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					  MOLD AND INSURANCE




Insurance Information Institute
            110 William Street
           New York, NY 10038
             (212) 346-5500
               www.iii.org

      Robert P. Hartwig, Ph.D., CPCU
  Senior Vice President & Chief Economist

             Claire Wilkinson
     Director, Global Insurance Issues



INSURANCE ISSUES SERIES

            August 2003
           Volume 1/Number 4
What is Mold?

Molds – a type of microscopic fungus – are found in virtually every ecosystem in every
climate on earth. They have existed in the natural environment for hundreds of millions
of years and humans have co-existed in the presence of mold and other fungi throughout
the entirety of their evolution. Molds and other fungi are used in the production of
everything from foods to medicines.

There are more than 100,000 species of fungi of which at least 1,000 are common in the
United States. According to the Centers for Disease Control and Prevention (CDC), mold
can be found almost everywhere, and will grow indoors where there is moisture. Some of
the most commonly found species are Stachybotrys, Cladosporium, Penicillium and
Aspergillus.

While some mold species can damage property if unchecked and some can affect people
with allergies and immune deficiencies, exposure to mold only rarely results in health
problems. Common health concerns arising from exposure to mold include hay-fever-like
allergic symptoms, according to the CDC. Certain individuals with chronic respiratory
disease may experience difficulty breathing when exposed to some molds, and people
with immune suppression disorders or underlying lung disease are more susceptible to
fungal infections.

The CDC states that “there are very few case reports that toxic molds (those containing
certain mycotoxins) inside homes can cause unique or rare health conditions such as
pulmonary hemorrhage or memory loss. These case reports are rare, and a causal link
between the presence of the toxic mold and these conditions has not been proven”.
However, because some molds can be a problem for some people, the CDC along with
other agencies such as Environmental Protection Agency (EPA) and Federal Emergency
Management Agency (FEMA) advises homeowners to clean up mold growth as soon as it
appears.

Mold may have been around approximately 400 million years, but its entry onto the
litigation scene is relatively recent. According to reinsurance intermediary Guy
Carpenter, there were at least 10,000 “toxic” mold cases filed in the United States and
Canada in 2001, of which around half were filed against insurance companies for bad


                                          2
faith (Exhibit 1). A report published in the Environmental Claims Journal in the Summer
of 20021 described mold as a litigation “perfect storm” and attributed its escalation to a
number of factors including a few high-profile plaintiffs, the ingenuity of the plaintiffs
bar, intense media coverage and uncertain science.

The Economics of Mold

Before 2000, the few mold-related claims that insurers did see were generally handled for
a few thousand dollars. In only two years, claims costs have skyrocketed.                      Today,
homeowners claims can reach $100,000 or more and the cost of some commercial claims
can run well into the millions. The typical homeowners mold claim now costs $15,000 to
$30,000 to handle, compared with $3,000 to $4,000 for the average homeowners claim
not involving mold.
The national cost of mold is difficult to track because most insurers don’t separate mold
from water damage claims, but the latest estimates clearly show that mold is a
multibillion dollar problem for insurers and therefore for the policyholders. US insurers
paid out at least $3 billion in mold-related claims in 2002, more than double the $1.3
billion paid the previous year.

Texas, which is widely recognized as mold’s “ground zero,” accounted for the majority
of all mold claims. It is estimated that Texas insurance companies have paid out just
under $4 billion for mold claims in the past three years. According to the Insurance
Council of Texas, mold claims in the state grew from $420 million in 2000 to just over $1
billion in 2001 to $2.2 billion (for 227,000 claims) in 2002. A special study by the Texas
Department of Insurance found that the number of such claims increased by 1,300
percent between the beginning of 2000 and the end of 2001 (Exhibit 2 and 3). Water
damage losses as a percentage of total homeowners losses in the state also shot up
between 2000 and 2002, clearly reflecting the impact of mold. TDI figures show water
damage losses per policy increased by 320 percent from 2000 through 2002 (Exhibit 4).
Claims and payouts peaked in July 2002 because newly introduced policies either limit or
exclude mold as a covered cause of loss (Exhibit 5).


