor
the insurance companies, by law, cannot                                                        house because of their liability on such
seek rate hikes to make up for their own                                                       claims.
stupidity.                                                                                        For the layman, an Amicus Brief is also
  In late 2001 and early 2002, insurers                                                        called a “Friend of the Court” brief and is
cried to their legislative and regulatory                                                      usually submitted by those with an interest
buddies and produced endless (and boring)                                                      in the outcome of a case. Rarely is POA on
sworn testimony about how these “mold            ruled that mold was not covered under the     the same team as the Texas Department of
claims”, which they acknowledged were            homeowner’s policy issued to the Fiess        Insurance but on this case, we actually saw
covered, were “gonna break ‘em”. The             family by State Farm. The insurance           eye-to-eye on an issue. Perhaps hell has
boo-hoos got them hefty rate hike                industry celebrated the ruling but they       frozen over.
approvals AND the approval to slash the          needed holy water thrown on it by a higher
                                                 court so that they could use the decision to    The “justices” have not yet made up their
coverage allowed in previously issued                                                          minds on the matter but their decision will
policies. That explains why, today you pay       deny claims that had been languishing for
                                                 years.                                        impact hundreds of thousands of
far more for far less. But, keep in the back                                                   homeowners whose claims have been
of your mind that the rates you pay today            Enter the 5 Circuit where most of the wrongly delayed by insurers for years
were SUPPOSED to be set based on what            justices (I use the term loosely) should hoping the 5th Circuit will deliver like
the insurance companies EXPECT to pay            have the State Farm logo sewn on their the mailman. And they might. The case, it
out in claims made in the future, not set to     robes. This was just the spot where State should be noted, has national implications
make up for unforeseen losses.                   Farm stood a good shot of getting its wish since it is in a Federal court.
  An intelligent person would question this.     list granted. Believe it or not, for as anti-
                                                 consumer the 5th Circuit is, it’s better than    No matter which direction the “justices”
After all, if rates are set in a forward-
looking manner and the industry no longer        the Texas Supreme Court where all justices rule, the fall out will be intense. If they rule
has the liability it had in the past, then it    (term again used loosely) are slaves to the in favor of Fiess, claims that have been
                                                 industry.                                     delayed by the carriers will finally be
would reasonably follow that rates would                                                       resolved however, the cost of repairs have
DECREASE, not increase. In fact, our                Now, it’s important to remember that grown because mold does not stop growing
analysis shows that you should be paying         SWORN TESTIMONY was presented to just because a claim is tied up in the legal
40-50% of what you paid for homeowner’s          state officials by insurers a few years ago system. If the court rules in favor of State
coverage in 2001.                                when they used “mold” as the reason for Farm, hundreds of thousands of families
  Also keep in mind that many                    rate hikes. (Hey, just in case you missed it, will never be paid for claims covered by
policyholders are actually owners of their       health insurers and HMOs used AIDS as a the policies and worst of all, such a ruling
insurance company. In “mutual                    way to rape and pillage in the mid-1980s so would say to insurers that they can deny
companies”, the policyholders are the            this is not a new strategy!) Insurers selling any type of claim and never look back.
company owners. Only a handful of                homeowner’s policies stated, in their
                                                 testimony, that they needed rate hikes          Of course, shareholders and mutual
insurance companies (such as Allstate, St.
Paul/Travelers, etc…) are publicly-traded        because of their liability on COVERED company owners should take management
entities.                                        PERILS that included mold related damage out to the shed to beat them silly for all the
                                                 that was caused as a result of water claims that were paid but never should
    Now that we have that out of the way,        damage. (It seems obvious but mold have been. Can you say “Class Action”?
let’s get to the issue at hand. There is a       problems can only happen when water             All of the Amicus Briefs submitted in
very meaningful case currently before the        damage occurs.)                               this case are available on POA’s website.
5th Circuit (an important Federal Appeals           State Farm, just like the other insurers,
Court based in New Orleans, LA). The             KNEW they had the liability under the old

