Author: Steve Hom

So-Called “Rugged” SUVs Sustain Costly Damage in Minor Accidents

Posted on by Steve Hom

Let’s say you are in your 2003 Honda Pilot SUV backing out of a parking space and accidentally back right into another car.  Or you’re driving your 2003 Chrysler Pacifica into a gas station and you swipe a low pole you did not see.  Or you are in your 2003 model Infiniti FX35 or your Cadillac SRX accelerating after coming to a complete stop and another vehicle slams into you.  What do all these accidents have in common?  They involve midsize SUVs driving slowly that sustain major bumper damage. It may come as a shock to learn that these seemingly minor fender benders can result in repair costs as high as $2,814.     

To look at the advertising, you would think SUVs are rugged, but the truth is few have bumpers designed to withstand even a minor bump in a low-speed collision. Eight of nine 2003 midsize SUVs earned poor or marginal ratings for bumper performance in 5 mph crash tests conducted by the Insurance Institute for Highway Safety. Among the nine vehicles tested only the 2003 Honda Pilot is equipped with bumpers that resisted major damage. The Pilot earned an acceptable rating. The 2004 Mitsubishi Endeavor, 2003 Nissan Murano, and 2004 Lexus RX 330 are all rated marginal. The 2003 Toyota 4Runner, 2004 Chrysler Pacifica, 2003 Infiniti FX35, 2004 Cadillac SRX, and 2003 Kia Sorento are all rated poor.

The Institute’s series of four bumper tests includes front- and rear-into-flat-barrier plus front-into-angle-barrier and rear-into-pole impacts. The tests assess how well bumpers can prevent damage in 5 mph impacts simulating the fender-bender collisions that are common in commuter traffic and parking lots. A good bumper system absorbs the energy of these minor impacts and protects expensive body panels, headlamp systems, and other components from damage.

Most of the tested vehicles sustained major damage in minor collisions at a fast walking speed.  Average damage per test ranged from about $400 for the Pilot to more than $1,600 for the Sorento and SRX. Of the 33 current midsize SUVs the Institute has tested for bumper performance, 23 are rated poor, 6 are rated marginal, and 4 are acceptable. None of those tested are rated good.

Three of the poor performers had the largest damage costs in the rear-into-pole test. The rear bumpers on the Chrysler Pacifica, Cadillac SRX, and Kia Sorento were not robust enough to keep damage away from the vehicles’ body parts and sheet metal.  Repair costs in the pole test were about $2,200 for the Sorento and more than $2,800 each for the Pacifica and the SRX. In each case, the tailgate was crushed and needed to be replaced.

The Sorento and SRX were the worst performers overall: Damage to these two vehicles totaled more than $6,500 in all four tests. Even in the front and rear flat-barrier tests, which are the least demanding because the crash energy is spread across the whole bumper, the Kia had repair bills of more $1,000.                       

Infiniti FX35 and Toyota 4Runner also rated poor. After the front-corner test on the Infiniti, more than $2,000 damage was calculated — much of it under the bumper cover. The bumper bar was cracked and bent, the radiator support was broken, and the headlamp assembly needed to be replaced. In the same test on the 4Runner the right fender buckled and the headlamp was crushed in part because the bumper is too short and leaves the corners of the front end unprotected.

The Honda Pilot was the only SUV tested that the Institute rated as having acceptable bumpers. Only the Pilot is equipped with bumpers that did a reasonable job of preventing damage to the vehicle.                   

There are the same inadequate bumpers on many other vehicles.  Of course, auto insurers must factor in the high risk of expensive bodywork for minor accidents when they set insurance premiums, so these costs get passed along to consumers in their auto insurance premiums.  “It’s not difficult or expensive to build a decent bumper,” says Adrian Lund, the Institute’s chief operating officer. “The Honda bumper system isn’t great, but it’s the best of a sorry lot. It shows that manufacturers can build SUVs with bumper systems that prevent costly damage in a minor collision.”

Congress Turns on the Floodlights

Posted on by Steve Hom

Recently, Congress passed legislation designed to solidify the National Flood Insurance Program (NFIP) managed by the Federal Emergency Management Agency (FEMA).  This legislation comes after the program, founded in 1968, was extended for a year in January of 2003.  The new legislation will extend the program for five more years while making some important changes to staunch the flow of red ink caused by repeat claimants in flood-prone areas.  