1
 Randy J. Maniloff, “Mold: The Hysteria Among Us”, Environmental Claims Journal/Vol. 14, No.
3/Summer 2002.


                                                 3
Mold Publicity

Perhaps the most significant mold case to-date involved an award in excess of $32
million by a Texas jury that found the insurer guilty of bad faith, fraud and failure to
disclose that mold had been found on the plaintiffs’ property. None of the $32 million
awarded to the homeowner was for bodily injury allegedly caused by the presence of
mold. A state appeals court in Texas later reduced the award to $4 million plus interest
and legal fees. Nonetheless the landmark case led to intense media coverage, which
increased public anxiety over an unproven link between mold and human health.

Another case that generated enormous publicity was the $20 million lawsuit filed by
television personality Ed McMahon against several companies in April 2002. The suit
alleged that the insurer and adjusters inadequately handled remediation of mold following
a burst pipe in McMahon’s Beverly Hills, California home. McMahon also alleged that
he and his wife suffered severe mold-related injuries as a result of the defendants’
negligence and that mold infestation was a contributing factor in the death of their pet
dog. The case has since been settled for $7.2 million.

Yet another high-profile case involved environmental activist Erin Brockovich who filed
a lawsuit against the builder and former owner of her million dollar California home,
alleging that construction defects led to the presence of high levels of mold which
resulted in huge repair costs as well as health problems for her and her daughter.

As publicity over the mold issue has intensified, more mold claims have been filed in
other states. In California, there has been a surge in water damage claims, both in terms
of frequency and costs, reflecting the state’s growing mold problem. Homeowners filed
more than 114,000 such claims in 2002, representing one-third of all homeowners claims
and payouts. According to the Insurance Information Network of California, water losses
paid have been on a steady upward trend since 1997, rising 151 percent to $562.4 million
in 2002 from $224.1 million in 1997 (Exhibit 6). The cost of the average water loss in
California has surged by 33 percent since 2001 and is up 156 percent since 1998 (Exhibit
7). The numbers are also growing rapidly in Arizona, Florida, Illinois, Pennsylvania and
Nevada.




                                             4
Fears Reduced

The first media reports on the mold issue in 2000 and 2001 were characterized to a large
degree by excitement bordering on hysteria. Vivid articles would frequently focus on
unsubstantiated ill-health effects which mold was alleged to have caused, in effect
warning every homeowner to fear for their families’ lives. Since then the media frenzy
has peaked, and there has been a marked shift in the content of media coverage.

By the end of 2002, press reports usually included recognition of the uncertain scientific
basis for many claims of permanent injury from household mold, and urged people not to
panic. The clear connection between the cost of mold claims and rising homeowners rates
is now a part of most stories on the subject. More media is focusing on those who are
profiting from mold fear, and there is more interest in better science. Seeking to avoid
becoming the next Texas, some 40 state insurance departments have now approved mold
exclusions and/or limitations on homeowners insurance policies. California passed the
Toxic Mold Protection Act of 2001 to define permissible exposure limits for indoor
molds and to develop new standards to assess, among other things, what health threat
may be posed by the presence of molds. Most important, individuals are less susceptible
to hysteria and more inclined to take action to clean up molds before they spread.

Commercial Lines & Mold

While the homeowners mold crisis may well have peaked in 2002, the migration of the
problem to areas of commercial insurance has the potential to affect many more lines of
business, such as commercial property, commercial liability, products liability, builders
risk/construction defects and even workers’ compensation (Exhibit 8). Insurers of
apartments/condos/co-ops, office structures, schools, and municipal buildings face the
prospect of rising claims, as building managers and owners, architects and engineers,
contractors and sub-contractors come under legal fire.

Recent lawsuits highlight the potential for increased liability in the commercial arena. For
example, several former employees of IBM recently filed suits, alleging that the company
failed to protect them from toxic mold and related health exposures at its Research
Triangle Park campus in North Carolina. Also in July 2003, employees of United Airlines
filed a lawsuit against the city and county of Denver claiming their recurring respiratory


                                             5
conditions and other health problems are the result of mold exposure at Denver
International Airport. This suit, filed in the Denver District Court, is seeking class-action
status and alleges that the city and county breached their “duty to maintain the airport in a
reasonably safe condition” by “failing to correct the airport’s poor environmental
conditions despite having knowledge of such problems”. Even though science is not yet
able to fully evaluate health claims associated with mold, these legal developments are of
increasing concern for owners of commercial buildings and their insurers.