   F L O R I D A W A K E S U P T O A N E W I N S U R A N C E R E A L T Y
   Post- Andrew Rule Changes Shifted More of the Burden to
   I n d i v i d u a l H o m e o w n e r s . P a y i n g 2 % D e d u c t i b l e T w i c e.
   B y C H R I S T O P H E R O S T E R , C A R R I C K M O L L E N K A M P a n d C H A D
   T E R H U N E — W A L L S T R E E T J O U R N A L S T A F F

                                                 As a result, hundreds of thou-       Big insurance companies say the
    As Floridians begin picking up the          sands of Florida homeowners --        changes in deductibles and the
    pieces from the second devastating          including many who have paid          decision to set up separate units
    hurricane in less than a month, many        for what they believed was "full"     in Florida were necessary to pre-
    are also discovering the full effects of    property insurance -- now find        serve the availability of adequate
    a decade of maneuvering by insur-           themselves holding the bag for a      insurance across the state -- for
    ance companies and state officials          much bigger portion of the esti-      situations just like the past
    that has dramatically reduced the obli-     mated $10 billion to $15 billion in   month's storms. "This is all hap-
    gations of private insurers to pay for
                                                insured damage from Frances           pening without any market tur-
    the impact of catastrophic storms.
                                                and Charley than they would           moil," says Robert Hartwig, chief
                                                have a decade ago.                    economist for the Insurance Infor-
    Charley and Frances are two of the
    biggest hurricanes to hit the U.S. since
                                                                                      mation Institute, a trade group.
    Andrew slammed into southeastern            Florida regulators and legislators
    Florida in 1992, wreaking $15.5 billion     allowed private insurance com-        After dumping more than 13
    in insured damage and wiping out            panies to add hefty new deducti-      inches of rain along Florida's cen-
    every cent of profit insurance compa-       bles to homeowners' policies and      tral east coast on Sunday and
    nies had ever generated on property         to raise premium rates in some        knocking out power to about six
    policies in the state. The losses forced    cases by as much as fourfold.         million people, Frances entered
    11 insurers out of business and trig-
                                                Thousands of property owners          the Gulf of Mexico.
    gered a wholesale revamping of Flor-
    ida's insurance market in a desperate       now hold policies with small local
    attempt to prevent other carriers from      companies, whose financial sta-       It then made a second landfall
    fleeing the state.                          bility is severely strained by the    Monday near Apalachicola, a ma-
                                                back-to-back storms of the past       jor oyster-harvesting area in the
    Big players such as Allstate Corp.          month and concerns that others        Florida panhandle. The storm has
    agreed not to abandon a combined 1.2        may soon follow. Already, an-         been blamed for at least four
    million policyholders in Florida only       other major hurricane, Ivan, is       deaths. Even after being down-
    after state officials began cooperating     gathering force in the Atlantic       graded to a tropical storm, Fran-
    in a legislative and regulatory effort to   and could threaten Florida by the     ces roared into Alabama and
    shift from insurance companies to           end of the week.                      Georgia still packing fierce winds
    consumers the burden for paying hun-
                                                                                      and sheets of rain.      Continued on page 13...
    dreds of millions of future storm-
    related losses.                                                                   Charley claims: commercial and residential

                                                                                       Company                        Amount

                                                                                       Nationwide              $381 million
                                                                                       Allstate                $276 million
                                                                                       Swiss Re                Less than $200 mil-
                                                                                       State Farm              Less than $200 mil-
                                                                                       St. Paul Travelers      $140 million
                                                                                       XL Capital              $125 million
                                                                                       The Hartford            $91 million
                                                                                       AIG                     $80 million-$100
                                                                                       AXIS Capital            $60 million-$80 mil-
                                                                                       CNA                     $40 million-$60 mil-

