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.
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 insurer 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 insurers 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.
Acknowledgment: 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 website.