Some of the changes Congress hopes to encourage are remedial in nature.  For example, $40 million a year has been authorized to pay for elevation, relocation, demolition and flood proofing of homes in flood zones that have been the subject of repeat claims.  Under the new legislation, the government would pay 90% of flood proofing costs, and the property owner would pay 10%.  The remediation would be optional for the homeowner, but the alternative would be bleak.  According to the Associated Press Online, one study reported that the subsidized NFIP plan costs insureds only about 38% of actuarial risk rates, costing the government about $200 million a year. Under the new plan, refusal to accept the government’s “mitigation” offer would end the subsidy for the property owner, resulting in a significant increase in flood insurance premiums.

Dissenters in Congress include Rep. Billy Tauzin, a Lousiana Congressman, who complained that the bill unfairly targets his constituency, noting that those who live in earthquake or tornado prone areas are not similarly penalized.  

The bill targets the most prolific claimants in the NFIP program. There are 48,000 properties that, within a 10-year period, have experienced multiple flood claims exceeding the deductible by at least $1,000, accounting for 25 – 30% of all claims.  Of those, the program targets the 10,000 properties that top the list for frequency and severity of claims.  Also targeted are homes whose multiple claims over time have totaled more than the value of the insured property.

With the spotlight (or floodlight?) on flood insurance, now may be a good time to review your strategy for managing your business or home’s exposure to floods, the most common disaster scenario in the US according to FEMA.  But do not make the assumption that disaster-relief will be available, obviating the need for flood insurance.  Less than half of flooding events are declared disasters, says FEMA, often leaving insurance the sole source of compensation for victims.

Flood insurance is available to protect homes, condominiums and nonresidential buildings including farm and commercial structures in participating communities.   It’s important to find out whether or not your community participates in the NFIP program, thereby making you eligible for flood insurance under the plan.   

Another important consideration is to buy insurance before an imminent flood.  Although you can buy coverage just prior to a flood, there is a 30-day waiting period before the policy becomes effective unless the flood map for your community was revised in the last year or the insurance is required to close a loan.

It is a commonly held belief that homeowner’s insurance covers floods.  While certain water damage may be covered under a homeowner’s policy, by and large most flood exposures are uncovered by any other policy (with the possible exception of an excess or umbrella policy specifically stated as excess above an NFIP backed policy).

The NFIP defines flooding as a general and temporary condition during which the surface of normally dry land is partially or completely inundated. The cause of flooding can be:

 

  • Overflow of tidal waters or inland waters;
  • Runoff, such as from rainfall;
  • Mudslides or mudflows caused by flooding; or
  • Collapse of land along a body of water from erosion exceeding normal levels.

 

To find out more about flood hazards, steps to take to mitigate flood damage or to deal with the after-effects of a flood in your community, check out the FEMA website at www.fema.gov/nfip.  Naturally, if you have any questions about flood insurance available for your home or business, call us for details.

Tips to Help Drivers Avoid Deer Collisions

Posted on by Steve Hom

When Mary Smith relocated from a densely populated area of Los Angeles to rural Kentucky, she expected her auto insurance premium to go down considerably.  After all, she reasoned that with far fewer cars on the road the risk of accidents must be lower.  Mary was stunned to find that her auto insurance premium in Kentucky was just about the same.  “How can this be?” she asked.  A big part of the answer came down to one word:  deer.

In many states the continuing explosion in the deer population has lead to a corresponding increase in deer related collisions.  And, there does not appear to be an end in sight, because the deer population continues to grow and urban habitats continue to spread to previously rural environments.

Drivers are indemnified for deer/car collisions under the comprehensive section of their auto insurance, which covers “contact with bird or animal.”  Although these accidents usually cost less than $2,000 per claim for repairs and injuries, costs can run as high as $8,000 or more depending on the vehicle and extent of damage.  According to research by the Insurance Information Institute (III), auto insurers paid nearly $1 billion in deer related claims in 2002.  Ultimately, the entire $1 billion is paid from individuals’ pockets in the form of higher auto insurance premiums.  Even worse than property damage and higher insurance rates are the risks of injuries and even deaths from deer/car collisions; approximately 100 people die and 13,000 are injured each year in deer related accidents.