      T H E AD V O C A T E

Florida Wakes Up (continued)
Gasoline retailers and Florida        the past would have fallen            vate reinsurance sold by com-
state officials were scrambling       directly to them. State Farm          panies including Berkshire
Monday to replenish fuel sup-         and Allstate paid a combined          Hathaway Inc., large Euro-          “Now,        about
plies at depleted service sta-        $6.2 billion in claims after An-      pean insurers and Bermuda-
tions, as about 2.5 million resi-     drew 12 years ago. After              based companies including XL
                                                                                                                800,000      coastal
dents who evacuated from the          Charley, which ripped through         Capital and Ace Ltd. Home-          homes that private
storm zone began heading              Central Florida on Aug. 13,           owners insurers didn't heavily
back home. Frances also               causing considerably less             rely on such reinsurance prior      insurers refuse to
threw another wild card into          damage than Andrew overall,           to Andrew and the coverage          fully cover are
the unpredictable political           State Farm and Allstate -- still      was hard to come by in the
equation in Florida -- a critical     Florida's two largest private         years following that storm.         currently insured
battleground in the November          insurers -- estimated their           Even so, the state-sponsored
                                                                            relief mechanisms shouldered
                                                                                                                by      Citizens
presidential election. The well-      combined losses at just $625
organized relief effort after         million, after collections from       nearly $3 billion of Charley's      Property. Its capital
Hurricane Charley, directed by        the state catastrophe fund and        $7.4 billion in insured damage.     base,      already
Gov. Jeb Bush, appeared to            private reinsurers. A State
blunt the risk of political fallout   Farm spokesman said some              After Andrew in 1992, state         rocked by Charley,
from that storm for President         of its Florida unit's reinsurance     officials agreed to set up a        could be depleted
Bush. But tempers were grow-          was provided by State Farm            backstop fund called the Flor-
ing strained in the wake of           itself, but he declined to say        ida Hurricane Catastrophe           by Frances .”
Frances as relief agencies            how much.                             Fund guaranteed by the gov-
struggled to get essential sup-                                             ernment that will pick up the
plies, electricity and emer-          Big Shift                             bulk of the insurance compa-
gency services into hard-hit                                                nies' tabs from Charley, Fran-
areas, and victims of Charley                                               ces and other massive storms.
                                      What has happened in Florida
took a second round of torren-                                              Claims from Charley are ex-
                                      is partly the result of a big shift
tial rains.                           in the way U.S. insurance             pected to consume about $2
                                      companies have operated               billion of the $6 billion in cash
When Hurricane Andrew                 over the past decade. The             held by the hurricane catastro-
slammed into Florida in 1992,         industry has adopted increas-         phe fund, which has about an
private insurance companies,          ingly sophisticated underwrit-        additional $9 billion of non-
primarily Allstate and State          ing tools to avoid insuring           cash assets. Frances will take
Farm Mutual Automobile In-            higher-risk homes and has             another so-far-unknown bite.
surance Co., picked up the            taken steps to lay more of the        Once the fund's cash is gone,
lion's share of the damage            burden to pay claims on poli-         it can sell bonds to raise more
tab. The companies were sent          cyholders themselves. Califor-        and impose an assessment,
reeling by the scale of the           nia residents who face the            or surcharge, of up to 2.27%
devastation, and in the after-        threat of storms or wildfires,        on each policy written in the
math, there was little debate         for example, must choose              state.
that changes had to be made           between sometimes bare-
in the state insurance system.        bones coverage offered by             In 2002, Florida lawmakers
It will take weeks or months to       insurance pools organized by          combined another insurer of
tabulate the precise losses           the state and high-cost poli-         last resort, the Florida Wind-
from Frances and Charley,             cies from niche insurers such         storm Underwriters Associa-
and how much of that insurers         as Lloyd's of London. But the         tion, with the other big state-
will absorb. But consumer             shift of responsibility for prop-     organized insurer, the Joint
advocates say the increased           erty losses in Florida -- in          Underwriting Association, to
liabilities shouldered by home-       terms of the number of policy-        form the Citizens Property
owners during the two recent          holders pushed into state-            Insurance Corp. Now, about
storms raise the question of          backed insurance funds and            800,000 coastal homes that
whether the changes have              the hefty increases in premi-         private insurers refuse to fully
been too generous to the in-          ums and deductibles -- far            cover are currently insured by
surers.                               exceeds what has happened             Citizens Property. Its capital
                                      in most other states.                 base, already rocked by
Already, it is clear that the                                               Charley, could be depleted
steps taken by big insurance          Insurers in Florida also have         by Frances.
companies are successfully            shielded themselves from
shielding them from responsi-         losses through the use of pri-
bility for huge losses that in


