After years of staggering losses, in part due to the advent of the mold crisis, the insurance industry has recently made some startling changes:

• Insurers have raised property insurance premiums as much as 50 percent in some areas such as Texas and California, and are limiting their coverage and liability for events associated with water damage and the growth of mold
• Insurers are refusing to write new policies in some states with high water damage claims

It's a real estate industry nightmare, and it is only getting worse. Insurers are looking for all the ammunition they can get to avoid losses.

Now Realtors are reporting that some insurers are refusing homeowners' coverage to buyers on some homes which have had prior claims.

"It has happened to us," says Mick Curtis, vice president of Long and Foster Realtors., Inc.. Curtis declined to give specifics about his sellers' situations, but used this hypothetical example to illustrate how prior claims can kill a real estate transaction.

"Four years ago, if the seller had a leak in the roof, there may be moisture remaining there that may lead to mold," he says. "The buyers could be declined insurance not because of anything they have done but because of the history of the house."

How can that happen?

Insurers have access to a ten-year-old database called the Comprehensive Loss Underwriting Exchange Property Database (CLUE). This database tracks claims on properties and property owners. CLUE is a voluntary repository supplied by carriers of homeowner's insurance policies for the nation. It can tell an inquiring insurer the name and address of the policy holder, and whether there has been a claim for water, earthquake, tornado, fire and other losses, and the damage claim amount paid.

If the insurer thinks the house is a poor risk for another catastrophe, a homeowner's policy can be refused to the buyer. Without insurance, the buyer can't get a loan, and that's a hurdle that has some agents taking preemptive action.

Curtis says his company is changing the way it trains agents to deal with the issue.

"When we take a listing, one thing we do is interview the seller to find out possible obstructions that could be posed to the seller that they aren't aware of," says Curtis. "For example, one thing is second mortgages and liens, and they might not realize that they have to bring money to settlement. We have an interview where we try to find out everything about the house, so there aren't any surprises at settlement.

"We now tell agents to ask, 'Have you made a claim to your insurance company in the last five years?' If the seller has, we ask them to contact CLUE, where they can see if their house has been put in the CLUE database. If they are aware of it, they can tell the buyer the situation," continues Curtis.

What if there was a leak that the seller filed a claim to have fixed? "If there is a report," says Curtis, "we want to find out the nature of it, and then we determine whether or not it is likely to red flag the property to insurers. If the claim has anything to do with water, it is likely to be a red flag. Then you need to inform the buyers agent that this exists before they go to contract."

What about the buyer? "We are telling buyers to get insurance coverage right way," suggests Curtis. "As soon as you become the contract purchaser, contact the insurance company and make sure the house is insurable."

According to Choicepoint.net, the developer of CLUE, the CLUE Property Database is also available to consumers.

Richard Collier, vice president of marketing and sales for ChoicePoint, says that the CLUE reports are an important tool for buyers and sellers, but cautions that they can't be used to check out properties. CLUE property reports can be obtained by the buyer concerning his own claims records, but the buyer cannot access the sellers' report except through an insurance agency which may say whether or not the home is insurable, or unless the seller gives him a copy of the report.

"I wouldn't buy a home unless the seller gave me a copy of their CLUE report," says Collier. "Realtors will be at an advantage when they do a listing to have the seller come to ChoicePoint and get a copy of their CLUE report to show potential buyers."

Collier adds that potential problems don't always come from the seller. Buyers need to be aware of their own claim histories, especially if they have had multiple claims. Buyers with histories of frequent claims are also being turned down for coverage on next-home purchases.

"If there were claims for a burglary because there were no alarms and a fire, because of a grease fire stared in the kitchen, the insurer may assume that this person is claim-prone," says Collier.

For those reasons and more, ChoicePoint is making a variety of reports more readily available to consumers.

"The first product for consumers will be insurance scores which will become available this month," says Collier. "It will work much like a credit score if they were going for a loan. Insurance scores predict future loss."

Starting in September, CLUE property reports will be accessible online at www.choicetrust.com. Until then, consumers can access a PDF file at www.choicetrust.com for print download, fill out the form, attach a check for $8 and send in the request for a report. While the mail-in method takes a few weeks, the online version at $12.95 will be available instantly.

Will CLUE reports become a standard disclosure for sellers? Will agents insist that buyers get prequalified for loans and get a copy of their insurance scores before they take them home viewing? These are questions that only the industry can answer, but the trend is that both could become true in the near future.

Collier notes, "The CLUE property reports only denote claims. Seven out of ten CLUE reports have no claims, so they should get a report that says 'No claims on file.' Out of the remaining three, there are 18 to 20 different loss types from burglary, fire, to slip and fall. This could be a positive. A buyer can go to the insurance company and say I have verification, now where can I get the best rate?"

Says Curtis, "The important thing to know is that yes, it is happening, and it can be a real problem if insurance is done at the last minute. If the sellers are in the CLUE database, we can deal with the issue before it goes to settlement. There are insurance companies that don't use the CLUE to determine rates, but we want to prevent the worst situation, and that is that the buyer has gone through the whole buying process and then they are told by their insurance company that they can't get a policy."

Published: August 5, 2002

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Blanche Evans is the award-winning senior editor of Realty Times, the Internet's leading independent real estate news service. She is featured daily on the Realty Times Video Network in the "Realty Viewpoint" segment. Blanche has been named one of the "25 Most Influential People In Real Estate" by REALTOR Magazine, and has been twice recognized as a "notable." In 2005, she was named "Top Reporter Covering the NAR" by Delahaye-Bacon's. Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. To contact Blanche, email her at . For more articles by Blanche, click here.