Most car/deer collisions occur between the months of October and December, but a car/deer collision may occur at any time. Most of these collisions occur either between 6:00 PM and midnight or around sunrise.  As expected rural, two-lane roadways are the sites of most incidents, but deer are also commonly found in densely populated areas.

The following are some tips to help drivers avoid colliding with deer:

 

  • Notice areas posted with deer crossing signs, areas known to have a large deer population, and areas where roads divide agricultural fields and forest lands.  Slow down in these areas.
  • Survey the surrounding fields and roadsides as you are driving.  You will often be able to see deer before they get close to the roadway.
  • If you see a deer near the road, slow down and blow your horn with one long blast to frighten the deer.
  • Keep in mind that if you see one deer there are usually others nearby.
  • Use your high beams if no traffic is approaching. They will illuminate the deer sooner than low beams, allowing greater reaction time. 
  • If a deer should dart in front of your vehicle, brake firmly but stay in your lane.  Do not swerve to avoid hitting it.  This can confuse the deer on where to run.  It can also cause you to lose control.  It is less dangerous to collide with the deer than to collide with another vehicle or a tree, pole, or other roadside object. 
  • Don’t think you are protected from deer/car collisions by using deer whistles or reflectors. According to the Insurance Information Institute, “these devices have not been proven to reduce deer-vehicle collisions.”
  • As always, wear your seat belt for safety and for deer-collision safety in particular.  Most people injured in car/deer crashes were not wearing their seat belts.
  • If you do hit a deer, don’t get out of the car. An injured deer, frightened and wounded, can be dangerous. If the deer is blocking the roadway call the police.        
  • Contact your insurance agent or company representative to report any damage to your car.

 

DEER / VEHICLE COLLISIONSState and Number of Collisions (1)

Alabama 20,000 average per year
Alaska NA 
Arkansas NA 
California NA 
Connecticut 3,098 (2000)
Delaware 231 (2000) 
District of Columbia NA 
Florida NA 
Georgia 51,000
Hawaii NA 
Idaho NA 
Illinois 22,933 
Indiana 10,904 (1999)
Iowa 13,000
Kansas 9,231
Kentucky 4,000 
Louisiana NA 
Maine 4,055 
Maryland 4,229 
Massachusetts 235
Michigan 66,993 
Minnesota NA 
Mississippi NA 
Missouri 8,112
Montana NA
Nebraska 5,323
Nevada 136
New Hampshire 1,365
New Jersey 20,100 (deer carcasses removed)
New Mexico NA
New York 8,570
North Carolina 12,233 (1999)
North Dakota 3,600
Ohio 31,586
Oklahoma NA
Oregon NA
Pennsylvania 2,564 (2000)
Rhode Island NA
South Carolina 3,326
South Dakota NA
Tennessee NA Texas NA
Utah NA
Vermont NA
Virginia 5,338
Washington NA
West Virginia NA
Wisconsin 45,278(2002)
Wyoming NA 

(1) 2001 data unless otherwise noted
Source:  Insurance Information Institute

Closing the Gap When Your Car Is Worth Less Than You Owe

Posted on by Steve Hom

You probably know that the minute you drive your new car off the dealer’s lot, it loses a significant portion of its value.  If you intend to keep it for at least a couple of years, to get to that break-even point and then sell it, the loss of value may not bother you. 

That loss of value would bother you more, though, if the nearby river overflowed and your new car floated way with everything else that wasn’t bolted down.  You might still owe $20,000 on it.  However, your insurance carrier might cover it for current value and send you a check for only $14,000.  You would end up owing the bank or finance company $6,000 and have no car to show for it. 

Unfortunately, that’s not the worst news.  These days, the big discounts being offered for new car purchases are depressing the value of slightly used cars even more.   That means, in auto industry parlance, that new car buyers who finance their new cars are even more  ‘upside down’ than ever before.  Lately, the average gap between what a car is worth and what is owed on it is $2,200.

In addition to discounting widening the gap, other factors, too, are putting new car buyers in the financial hole.  One of these is the buyer’s tendency to look for longer terms and lower payments.  But the longer it takes to pay for the car, the longer it takes to reach the point at which you owe less than the car’s depreciating value.  Another is the finance industry’s desire to accommodate these buyers, not to mention gain more interest.  In California, some dealers are writing seven-year finance contracts.  (Many people recall when three-year loans were standard, four-year unusual and five-year unheard of. These days, five-year loans are common.)