                                Citizens Property Insurance       damage has been exacer-            ripping me off," Mr. Jones said
                                expects to pay about $950         bated in some areas by flood-      as the rains and wind of Fran-
                                million for 37,000 claims re-     ing, which isn't covered by        ces rolled through his
                                lated to Charley -- nearly two-   most private insurance under       neighborhood over the week-
                                thirds of the $1.5 billion sur-   a decades-long practice.           end.
                                plus it reported at the end of
                                June. It also could levy a sur-   Charley did about $15,000 of       He said he realized his de-
                                charge on homeowners' poli-       damage to Don Boyle's roof in      ductible had increased only
                                cies if it runs out of money.     Orlando, Fla. Then Frances         after calling State Farm to
                                                                  shredded the blue tarps cover-     report that a massive laurel
                                Many of the largest insurers in   ing his two-story house Sun-       oak tree in his front yard had
                                Florida also have established     day and caused eight new           fallen on his house during
                                separate corporate entities to    leaks in his kitchen, garage       Charley.
                                operate in the state. Rather      and elsewhere. He got up on        Some local insurance agents
                                than distributing the cost of     his roof during Frances and        in Florida said homeowners
   Forecasters predicted this   Florida losses across all poli-   tried to put the tarp back         shouldn't be surprised by the
   hurricane season would be    cyholders of the insurance        down, but the winds were too
   one of the worst ever.
                                                                                                     level of their hurricane de-
                                company, as is traditional in     strong.                            ductibles, given that numerous
                                the insurance business, the                                          notices were sent to policy-
                                new Florida units pay losses      He called his insurer, USAA,       holders after a separate wind-
                                only from the assets of the       to ask whether he risked get-      storm deductible was intro-
                                single-state units. If massive    ting charged a second 2%           duced in Florida in 1996.
                                storms wipe out those funds,      deductible -- about $4,000 on      The decision on charging poli-
                                the Florida companies can         damage from the second             cyholders one or two deducti-
                                dissolve without affecting the    storm. The company told him        bles could be open to interpre-
                                parent company's operations       a claims adjuster would make       tation. Damage in the same
                                elsewhere in the U.S.                                                area of the house could be
                                                                                                     deemed a continuation by an
                                For homeowners, the biggest            Florida residents             insurer, agents say, but a tree
                                change came through dra-                                             falling on a separate part of
                                matically higher premiums and          may have to pay               the house could be treated as
                                new deductibles that require                                         a new claim from Frances. In
                                policyholders to absorb thou-                another                 1996 insurers were allowed by
                                sand of dollars in costs from                                        the state to charge double
                                wind damage.                           deductible every              deductibles for separate
                                                                                                     storms under a "named
                                A total of 2.5 million Florida
                                                                       time a hurricane              storms" provision. Charley
                                homeowners have policies                                             and Frances are the first ma-
                                with windstorm deductibles of
                                                                       hits this season.             jor hurricanes under the wind-
                                2% of their home's policy                                            storm deductible.
                                value. A further 177,000
                                homeowners have 5% de-            that decision after he sur-        Florida officials say the state's
                                ductibles, meaning a home-        veyed the new damage. "Now         onerous deductibles are sim-
                                owner with a policy value of      Ivan is lurking out there," said   ply part of the price residents
                                $300,000 would pay $15,000        Mr. Boyle, a 32-year-old engi-     had to pay to keep private
                                to repair hurricane damage        neer at Lockheed Martin.           insurers in the state. Insur-
                                before the insurer would pay      "Paying a $4,000 deductible        ance generally is regulated on
                                any part of the claim.            again wouldn't be my first         a state level, typically by pow-
                                                                  choice."                           erful commissioners who have
                                Many homeowners hit by Hur-                                          the authority to block rate in-
                                ricane Charley three weeks        Mac Jones, a 53-year-old           creases proposed by compa-
                                ago were already smarting         mailman living in Belle Isle,      nies and to set voluminous
                                from having to pay higher de-     south of Orlando, has a 5%         rules under which insurers
                                ductibles for storm damage.       deductible totaling $6,200 on      operate. But after Andrew hit,
                                They're livid that they may be    his house. He was incensed at      many insurance companies
                                forced to pay a second de-        the prospect of having to pay      said they would abandon Flor-
                                ductible for Frances-related      double that if Frances inflicts    ida unless the state made
                                damage when their homes           more damage. "This is legal-       radical changes in its regu-
                                have yet to be repaired. The      ized price-gouging. They are       lations and rate structures.