Construction defect litigation related to mold is also on the rise. For example, in April
2003, Hilton Hotels Corporation filed a lawsuit against 18 companies and individuals
over alleged construction defects in its $95 million Kalia Tower in Hawaii. The hotel
opened in May 2001, but was forced to close in July 2002 because of mold infestation.

Claims arising from the September 11 terrorist attacks have referenced mold. A recent
lawsuit filed by the Manhattan U.S. Attorney’s Office accuses the insurer of refusing to
pay clean-up and damage costs for a post office located near the World Trade Center site.
The suit alleges that the building was hit by burning debris, causing fire and smoke
damage, shattered windows, and water damage from the building’s sprinkler system. The
water damage caused mold to grow in the post office’s walls, ceilings and air-
conditioning ducts, the suit alleges.

Impact on Availability and Affordability of Insurance

The rise in mold claims has had a direct effect on homeowners premiums in the state of
Texas and across the country. The price of the average homeowners insurance policy
today is estimated at $569 (less than one percent of the median family of four’s income
nationally) (Exhibit 9). Although the average cost of coverage rose by just 2.3 percent in
2002 according to federal statistics, prices are expected to rise by 7 percent in 2003 and 9
percent in 2004 (Exhibit 10).

While many factors affect the cost of homeowners insurance, growth in the frequency
and severity of mold claims has had a significant impact and this is threatening the terms
of homeowners coverage, the widespread availability and affordability of which has
helped propel homeownership rates to record highs in recent years. According to
Insurance Services Office Inc, the average amount paid for each homeowners claim rose


                                             6
to $4,168 in 2000, up 10.5 percent from $3,773 in 1999. The average amount paid for
each water damage claim, which includes damage caused by mold, rose by 10.5 percent
to $3,347 in 2000, up from $2,984 in 1999. As the loss situation has worsened, so the cost
of homeowners insurance as a percentage of income has climbed substantially in certain
states, and a further rise in mold claims will drive the price higher, making coverage less
affordable for consumers.

The explosion in mold claims in Texas has driven up insurance premiums for that state’s
3.3 million homeowners policyholders, who already pay the highest insurance premiums
in the country - $1,288 on average in 2002, due to the state’s exposure to a wide variety
of costly natural catastrophes including tornados, hail, hurricanes and tropical storms.
Even so, figures from the Texas Department of Insurance show that homeowners
premiums have not kept pace with the paid loss ratio which has increased sharply since
1999 (Exhibit 11).

In many states, availability of homeowners coverage has also become a problem, as
several insurers have announced new restrictions on the sale of homeowners insurance
due to the mold problem. For example, in Texas the number of insurers writing
homeowners coverage has been declining steadily and fell to 128 in 2001, down from
162 in 1997 and 276 in 1990 (Exhibit 12).

Construction Effect

Any lack of affordable homeowners insurance threatens to undermine one of the few
sectors of strength in the United States economy – construction. Despite economic
growth that slowed from 2.4 percent in 2002 to just 1.4 percent during the first three
months of this year, an estimated 1.68 million new homes will be built in 2003 (Exhibit
13). New home sales are forecast to surge by 3.1 percent to an unprecedented 1.0 million
in 2003, according to the National Association of Realtors (NAR). An additional 5.73
million existing homes will be sold - another record for the year.

However, the issue of mold has already delayed and even halted some home sales and
new constructions, particularly in problem states like Texas, Florida and California, and
this is putting jobs at risk. For example, construction of single-family homes supports
about 750,000 jobs in those three states alone (Exhibit 14) and some $8 billion to $9


                                             7
billion in wages in construction and related industries (Exhibit 15). Furthermore, condo
construction in parts of California has come to a virtual stop because of a surge in
construction defect litigation, which in turn has triggered a sharp increase in insurance
costs for contractors (Exhibit 16). The problem is fast spreading to other mold hotspots
like Arizona, Texas and Florida. In response, “right to cure” laws, which would give
builders the right to repair defects before lawsuits get filed, have been passed in five
states and are under consideration in 16 others.