Dan Kiley, reporting in USA Today, noted that Friendly Chevrolet in Dallas estimates that 90% of its customers are upside-down, often owing as much as $10,000 to $15,000 more than the car is worth at trade-in time.

Gap insurance can fix that.  Some gap insurance policies can also be worthwhile if you simply want to trade the car in during its ‘upside down’ period.

Dealers, becoming more aware of the problems these widening gaps can cause, are beginning to offer gap insurance, usually costing between $500 and $700.  But, some manufacturers, including Honda and Toyota, discount so infrequently that they find only 15% of their customers-versus 90% for some big discounters-are ‘upside down’ and may not offer gap insurance at the dealership. And, in any case, dealer gap insurance may not be as comprehensive as the gap insurance you can find through an agent.

If you finance through a bank or credit union rather than the dealer’s finance company, you probably will not be offered gap insurance, either.  In fact, you may not be able to purchase it through the bank or credit union at all.  Again, the best bet is to check with an agent, who can not only find you the best policy for your situation, but help you assess whether you need it, or would be better off directing those insurance dollars to a more immediate need. And it is likely to be more cost-effective than the insurance offered by the dealer. 

While the insurance product is most often referred to in the press and at dealerships as gap insurance, some companies, such as Progressive Insurance Company, call it loan/lease payoff coverage.  And there might be other names, but your agent will know the ones that apply to the products of companies he or she represents.

If you decide gap insurance is a good idea for your situation-and remember, you would otherwise be self-insuring for losses during the time when your car’s loan exceeded you car’s value-discuss gap insurance with your agent when you start looking for your new car.  You will want to ask your agent to investigate the instances in which a company’s gap coverage would not kick in, and how it would pay if it did.  Some policies pay replacement value for a totaled car, even if replacement value is thousands higher than when you bought the car.  Others pay only the total owed on the car.  And still others pay a percentage of the total owed, leaving you to self-insure for part of that gap.  Some companies also require that you place your collision and liability insurance with them as well, but you may well get a discount for ‘packaging’ all of it; your agent can help you through this

If you think gap insurance is just another little bill to pay, remember this essential fact: having it may make the difference between surviving the loss of a car in good shape, or in great distress.

What’s the Deal with State-Sponsored Auto Insurance?

Posted on by Steve Hom

Low-income drivers on both coasts can now get basic insurance directly from the insurance department of the state they live in-as long as that state is New Jersey or California.

Affordable, state-sponsored auto insurance could be good news for low-income drivers who need a car in the 45 states with stringent mandatory insurance rules, and a federal program for making such assistance available-the Auto Choice Reform Act-has been discussed since 1998.  At that time, the National Association of Independent Insurers (NAII) commissioned a study to determine the impact of affordable, state-sponsored insurance on the lives of low-income citizens.

The study found that, in 1991, U.S. households overall spent 2 percent of their annual income on car insurance. Low-income residents in Maricopa County, Arizona, spent up to 30 percent of their annual income on auto insurance.  But they had to have reliable private transportation to their jobs-as do most Americans-and often paid for car insurance while jeopardizing other necessary purchases.  This study found that 44.1% of respondents could not buy food at least once because that money had to be spent for car insurance.

In response to this information, California legislators made extension of the state’s mandatory insurance law contingent on developing a state-sponsored, affordable insurance program.  Naturally, the legislators expected it would be wildly popular, but experience has shown that only 4,000 drivers had taken advantage of it by 2003, for a number of reasons.

Among those reasons are:

 

  • The need to meet a tough financial eligibility rule.
  • For some, the cost-at approximately a dollar a day-was still too high.
  • Even a dollar a day was not low enough to cause already-covered, low-income drivers to switch; California’s bare-bones package offers no medical coverage to the policyholder, just to passengers.

 

In 2003, eligibility requirements and price were adjusted so that more drivers would qualify. The program now requires a policyholder’s annual income to be no more than 250 percent of the federal poverty level, or about $38,000 for a family of three. (The standard had originally been 150 percent.)

