Standards Needed for Mold Exposure, Testing, and Remediation
April 2004
Richard Zarandona and Kent Holland discuss
the mold litigation explosion, defective construction as the alleged cause of
mold growth, the health effects, and the need for standards.
by Richard Zarandona and J. Kent Holland Jr.
Arch Insurance
Group Inc.
Currently, federal or state established standards of safety thresholds for
mold exposure are nonexistent. Scientific agreement has not even been reached
on whether mold (or various types of mold) are hazardous or injurious to health.
Nor are there standards for mold testing and remediation.
The only authoritative standard we have found for examining, monitoring,
and remediating mold was written several thousand years ago. That's right. It's
found in the Bible—Old Testament (or Pentateuch) at Leviticus 14:33-45. With
regard to mold or "spreading mildew," "The Lord said to Moses," that if an owner
of a house sees mildew in his or her house this is what must be done:
- The owner of the house must go and tell the priest, "I have seen something
that looks like mildew in my house." The priest is to order the house to
be emptied before he goes in to examine the mildew, so that nothing in the
house will be pronounced unclean. After this the priest is to go in and
inspect the house. He is to examine the mildew on the walls, and if it has
greenish or reddish depressions that appear to be deeper than the surface
of the wall, the priest shall go out the doorway of the house and close
it up for seven days. On the seventh day the priest shall return to inspect
the house. If the mildew has spread on the walls, he is to order that the
contaminated stones be torn out and thrown into an unclean place outside
the town. He must have all the inside walls of the house scraped and the
material that is scraped off dumped into an unclean place outside the town.
Then they are to take other stones to replace these and take new clay and
plaster the house. If the mildew reappears in the house after the stones
have been torn out and the house scraped and plastered, the priest is to
go and examine it and, if the mildew has spread in the house, it is a destructive
mildew; the house is unclean. It must be torn down—its stones, timbers and
all the plaster—and taken out of the town to an unclean place.
Today, in a world without standards, we are more likely to get less consistency
and more unpleasant surprises, as described in the Texas newspaper report below.
Texas has been one of the states with a skyrocketing number of reported cases
of mold related claims by homeowners. According to an article by reporter Ed
Timms in the Dallas Morning News (February
16, 2003), "Across the state, Texans whose homes were gutted, or left unfinished,
say they are casualties of botched mold remediation. Some fly-by-night companies,
they say, have abandoned jobs after stripping the interior of houses to the
studs."
Furthermore, "homeowners complain that mold remediators failed to properly
contain mold in their homes, charged for services that were not provided, forged
signatures, falsified claims and walked away with the jobs unfinished." The
newspaper reports that one Dallas homeowner was billed three times the tax value
of his home, and that numerous others were billed for cleanup costs that exceed
their home's value. The article goes on with example after example of homeowners
who have had terrible experiences with contractors they hired to remediate their
homes of mold.
The Dallas Morning News reporter asks
rhetorically, "What does it take to be a mold remediator?" and he answers, "While
the state requires manicurists to complete 600 hours of instruction in an approved
program, the training requirements for mold remediators are not quite so rigorous:
There are none." He then quotes Brenda Wells, a University of North Texas associate
professor of insurance and director of the university's Financial Services Center
as follows: "You've got to have a license in this state to kill bugs, but you
don't have to have a license to tell an insurance company you need to spend
$50,000 instead of $5 to clean up mold. I literally can take out a Yellow Page
ad tomorrow that says I'm a mold remediator [and] I don't know the first thing
about cleaning up mold."
The Mold Litigation Explosion
Mold is turning to gold for plaintiff's lawyers. An article in the American Bar Association (ABA) Journal (December 2001), interviews Alexander Robertson IV, an attorney in California
who has earned "multimillions" for his firm handling toxic mold litigation.
When asked how many cases he had, he answered, "Thousands—I don't want to count
them." He explained, "The use of asbestos isn't occurring anymore, and most
of the asbestos products were done away with. With mold, it's naturally occurring,
and the supply is endless."
Another attorney quoted in the ABA Journal article, Guy Keith Vann, says, "I've learned these can be terrific cases from
the plaintiff's perspective, in terms of the percentage of cases that turn into
money vs. cases that don't." He obtained a $1 million toxic-mold verdict that
was sustained on appeal in the case of New Haverford
Partnership v Elizabeth Stroot, 772 A2d 792 (Del 1999).
From reading through numerous articles on the subject of mold threat, in
newspapers, magazines, and journals, it is apparent that there are a growing
number of lawsuits and claims alleging that homes must be remediated or even
destroyed because of a mold "problem." Yet, many of these same articles and
papers quote extensively from medical specialists and other professionals who
state as a general proposition that mold is not a problem for people other than
those who have allergies, and that even then, it is not nearly the problem it
is made out to be.