Exclusions and Limits

Insurance departments in 39 states have already approved mold exclusions in
homeowners insurance policies (Exhibit 17). Mold exclusions are also becoming
increasingly common in commercial property and liability policies. Certain states also
allow insurers to establish sub-limits (either as a percentage of the policy limits of as a
fixed dollar amount) for mold remediation coverage. While some companies prefer to
create an absolute exclusion, others exclude mold but offer an attachment to the policy,
called an endorsement, which makes coverage available for an additional premium. Most
companies have inserted clarifying language into their policies, providing a tighter
definition of what is and what is not covered under the terms of the policy. In the course
of the changes, a number of insurers have developed stand-alone policies to cover mold-
related damage. All these steps are part of the ongoing effort to avert a full-blown crisis
in availability and affordability of coverage and to ensure a stable and competitive market
exists for both homeowners and commercial policyholders in the future.




Following are 17 exhibits which illustrate the key issues surrounding mold and insurance.

For additional information, see:



•      Insurance Information Institute, www.iii.org
•      Center for Disease Control, www.cdc.gov
•      Environmental Protection Agency, www.epa.gov


                                             8
•   Federal Emergency Management Agency, www.fema.gov
•   Conning & Co., www.conning.com
•   Guy Carpenter, www.guycarp.com
•   Insurance Council of Texas, www.insurancecouncil.org
•   Texas Department of Insurance, www.tdi.state.tx.us
•   Insurance Information Network of California, www.iinc.org
•   National Association of Realtors, www.realtor.com
•   Insurance Services Office Inc, www.iso.com
•   National Association of Insurance Commissioners, www.naic.org
•   A.M. Best, www.ambest.com




                                       9
                                                                                        Exhibit 1



              Documented Toxic Mold Suits
                            Former
                           Owners of
                          Sold Homes                                     Bad Faith
                             10%                                          Against
                                                                          Insurers
                                         1,000
                                                                            50%
       Builder for                       Cases
      Construction
        Defects               2,000                            5,000
          20%                 Cases                            Cases

                                         2,000
                                         Cases
              HO
         Associations
         for Improper
         Maintenance
              20%                                         Source: www.toxlaw.com; Guy Carpenter




                                                                                         Exhibit 2

                       TX: Estimated Total Number
                             of Mold Claims

   15,000
                   The number of mold claims rose                            14,706
                1,306% between 2000:I and 2001:IV
   12,000                                                          11,318


    9,000                                                  7,145


    6,000
                                                  4,033
                                          2,472
    3,000              1,933
                                1,627
              1,050

         0
             00:Q1    00:Q2    00:Q3     00:Q4    01:Q1   01:Q2    01:Q3     01:Q4

Source: Texas Department of Insurance.




                                                  10
                                                                                                                                                                       Exhibit 3



                                                TX: Average Cost Per Mold Claim*

                                                  The average cost of mold
                        $40,000                 claims rose number of mold                                                    $36,213               $34,538
                        $35,000                  claims rose 152% between
                                                     2000:I and 2001:II                                  $28,061
                        $30,000
                                                                                      $24,024
                        $25,000

                        $20,000                                    $15,402
                                                $13,719
                        $15,000

                        $10,000

                                 $5,000

                                    $0
                                            00:Q1                 00:Q2             00:Q3               00:Q4                 01:Q1             01:Q2

   *Includes loss and loss adjustment expenses.
   Source: Texas Department of Insurance; Insurance Information Institute estimates.