Liability coverage, at $10,000 for bodily injury to one person, is lower than the state’s minimum liability limits for private coverage, but insurance industry data show 90-percent of bodily injury claims are for less than $10,000.

The New Jersey plan, available for the first time in 2003, is slightly more extensive, paying up to $15,000 of most medical expenses due to an accident, and providing coverage for catastrophic injuries, such as severe brain damage, up to $250,000. Eligibility is based on standards for Medicaid. 

Acceptance of these policies by low-income drivers could be good news for all drivers in the states that have them.  For one thing, these policies eliminate the hassle that occurs in accidents with uninsured motorists.  This should make them attractive to the insurance industry as well as drivers.  For another, they would relieve an enormous amount of stress on low-income working families, and any stress reduction in U.S. society-particularly on the roads-would have to be a good thing.

Is there a downside for the insurance industry or for individual drivers? 

Not really, although the California program was begun partially in response to lobbying by insurance companies that wanted to impose a surcharge on drivers for temporarily dropping coverage or having been previously uninsured.  California’s legislators found that idea punitive and counterproductive.  But some states, Maryland for example, continue with very costly automatic uninsured driver coverage, and without an elective plan to cover those who have trouble paying market-priced insurance bills.  Maryland’s coverage kicks in the second a driver’s insurance lapses, regardless of the reason for the non-payment; forgetfulness, bank error, and/or poverty are equally penalized under the law.

A survey for the California Department of Insurance said that the poor want to comply with mandatory auto insurance laws.  It suggests developing a product that clearly and directly benefits the poor and is “affordable, such as an under-$300 policy that provides medical benefits and lost wage coverage.” 

That’s a small step for California…but a huge leap for states like Maryland and 42 more that have yet to consider organizing auto insurance assistance for the low-income drivers.

PIP and No-Fault-Is “Reform” the Wave of the Future?

Posted on by Steve Hom

More and more states are abandoning the PIP/No-Fault form of auto insurance in favor of a tort-based set of laws.  PIP/No Fault originated in the 1930s as an alternative to the often slow and expensive process of litigating claims.  The intent was to speed up the process by shifting the dispute resolution to the insurance companies rather than the courts.  In theory, this was supposed to reduce insurance rates, and initially rates did go down.  By the mid-70s, almost 20 states had some form of no-fault insurance laws.  However, over time, rates rose until “No-Fault” states had higher rates than tort-based states.  Beginning in 1980, states started repealing their no-fault laws, and now only nine states (Florida, Hawaii, Kansas, Massachusetts, Missouri, Minnesota, New York, North Dakota, and Utah) have mandatory no-fault laws. Eleven states plus the District of Columbia have hybrid laws (Arkansas, Delaware, Kentucky, Maryland, New Jersey, Oregon, South Carolina, South Dakota, Texas, and Virginia).

The pendulum seems to be swinging back to tort-based auto insurance. What does that mean for you as a policyholder?

The Good News

Tort-based systems, in theory, give you more choices for medical payments and could save you substantial amounts of money.  As an example, depending on the insurance company and coverages selected, insureds in Colorado (the most recent state to revert to a tort-based system) could see savings of 10%-30%, according to several recent Denver Post articles.

The Choices

PIP, or personal injury protection, is still available (in most cases), should you wish (or need) to pay for it.  If you choose to drop this coverage or are already under a tort-based system and don’t have this coverage, you can still purchase it, with most policies, for medical expenses.  However, this coverage will be limited, generally to no more than $50,000.  If the additional coverage is purchased, it will pay expenses incurred by you and your immediate family for injuries resulting from an auto accident when you or they are at fault.

Since many drivers are uninsured or underinsured, it is essential that you understand the ramifications and make an informed decision about the “Uninsured/Underinsured Motorists” coverage option.

What If?

What happens if you are at fault? Your auto policy should pay the other person’s claims.  Companies normally negotiate this with each other.  If you have insufficient coverage you may have to go to court—the tort aspect of the law. Either you or your health insurance company will normally pay medical expenses for you and your family once expenses exceed your auto policy coverages.

What if you are injured by another driver and that driver is at fault?  Generally the two auto insurance companies will work together to determine fault and pay benefits accordingly.  This resolves the problem in most cases.  If not, or if the amounts paid are insufficient, it may be necessary to resort to the court system to recover damages.