                                      sioner, Bill Nelson, now a U.S.        obligated to back it up in the        Insurers in the mid-1990s also
radical changes in its regulations                                           event of another hurricane.           began adding "windstorm
and rate structures.                  senator from Florida, proposed                                               deductibles" to their policies.
                                      offering private insurers $100 for     But after Mr. Nelson took office,     Typically homeowners-policy
Just months after that hurricane,     every policyholder they took out       he approved Allstate's request.       deductibles are expressed in dollar
more than a dozen insurers            of the JUA. Insurance regulators       Allstate capitalized the company      terms -- $500 is common. But in
threatened to dump policyhold-        also promised some insurers they       with $450 million, and it cur-        Florida and other coastal locations,
ers, potentially leaving more than    wouldn't have to pay assessments       rently has total assets of more       insurers required 2% and higher
one million homeowners without        that other carriers would if a         than $1 billion. It's not clear how   deductibles to shift the cost of
coverage. In April 1993, Allstate     hurricane drained the underwrit-       much of Allstate's $425 million       claims to policyholders. In 1996,
alone proposed dropping 300,000       ing association's assets. In re-       in Charley losses will be taken       the legislature approved
policyholders.                        sponse, a handful of small insur-      out of that capital, as the Florid-   deductibles as high as 5%.
                                      ers, including Florida Select and      ian company doesn't include
The following month, then-            Sunshine State, were formed with       Allstate's auto business, or non-     Insurers also have been able to
Florida Insurance Commissioner        the specific purpose of taking         Florida losses from the recent        dramatically raise their premiums
Tom Gallagher issued a morato-        policies out of the state JUA          hurricanes. But rating agency         through an unusual three-person
rium preventing insurers from         pool.                                  A.M. Best last week placed the        private arbitration panel set up by
refusing to renew policyholders.                                             company on watch for a possible       the Florida legislature in 1996 to
Almost simultaneously, he urged       Dropping 90,000 Policyholders          downgrade of its rating for finan-    settle price-increase disputes
Florida's governor and legislature                                           cial strength.                        between insurance firms and the
to form the insurer-funded hurri-                                                                                  state insurance regulator.
                                      Big insurers continued dumping
cane catastrophe fund that would                                             Until last month, the company         Previously, the state insurance
                                      policies. After the state-imposed
help shield insurers from future                                             had been a money-maker for            commissioner held most of the
                                      moratorium against dropping
hurricane losses. The fund was                                               Allstate. Over the past three cal-    power in approving rate increases.
                                      insurance policies, the Florida
formed later in 1993, and insurers                                           endar years, Allstate Corp. has       The panel is composed of one
                                      legislature passed a law that said
began paying premiums into it.                                               taken about $300 million in prof-     person nominated by the insurer,
                                      insurers could refuse to renew no
The costs were passed along to                                               its out of the Florida subsidiary,    one person chosen by the
                                      more than 10% of their policy-
policyholders in the form of                                                 according to A.M. Best.               insurance commissioner and a
                                      holders in any one year. Allstate
higher premiums.                                                                                                   third person chosen by the two
                                      took advantage of that provision
                                      and refused to renew 90,000            Michael Trevino, a spokesman
Just weeks after Andrew hit, the      policyholders between 1994 and         for Allstate, said forming the
state also created the Florida        mid-1996.                              separate "well capitalized" unit in   Mr. Nelson decried the use of the
Residential Property and Casu-                                               Florida was a sensible business       panel as "an arbitration system that
alty Joint Underwriting Associa-                                             decision. He said that if a storm     allows companies to go around the
                                      In July 1996, Allstate said it
tion, an insurer of last resort for                                          strained Allstate Floridian's capi-   people's elected commissioner." In
                                      would stop sending nonrenewal
thousands of property owners                                                 tal, the decision of whether          the summer of 1997, Mr. Nelson
                                      notices to policyholders, sparing
that private companies were no                                               Allstate Corp. would pump             shot down a request by State Farm
                                      another 37,000 homeowners who
longer willing to cover. By early                                            money into the firm would be          Fire & Casualty Co. to raise rates
                                      already had been told they would
1994, it had 300,000 customers,                                              difficult, given the damage such a    by about 20%. State Farm
                                      be dropped after Sept. 16 of that
despite offering only limited                                                decision might have on Allstate's     appealed to the panel, and in its
                                      year. But the company agreed to
coverage on property and some                                                reputation nationwide and poten-      first hearing, in Miami, the panel
                                      do so only after the state ap-
contents of homes.                                                           tially costing the company auto-      voted 2-1 to approve State Farm's
                                      proved its fifth rate increase since
                                                                             insurance business in Florida.        request. It was the first of several
                                      Andrew, a 22% jump. More im-
                                                                                                                   defeats the panel handed Mr.
Even with the state and the new       portantly, Florida officials gave
association taking up a signifi-      Allstate the green light to form       Insurers in the mid-1990s also
cant portion of hurricane risks,      the Allstate Floridian Insurance       began adding "windstorm de-
insurers in Florida also asked for    Group, a subsidiary that would         ductibles" to their policies. Typi-
huge increases in premiums. In        issue policies only in Florida and     cally homeowners-policy de-
October 1993, the state approved      potentially shield the parent com-     ductibles are expressed in dollar
increases for State Farm and          pany from any losses in the state      terms -- $500 is common. But in
Allstate of 24% and 30%, respec-      that exceeded the unit's financial     Florida and other coastal loca-
tively. Still, private insurers re-   resources.                             tions, insurers required 2% and
mained lukewarm about doing                                                  higher deductibles to shift the
business in the state. The Joint      Allstate had been pushing to           cost of claims to policyholders.
Underwriting Association had          form the Florida-only company          In 1996, the legislature approved
more than doubled to 760,000          since shortly after Andrew, but        deductibles as high as 5%.
policyholders by mid-1995.            Mr. Gallagher had turned down          Insurers also have been able to
                                      the request. "I didn't think it was    dramatically raise their premiums
To induce insurance companies         a good idea," Mr. Gallagher says,      through an unusual three-person
to compete for more of those          adding that he didn't want the big     private arbitration panel set up by
homeowners, Mr. Gallagher's           insurer to set up a thinly capital-    the Florida legislature in 1996 to
successor as insurance commis-        ized subsidiary without being          settle price-increase disputes