                                                                                                                                                                  Exhibit 4

                                                    Texas HO: Per Policy Water
                                                     Losses Have Skyrocketed
                                 $800                                                                                                                 70%
                                                                                   All Water Damage per Policy                                $714
                                 $700                                                                                                    61.3%
                                                                                                                                                              All Water Dam as % Total Losses




                                                                                   All Water Dam as % Total Losses                                    60%
    Avg. Water Loss per Policy




                                 $600
                                                                   Water damage losses per                                                            50%
                                                                                                                                      43.4%
                                 $500                                policy are up 320%
                                                                   between 2000 and 2002                                                              40%
                                                                                                                                       $379
                                 $400                   33.9%
                                                                                                             30.8%
                                                                                                                     31.0%
                                                                                                                                                      30%
                                                                                                                             27.0%
                                 $300                                                                25.1%                           24.3%
                                                                20.7%      18.0%    20.7%
                                                  $186                                                                                                20%
                                 $200                                                        17.6%                             $170
                                                                      12.4%            $128    $127    $123    $125    $121
                                                12.5%                          $114
                                 $100     $69
                                                          $88     $86    $88                                                                          10%

                                   $0                                                                                                                 0%
                                          89       90      91      92    93    94       95      96      97      98      99      00      01     02


Source: Texas Department of Insurance; Insurance Information Institute




                                                                                                 11
                                                        Texas: Mold Losses/Claims                                                                        Exhibit 5




                                                         Are Finally Moderating*
                                           $250                                                                                                     30000
   Water Damage Paid Losses* ($Millions)




                                                                      Paid Losses
                                                                      Claim Count                                                                   25000
                                           $200

                                                                                                                                                    20000




                                                                                                                                                              Claim Count
                                           $150
                                                                                                                                                    15000
                                           $100
                                                                                                                                                    10000

                                            $50
                                                                                                                                                    5000

                                             $0                                                                                                     0
                                             D -01




                                             D -02
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                                             Ap 01




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                                             M 01




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                                             O 1




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                                                      2
                                                     0




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                                                  l-0
                                                   -0
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                                                                                                              * Data are for TDI Cause 61: Discharge – Other Damage.
                                                                                                              Not all claims in cause 61 are mold and mold claims may
Source: Texas Department of Insurance; Insurance Information Institute                                        also arise from other (non-water) causes of loss.




                                                           California: Surging Water Claim                                                                 Exhibit 6


                                                                Frequency and Costs:
                                                          Symptom of Growing Mold Problem
                                                                           •Water losses paid rose 151%
                                                                           from 1997 to 2002 and 77%
 $600                                                                                                                                              38%
                                                                           since 1999                                                $562.4
 $550                                                              36%     •Water claims accounted for less                                        36%
                                                                           than 1/4 of all HO claims in           $496.3
 $500                                                                      1997, now they account for 1/3.                                         34%
                                                                                                  $441.6                                  33%
 $450
                                                                                                                        32%                        32%
 $400                                                                                                 31%
                                                                                                                                                   30%
 $350                                                                           $316.5
                                                              $298.9                                                                               28%
 $300                                                                                27%
                                                                                                            California may be                      26%
 $250                                         $224.1                                                        in a drought, but
                                                  24%                                                                                              24%
 $200                                                                                                       homeowners say
 $150                                                                                                       they’re drowning                       22%

 $100                                                                                                                                              20%
                                              1997             1998              1999             2000             2001               2002

                                                        Paid Water Losses ($ Mill)       Water Claims as % of All Homeowners Claims


Source: Insurance Information Network of California; Insurance Information Institute




                                                                                                    12
                 Sharply Rising Average Water
                                                                                                         Exhibit 7




                Claim Cost in CA: Mold Symptom
 $5,000           The cost of the average water loss in CA is                                   $4,925
                             up 156% since 1998                                 $4,597
 $4,500

 $4,000
                                                                $3,691

 $3,500                                         $3,326

 $3,000
                $2,485
 $2,500
                                $1,925
 $2,000

 $1,500
                  1997            1998           1999            2000            2001            2002

Source: Insurance Information Institute based on data from the Insurance Information Network of California;




                                                                                                         Exhibit 8

                  Mold and Commercial Insurance: the
                          Next Battlefields?
    • Homeowners issue probably crested in 2002
    • Migration to commercial area affects many lines:
            Commercial Property  Commercial Liability
            Products Liability   Builders Risk/Construction Defects
            Workers Comp…(very little)
    • Hot Spots:
            Apartments/Condos/Co-ops                            Office Structures
            Schools                                             Municipal Buildings
            Cars? (GM case in NC)
    • Trend toward class actions since science doesn’t
      support massive individual non-economic damages
            Much more lucrative for trial lawyers to form class
   Source: Insurance Information Institute.