What if the other driver is at-fault and has no (or has inadequate) insurance?  Your insurance company normally covers your medical expenses.  This protection is provided under the uninsured/underinsured motorist coverage.  If you do not have this coverage, then your health insurance usually pays the bills, or you can sue the other party.  Which brings us to the final important considerations.

Consider the “Deductible Gap”

Generally, under a tort system, medical payments under your own policy are limited.  However, in most cases you can choose “additional medical payments” and “Uninsured/Underinsured Motorists” coverages as part of your auto insurance policy.  After years of rising rates, many people may choose to forgo any additional coverages.  This could be a problem if you have high-deductible health insurance, or no health insurance at all.  There is potentially a huge gap between the amount paid under a tort-based policy and your health insurance deductible.  If you have no insurance, the out-of-pocket costs could be staggering.  If you are not at fault in the accident, the tort-based system allows you to go to court to get compensated for these costs, as well as for pain and suffering, but there is a time factor and a lot of out-of pocket expenses involved.

What Does This Mean for Health Insurance Costs?

As more costs are shifted to the health insurance system, your costs are likely to rise.  Furthermore, not everyone has health insurance.

So, What Is Next?

This is a good time to look at your health insurance to make sure it covers you adequately if you drop PIP/No-Fault coverage.  It’s all about avoiding unpleasant surprises!

What’s the Deal With Generic Crash Parts?

Posted on by Steve Hom

If you were to hang around the inventory area of any major independent auto repair shop, you’d hear the statement, “Parts are parts.”  In short, generic, also called aftermarket, parts will be perfect clones of those from the automaker, or original equipment manufacturer (OEM).

The initial introduction of aftermarket parts undercut the OEM prices by 30 percent.  Even the Insurance Institute for Highway Safety believed that the only place it might matter whether a part was OEM or aftermarket was the hood.  So many insurers decided using aftermarket parts was one way to keep costs, and premiums, down.  Even so, the use of aftermarket parts reportedly never rose above 15 percent of the market, despite the efforts of the Certified Automobile Parts Association (CAPA).

CAPA was established in 1987, through the efforts of the Auto Body Parts Association (ABPA) in order to improve public confidence in aftermarket parts. Although CAPA gets significant funding from the insurance industry, collision repair experts also sit on the 14-member Board of Directors and provide substantive advice.

Despite all this, in recent years, several class action lawsuits have substantially eliminated the use of aftermarket crash parts.

The first major setback for aftermarket parts happened in 1999.  In the case of Avery vs. State Farm, a jury in southern Illinois found State Farm liable for $456 million in damages and an additional $730 million in punitive damages in a class action suit involving use of aftermarket auto parts.  The plaintiffs claimed State Farm Mutual Auto Insurance Co. had failed to tell policyholders about the use of aftermarket parts in auto repairs, violating consumer fraud laws and that, further, using those parts did not restore the automobile to its pre-crash condition, resulting in a breach of contract.  Although the award was reduced to $1.05 billion, the appellate court left the decision in favor of the plaintiffs standing.

Such rulings have caused most insurers to avoid aftermarket parts, allowing the automakers to regain a captive market, and also eliminating an opportunity for insurers to save money and pass those savings on to the policyholders.

Not long after the State Farm verdict, Public Citizen, a consumer advocacy group founded by Ralph Nader, condemned the ruling: with no basis in fact, the courts had created a virtual monopoly for OEMs in crash parts.  Worse, that monopoly was not going to serve, but rather cost, the consumer.

Still, there are a few bright spots.

In February 2003, three class action suits involving aftermarket parts-one each in Ohio, Washington state and Florida-were overturned or dismissed.

The Institute for Highway Safety did further studies, too, and, in March 2000, concluded again that the source of cosmetic crash parts has nothing to do with the car’s subsequent crashworthiness.  The test involved a 40-mph crash with identical 1997 Toyota Camry’s one with OEM cosmetic parts and one with a CAPA-certified hood (the only part originally thought to possibly require OEM replacement).  The CAPA-certified parts performed identically to the automaker parts in every significant way, reports the Insurance Information Institute.  As a result, CAPA is hoping its new term-“functionally equivalent”-will be more effective in explaining the parts’ performance than the old term used in state and local laws, “of like kind and quality.”