The ADVOCATE is a monthly newsletter from
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CALL US TODAY. IT’S TOLL-FREE                      they’ve paid. We also expose legislators and regulators who have helped the
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                                When to Test A Home For MOLD.
                                When a homeowner suspects their home is what’s             could face serious legal problems if the house
                                causing mysterious symptoms, they often pick up            sells and the buyer was never told of the testing
                                the phone and call an air quality professional to test     results.
                                their home.

                                                                                            A homeowner does not have to disclose
                                 Suddenly, their suspicions are confirmed. The             what is suspected; disclosure is only re-
                                results come in and it’s bad news – the home has a         quired if a homeowner KNOWS (i.e. had test-
                                severe toxic mold problem that requires extensive          ing done) of a problem.
                                and expensive repairs.

                                                                                            POA does suggest that buyers test and we even
                                 The news also does something few contemplate              provide an inexpensive way to accomplish this
                                before making the call: their home value has just          goal. Frankly, a new home buyer can use the
                                taken a huge hit. This is because a homeowner              results to negotiate a better price.
                                must disclose any and all KNOWN environmental
                                conditions if it is listed for sale.
                                                                                            So, in plain English, give serious thought and
                                                                                           consideration to testing BEFORE you proceed. If
                                 POA neither advocates for or against testing. We          you are convinced that you should test, here’s a
                                certainly do not suggest that homeowners should            link for an inexpensive and accurate test that
                                commit fraud and not disclose a KNOWN problem.             can be done through one of the leading universi-
                                But, it is also fair to warn those who consider test-      ties involved in air quality issues:
                                ing that what they find out is a written record that,
                                by law, must be disclosed if the owner decides to
                                sell the property. If not disclosed, the homeowner

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