                                                           13
                                                                                                                   Exhibit 9

                                            States with Highest
                                         Premium/Income Ratios*
                                                                   HO insurance is very affordable,
                         2.5%                                      consuming less than 0.9% of the
                                                                  typical family’s income nationally,
                                                                  but 1.24% in FL and climbing! Can
Premium as % of Income




                         2.0%
                                      1.72%                        we afford another price stressor?
                         1.5%                     1.41%
                                                          1.32%
                                                                    1.25%             1.24%

                         1.0%                                                                             0.86%


                         0.5%


                         0.0%
                                       TX          LA       MS           OK            FL                   US
      *As a % of the median family of 4’s income, 1998.
       Source: NAIC, Insurance Information Institute




                                                                                                                  Exhibit 10

                                            Average Expenditures on
                                             Homeowners Ins.: US
             $650
                                   Average HO expenditures are
                                                                                                              3




                                 expected to rise by 8-10% in 2003
                                                                                                            60




             $600
                                                                                                      3
                                                                                                    55




             $550
                                                                                              2
                                                                                            51
                                                                                  0
                                                                                50
                                                                     8




             $500
                                                                   48
                                                             1
                                                           48
                                                      5
                                                    45
                                              0




             $450
                                            44
                                  8
                                41




             $400
                              95




                                           96




                                                     97




                                                            98




                                                                    99




                                                                                  *




                                                                                             *




                                                                                                      *




                                                                                                              *
                                                                                00




                                                                                           01




                                                                                                    02




                                                                                                            03
                            19




                                         19




                                                   19




                                                          19




                                                                  19




                                                                              20




                                                                                         20




                                                                                                  20




                                                                                                          20




*III Estimates
Source: NAIC, Insurance Information Institute




                                                                         14
                                                                                                                                                                           Exhibit 11

                                  Texas HO: Paid Loss Ratio Up
                               Sharply, Premiums Haven’t Kept Pace
                         $1,400                                                                                                                                120%
                                                                                                                                                  $1,288
                                                                                            Written Premium per Policy
                         $1,200             99.4%                      100.6%               Paid Loss Ratio                                                    100%
                                                       93.3%                                                                               89.6%
                                                                                              89.7%                                                         90.3%
                         $1,000
    Premium per Policy




                                                                                                                                                               80%




                                                                                                                                                                           Paid Loss Ratio
                                                                                                                                         77.5%
                                                                           67.7%
                                                                                      70.5%
                          $800                                 65.0%
                                                                                                         58.5%                                                 60%
                          $600                                                                                   44.7%           49.1%
                                                                                                                         43.7%
                                                                                                                                                               40%
                          $400                Paid loss ratio is up 83.9%
                                              since 1999 while average                                                                                         20%
                          $200                premium is up just 41.4%
                               $0                                                                                                                              0%
                                       89         90      91      92      93     94      95         96      97      98     99      00       01         02



Source: Texas Department of Insurance; Insurance Information Institute




                                            Homeowners Insurance                                                                                                     Exhibit 12




                                           Companies in TX (1980-2001)
                                                                                                                    Chronic problems in TX
                                                   313




  325
                                                                                                                        insurance market
                                                          299
                                            290
                                     287




  300                                                                                                               discourage insurers from
                               280




                                                                  277




                                                                                              276
                                                                                      273




                                                                                                                      doing business there.
                                                                                272
                                                                         271




                                                                                                     263




  275
                         258




                                                                                                            240




  250
                                                                                                                    220




  225
                                                                                                                           204
                                                                                                                                  194




  200
                                                                                                                                         181
                                                                                                                                                 162




  175
                                                                                                                                                        151
                                                                                                                                                               138




  150
                                                                                                                                                                                    128
                                                                                                                                                                     127




  125                                                                                 59% decline in the number of HO
                                                                                       insurers between 1984 and 2001!
  100
                         80

                               81

                                     82

                                            83

                                                    84

                                                           85

                                                                  86

                                                                         87

                                                                                88

                                                                                      89

                                                                                              90

                                                                                                      91

                                                                                                             92

                                                                                                                    93

                                                                                                                           94

                                                                                                                                  95

                                                                                                                                          96

                                                                                                                                                 97

                                                                                                                                                        98

                                                                                                                                                                99

                                                                                                                                                                     00

                                                                                                                                                                                      01




 Sources: A.M. Best; TX Coalition for Affordable Insurance Solutions.