It is likely, however, that insurers will be wary of using aftermarket parts in the near future, unless more judgments are overturned.  Or until there is legislation clearing the way for aftermarket parts.

CAPA has produced model legislation that was introduced by the National Council of Insurance Legislators in 2002.  However, it was tabled until winter, 2005, meaning the status quo will remain at least until then.   Were it to be passed, CAPA says, the public would be protected both from an expensive monopoly and any chance of substandard parts.

Erin Brockovich Brought Mold to the Attention of Homeowners, Insurers Everywhere

Posted on by Steve Hom

The toxic mold issue gained national attention when activist-turned-celebrity Erin Brockovich testified before the California legislature in 2001 that she, her husband, and their three children were battling mold-related illnesses due to fungus that had contaminated their home. Since then, homeowners everywhere have been curious about the more that 100,000 species of mold that contaminate homes and can cause damage to the lungs and nervous system.

In fact, one of most toxic molds, Stachybotrys (pronounced “stack-e-botris”), has been found in all 50 states and grows in areas that are wet, including in leaky plumbing, sewer backups, and even around frequently overflowing washing machines. Unlike, Stachybotrys, most molds are not hazardous to you if you are healthy. Too much exposure to most molds, however, may cause asthma or hay fever or serve to worsen other existing symptoms, according to experts.

Even if mold in your home does not cause health problems, it establishes itself in the wood of your home, causing “dry rot.” This can quickly turn a homeowner’s worst nightmare into a devastating reality.

Dead mold eventually causes wood to dry and shrink, breaking up into irregular chunks. Cracks in the wood then act like straws, siphoning up moisture and carrying it to the undamaged portions of wood. Left unchecked, this process keeps recurring, continually rotting more wood, and can cause severe structural damage to your home.

Even so, insurance companies typically consider mold damage a home maintenance problem and, consequently, it is excluded in standard home insurance policies, which cover mold damage only if it is the result of a covered peril, such as a burst pipe. Mold caused by water from humidity, leaks, condensation, or flooding is excluded from coverage.

Adding insult to injury is the fact that mold claims cost insurers more than $1 billion in 2001, approximately five times the cost in 2000, according to the Insurance Information Institute. As a result, home insurers are raising their premiums and most are excluding mold altogether.

A handful of insurers now offer riders that allow you to purchase some degree of mold coverage. For information about mold coverage in your home insurance policy, ask your personal insurance agent.

Your Roommate Wrecks Your Car – Who Pays What?

Posted on by Steve Hom

If your roommate borrows your car and causes an accident, who pays what? If you both have auto insurance, your insurance will pay first and you’ll be responsible for your deductible. Your auto insurance policy insures your vehicle plus you, any relative, and anyone else using your car if the use is reasonably believed to be with your permission.

On the other hand, if your roommate causes an accident that results in serious bodily injury and property damage to another person, the actual driver’s policy will cover the bodily injury liability and the car owner’s liability covers property damaged caused by his or her car. As owner of the car, your liability insurance also covers the cost of your legal fees in the event you are sued, but if your liability limits are exceeded, the courts can attach your personal assets, such as your home, to recover damages. Liability coverage will not pay for damages beyond the limit for which you are insured.

If you lend your car to a roommate who does not have insurance, you are opening yourself up for trouble. If the damages your friend causes exceed your insurance policy limits, the injured party can come after you for medical and property damage expenses.

What if your roommate drives your car without your permission? You’re likely not to be held responsible for the damages because your roommate borrowed you vehicle without your knowledge. In this case, your roommate’s insurance will kick in first. If your roommate isn’t covered, you will need to use your collision insurance to cover the damages to your vehicle, and your liability coverage will cover damage to other’s property. Unfortunately, the insurance company will assume your roommate has permission to use your car unless there are clear indications that you denied permission or there are extenuating circumstances, such as a drunk friend takes your car without your knowledge.

If your car is stolen and then involved in an accident, you will not be held responsible for damages done to other people and their property, but you will probably have to use your collision insurance to pay for the damage to your car. In the unlikely event the thief has auto insurance, his company will not pay for his criminal act.


Regardless of the scenario, it is wise to understand your insurance policy and exactly what it covers and when. Just as important, exercise common sense when loaning your car to roommates, friends, and relatives.