It has been estimated that over 10,000 cases related to mold have been filed
in the United States. And the number seems to be growing exponentially. Construction
contractors are brought into these cases on the theory that their defective
means, methods, and procedures of performing their work caused water leakage,
condensation accumulation, or other conditions that caused the growth of mold.
Design professionals are being brought into these cases on various theories
such as specifying improper materials for construction, failing to specify a
design to effectively eliminate or minimize mold growth, and failure to adequately
monitor or review construction during the construction phase of the project.
Suppliers of various materials such as wall and roofing materials and water
pipes and couplings are being sued on theories such as their materials (a) failed
to keep water from infiltrating a building, (b) failed to allow water to seep
back out of a building, (c) were too easy a source for mold to grow, or (d)
in the case of pipes and couplings, were too subject to leakage inside of wall
cavities. As seen from the newspaper articles cited herein, the remediation
firms that are subsequently hired to repair water damage and remediate mold
are also subject to suit for faulty workmanship during remediation.
Joy Victory reported in the Corpus Christi
Caller Times (November 3, 2002), "Mold claims filed with insurance companies
have taken off in just the past few years. Farmers Insurance Group had 11 mold
claims filed in 1999 and 10,813 in 2001. The average cost of cleaning up mold
also grew eight times between 2000 and 2001, going from $17.09 per policyholder
in the first part of 2000 to $147.68 in the second quarter of this year, according
to the top three insurance companies in Texas."
Connecting Mold to Adverse Health Effects
According to the Corpus Christi Caller Times article, the Texas Medical Association's Council of Scientific Affairs commissioned
a literature review and found no reputable studies linking health problems to
mold. They concluded that black mold only causes problems in people who are
allergic to it. And for those who are allergic to the mold, the newspaper cited
professional allergists for the conclusion that "The allergy symptoms probably
will be no worse than a cat or dog dander allergy, causing symptoms such as
congestion, sneezing and watery eyes. In some people, it can cause asthma-like
problems."
The supervisor of health hazard evaluation with the Wisconsin Department
of Health and Family Service, William Otto, was quoted by the Milwaukee Journal Sentinel (December 13,
2002, Michele Derus reporting), as saying, "There's a lot of debate out there
about what symptoms are from mold and what aren't. To us, the health effects
are allergy-type symptoms. Maybe 20 percent of the population has some type
of sensitivity. But at what level does someone get sick? That seems pretty much
an individual thing." Otto was further quoted as saying, "That doesn't mean
we can't address the problem. We emphasize getting at the moisture source, fixing
it and getting rid of the contamination. More and more state health departments
are following that philosophy."
But there are certainly numerous reported instances where individuals have
asserted that their health was so significantly impacted by mold that they could
no longer work or enjoy a good quality of life. In the Detroit Free Press (February 18, 2003)
Patricia Anstett reported the story of a medical doctor who, after his building
was renovated in 1999, started sneezing, suffering with itchy eyes, nosebleeds,
shortness of breath, skin rashes and fatigue. Environmental health firms found
"foul-smelling black mold substance blanketing his office—the result of several
flooding incidents that were attributed to a construction flaw." Prior to the
renovation, it is reported that he hadn't missed a day of work in 28 years,
but due to his worsening in the months after the renovation, he hasn't worked
since November 25, 2000.
Courts in some jurisdictions have permitted testimony linking adverse health
to mold exposure. See, for example, Mondelli v Kendel
Homes Corp., 631 NW2d 846, 856 (Neb 2001) (plaintiff alleged asthma–related
symptoms from mold). Courts in other jurisdictions, however, have excluded testimony
attempting to make the link between mold exposure and adverse health. See, National Bank of Commerce v Associated Milk Producers,
Inc., 22 F Supp 2d 942 (ED Ark 1998).
Defective Construction Is the Alleged Cause of Mold Growth
Some reasons offered for the recent increase in mold litigation include the
following: (1) fast construction during the housing boom of the past several
years has led to faulty workmanship; (2) also as a result of the fast pace of
construction, lumber has been used before it sufficiently dried and materials
have been permitted to lay uncovered and exposed in the weather before their
use; (3) complex designs with multiple roof angles and gables, skylights, innovative
angular and tiered wall systems, and the like have exacerbated the likelihood
of leakage; (4) as buildings have become more air-tight, they may prevent materials
that get wet, either by condensation or leakage, from drying out; and (5) building
materials that are being used today are more susceptible to mold growth. The
number of theories and potential defendants seems to grow almost as fast as
mold itself.
As with the medical building renovation reported in the Detroit paper, it
appears that many of the reported cases of mold problems began following renovation
or remodeling of an existing house or office. In many other cases, the problem
is alleged to be caused by faulty new construction that permitted leaks of water
into the building from roofs or wall systems, or from interior water pipes.