                                                                                                    15
                                                                                                            Exhibit 13

                     New Private Housing Starts
                                           (Millions of Units)
                              New Private Housing Starts
       2.0
                             •Housing market remain strong.
       1.9
                     •Virtually no exposure impact for insurers
       1.8
                                                                                         1.71 1.68
       1.7                                                        1.62 1.64 1.57
                                                                                 1.60                1.62
       1.6
                                          1.46          1.48 1.47
       1.5
                                                 1.35
       1.4
                                   1.29
       1.3
              1.19          1.20
       1.2
       1.1           1.01

       1.0
              90     91     92     93     94     95     96   97     98   99   00   01    02 03E 04F


 Source: US Department of Commerce; Blue Chip Economic Indicators (5/03), Insurance Info. Institute




                Number of People Employed in
                                                                                                            Exhibit 14




              Construction of Single-Family Homes
                                                                          Mold Puts Jobs at Risk
                                                                      Construction of single-family
                                                                       homes supports about one-
                   265,118
                                                                    quarter million jobs in states with
                                                                       the biggest mold problems
                                                        256,795



                                                                                        244,555




                   Texas                                Florida                     California
Source: National Association of Homebuilders, Insurance Information Institute
* Single family units, based on year 2000 construction figures




                                                                  16
                 Billions in Wages Depend on
                                                                                                    Exhibit 15




              Construction of Single-Family Homes

                                               $ Billions                 Mold Puts Wages at Risk
                                                                           Construction of single-
                   $8.6                                                  family homes supports $8
                                                                        billion - $9 billion in wages
                                                     $8.3               in construction and related
                                                                          industries in states with
                                                                          biggest mold problems.
                                                                                        $7.9




                  Texas                            Florida                       California
Source: National Association of Homebuilders, Insurance Information Institute
* Single family units, based on year 2000 construction figures




                     Construction Defect Litigation
                                                                                                    Exhibit 16




                     Destroying CA Condo Market
                                Ratio of Losses Paid Out
$3.00                            to Premiums Taken In                           $2.95

$2.75          Condo construction in parts of CA has
                      come to a virtual stop.
$2.50
               Insurer costs rose 58% in just 2 years!
$2.25

$2.00                           $1.87                                              “Right-to-Cure”
                                                                                    laws now in 5
$1.75
                                                                                   states: AZ, CA,
$1.50                                                                               NV, TX, WA
                                                                                        16 considering
$1.25
                                                                                          such laws.
$1.00
                                 1998                                           2000
Source: ISO, Insurance Information Institute




                                                            17
                                                                                                                                                                      Exhibit 17




                                ISO Mold Exclusions
                                          Homeowners policy mold exclusions approved by
                                        insurance departments in more than 30 states + DC*
             AL

                                  WA
                                                                                                                                                                      ME

                                                    MT         ND
                                                                                                                                                            VT
                                                                                   MN                                                                            NH

                           OR                                                                                                                                    MA
                                                                                                                                                       NY
                                                                                                   WI                                                            CT
                                                                SD
                                         ID                                                                            MI                                              RI
                                                    WY                                                                                       PA             NJ

                                                                                        IA
                                                                    NE                                                           OH                DC
                                                                                                                                                                 DE
                                   NV                                                                   IL        IN                                             MD
                                                                                                                                       WV
                                               UT                                                                                                 VA
                                                          CO
                                                                     KS                      MO                             KY
                          CA                                                                                                                      NC
                                                                                                                       TN

                                                                              OK                                                            SC
                                          AZ         NM                                      AR
                                                                                                             MS
                  HI                                                                                                   AL             GA
                                                                                                             MS

                                                                                              LA
                                                                         TX
          Exclusion Approved
                                                                                                                                             FL

          No Approved Exclusion



*As of July 29, 2002.
Source: Insurance Services Office




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