CLAIM CHECK IT'S GETTING HARDER TO ACQUIRE HOMEOWNERS INSURANCE AND IF YOU DO, YOU'D BETTER NOT USE IT.

Byline: Barbara Correa Staff Writer

In the middle of a dinner party a year ago, Robyn Goodmanson's sister-in-law pointed up to a black stripe on the ceiling of the dining room and asked what it was. ``Everybody stopped eating and looked up at it,'' said Goodmanson, whose home in Long Beach was built to order three years ago.

That dinner table curiosity turned out to be toxic mold, nurtured inside the wall for a year by a slowly leaking toilet pipe. To date, it has cost the Goodmansons several hundred thousand dollars in clean-up costs. Even worse, it has marked the family as high-risk homeowners, and no insurance company in the country will touch them.

As insurance underwriters raise premiums and toughen renewal policies, homeowners across Southern California are scared stiff that filing just one claim with their insurance company could blackball them for years and render their home unsaleable.

The trend harks back to the hostile insurance atmosphere homeowners encountered after the 1994 Northridge Earthquake. What's different this time is that the new restrictions aren't limited to any one area.

``If you have filed a water claim, you'll have a hell of a time selling your house,'' said Nancy Kramer, a spokeswoman for the California Department of Insurance. ``The concern right now is less about premium increases and more that homeowners are having a hard time getting insurance.''

``There is clearly something going on in the insurance industry that is devastating homeowners,'' said Doug Heller, senior consumer advocate at the Foundation for Taxpayer & Consumer Rights in Santa Monica. FTCR's founder, Harvey Rosenfield, authored Proposition 103, a ballot measure passed in 1988 that introduced more stringent regulation of the insurance industry, particularly auto insurance.

The culprit, from the homeowners' standpoint, is the Comprehensive Loss Underwriting Exchange, an Internet database that posts home and auto insurance claims and damage reports for up to five years.

CLUE, which has 90 percent of the insurance information-sharing market nationwide, was created 10 years ago as an information-sharing tool for insurance companies. It has always been used to track fraud and screen prospective clients, but more recently, as with credit reporting agencies, insurance companies are increasingly using it as a tool to determine who is and who is not fit for home insurance.

There isn't much homeowners - or regulators - can do about that.

``We have authority over setting rates but not over underwriting rules,'' said Nancy Kramer at the Insurance Commission. ``The insurer can say, if we don't want to cover a shake roof, we don't have to.''

In the past two years, insurers have used that latitude to restrict new business and tighten rules for existing clients.

State Farm stopped writing new homeowners policies in California last spring. About the same time, Allstate changed its policy of accepting new clients with one loss in three years to no losses in three years. Auto Club's home insurance unit has a new policy that eliminates eligibility for homes with water damage loss in the past four years, or have had two claims filed for any reason in the past five years. Longtime provider 21st Century bailed out of the California homeowners insurance market entirely a year ago.

The 9-11 effect

Up until 2001, home premiums and claims had held fairly steady through the 1990s. Then Sept. 11 hit. Even though the events were on the other side of the country from California, the $40 billion in estimated losses they incurred rippled through the industry, prompting reinsurers (companies that insure insurance companies) to restrict coverage, instantly hardening the entire industry, said Pete Moraga, a spokesman for the Insurance Information Network of California, a trade group.

Adding insult to injury, the insurance companies, like everyone else, were losing money in the stock market. At the same time, water damage claims in California were steadily rising, not just in number but in amount. From 2000 to 2001, water damage payouts in California jumped from and $383 million to $430 million, to 32 percent of all claim payments, the Insurance Information Network said. Paranoia over mold, always a consequence of water damage, also took root, with several high-profile lawsuits filed by celebrities Ed McMahon and Erin Brokovich.

As the industry responded by raising premiums (they rose 15 percent last year) and getting pickier about renewals and new insurance, consumer complaints started soaring, reflecting homeowners dumped by their insurance companies. Written complaints against home insurers filed with the California Department of Insurance quadrupled, from 312 in 2001 to over 1,200 in 2002.

The state Insurance Department and consumer advocates say they are working to introduce legislation that would add consumer protections to the home insurance market.

But until that happens, the best insurance for homeowners is to pay careful attention to maintenance.

Maintenance a must

``People should be looking at home maintenance just like you would auto maintenance. Most people know you have to check your car hoses, but they never check their pipes,'' said Pete Moraga.

The main factors behind rising water damage are that Southern California's housing stock is aging, and that there are just more homes, and thus more claims, said Joseph Bonadiman, a San Bernardino civil engineer who has testified as an expert witness in hundreds of personal injury cases.

Other factors have more to do with design and materials.

``There are still homeowners out there who live in fire areas who have wood-shingled roofs,'' which from an insurer's standpoint are tinderboxes waiting to be ignited, said Moraga.

Also, more homes are being built with the laundry room on the second floor near bedrooms.

``The number one culprit is damaged hoses to washer/dryers and refrigerators,'' said Robert Mitchell, a spokesman for State Farm. ``If one of those hoses break on the second floor, you're affecting electricity, the dry wall, carpet. It used to be washing machines were on a concrete floor in the garage.''

Another factor is that higher home values mean more expensive materials are being used in home construction, like hardwood floors. When the pipes leak, replacing those materials is more expensive.

Trade groups, like the Insurance Information Network of California, are trying to educate homeowners about basic preventive maintenance. The IINC periodically organizes free workshops at home improvement chain Lowe's that train homeowners to do basic water system inspections themselves.

In the Goodmansons' case, however, the water leakage problem - that grew a mold so strong their 5-year-old daughter's bedroom had to be hermetically sealed to clean it - was not due to poor maintenance. Rather, the pipes apparently were installed wrong by the building contractor in the first place.

The League of California Homeowners, a consumer group in Ontario, lists approved contractors on its Web site. As for claims, the association has begun advising its members to think very seriously before filing any damage claim, said Ken Willis, president. ``If it's something that's going to cost you a couple hundred dollars,'' he said, ``do it yourself.''

CAPTION(S):

3 photos, 12 boxes, chart

Photo:

(1) Robyn and Chris Goodmanson, here with daughter Kaysen, 2, have mold problems in their Belmont Shore home.

(2) A slowly leaking toilet pipe is what caused this mold damage in the ceiling above the Goodmansons' dining room.

(3) Jose Garcia works on Robyn and Chris Goodmansons' bathroom after they spent heavily to fix mold problems.

Jeff Gritchen/Staff Photographer

Box:

(1) Shop around

(2) Raise your deductible

(3) Buy home and auto policies from the same insurer

(4) If you stay with the same company...

(5) Increase home security

(6) When you buy your home

(7) Take advantage of low mileage discounts

(8) Compare policy limits and value of your possessions once a year

(9) Stop smoking

(10) Ask for senior discounts

(11) See if you can get group coverage

(12) For more information

Chart:

CALIFORNIA WATER DAMAGE CLAIMS

SOURCE: Insurance Information Network of California

Staff Graphic