Other cases have alleged that condensation from HVAC systems has caused or contributed
to the growth of mold.
In another article in the Milwaukee Journal
Sentinel (December 29, 2002), reporter Dan Benson describes the situation
of a Michigan family that moved out of their house into a hotel for 2 months,
and then into a rental home (all at insurance company expense) following a remodeling
job on their home. They allege that faulty workmanship resulted in leaks and
condensation around light fixtures, causing mold to grow on the roof sheathing,
soffit area, and even in the basement. Now they are in a dispute with their
homeowner's insurance company over repairs and damages.
A jury in one Texas case awarded judgment for a homeowner against her homeowners
insurance carrier in the amount of $32 million, on a claim property damage,
bodily injury, and mental anguish, all resulting from water damage and mold.
In Florida a jury awarded judgment over $11 million to Martin County Florida
against a construction manager and its sureties for water damages and mold caused
by construction defects. There was water infiltration through the exterior synthetic
hard coat wall system and there were problems with the HVAC system. A significant
part of the County's monetary damages arose from its decision to vacate the
entire building while construction problems were corrected and remediation was
carried out.
The Insurance Company's Perspective
Insurance premiums have historically been based upon actuarial information
and underwriting guidelines that were in place before the massive mold litigation
began. Consequently, the premiums collected have only covered risks and losses
from the old bread-and-butter issues surrounding design and construction. Insurance
companies that are defending against mold-related claims, and in some instances
paying significant damages for mold-related claims, are being hurt financially
because of insufficient collected premium to cover unforeseen claims on risks
for which they charged no premium.
With new insurance policies for homeowners, and for design professionals
and contractors that are involved in home design or construction, insurance
companies are at significant risk unless they do something to limit their own
exposure to loss resulting from claims alleging damages arising out of mold-related
matters. For reasons such as those discussed in this newsletter, insurance companies
currently underwriting policies such as these are finding it difficult, or even
impossible, to evaluate the risk of potential mold-related damages and claims.
Without actuarial data and scientific information to assist the underwriters,
it is impossible to know how much premium is actually necessary to cover the
potential risk. In the absence of standards for mold exposure and for mold testing
and remediation, it is hard to see how this situation will change anytime in
the near future.
In the meantime, some insurance companies are devising ways to provide limited
mold coverage to some of their insureds, while at the same time protecting the
insurance company against the financial disaster that could ensue from an avalanche
of mold claims. For example, it may be possible to endorse policies to provide
a sublimit of coverage for mold. A design professional liability policy or contractor's
general liability policy, for example might include an endorsement stating that
damages related to mold shall be limited to a dollar amount less than the full
policy limit. Another approach is to limit coverage to property damage only,
and to specifically exclude bodily injury claims. It is likely that for the
foreseeable future, decisions concerning the terms, conditions, and amounts
(if any) for granting mold-related coverage in new policies will be made by
insurance carriers on a case-by-case basis.
Need for Standards
It is clear that there is a need for standards related to mold. Until standards
are established, it will be hard for insurers to cover design professionals
and contractors for this exposure. Many of these firms may have to operate without
coverage or with limited coverage that may expose them to serious financial
risk. Standards are needed now, and they need to address, at a minimum, licensing,
and certification of mold evaluators and mitigators. Standard testing methods
are needed to enable accurate and consistent analysis of the potential problems.
Establishing criteria and methodology for clean-up must be accomplished in order
to determine a reasonable standard of care for designing and carrying out mold
mitigation efforts.
Finally, more research needs to be done by the medical community to develop
quantitative exposure guidelines and causal links to health effects. A cooperative
effort between local, state, and federal agencies is needed—and needed soon—so
that we can move ahead from the biblical standards for dealing with mold in
earthen houses to the standards required by a modern society.
Acknowledgement: This article was originally written for publication in Environmental Risk Briefings, a newsletter
published by Arch Insurance Company. The Briefings are available at the Arch
Insurance Web site.
Richard Zarandona is a senior vice president for the Arch Insurance Group where he directs and
manages the Environmental and Design Professional operations. He holds an MBA
degree in finance from the Silberman School of Business. He also has a master's
degree in engineering and is a licensed professional engineer in numerous states.
Mr. Zarandona has spent more than 25 years working in the environmental and
insurance fields. He has provided expert testimony for environmental projects
and has managed Phase I and Phase II site assessments, site remediations, and
numerous federal and state cleanup actions and studies.
Copyright © 2004. ConstructionRisk.com, LLC
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author’s employer or IRMI. This article does not purport
to provide legal, accounting, or other professional advice or opinion. If such advice
is needed, consult with your attorney, accountant, or other qualified adviser.