Move aside asbestos, radon and lead paint – as mundane a substance as it may seem, the environmental hazard du jour is mold. Nationwide reports document the substantial concern that mold has attracted from environmental and health agencies, courts, insurance companies, employers and employees, multi-family property owners and, predictably, personal injury lawyers. Even Erin Brockovich (the real one, not Julia Roberts) has sued her builder for mold that developed in her home.
Big Verdicts
But the issue is real and the dollars are big: earlier this summer, Melinda Ballard, of the aptly named Dripping Springs, Texas, obtained a $32.1 million verdict against Farmers Insurance Group (Farmers) for Farmers' alleged unfair and deceptive handling of a claim related to the presence of mold in Ms. Ballard's 11,500-square foot home, which may ultimately have to be leveled due to the mold infestation. Farmers is evaluating an appeal, and Ms. Ballard plans to pursue additional legal action against the company for her family's health related injuries. Other awards, though smaller, are still noteworthy: $1.04 million to two tenants of a Delaware apartment building who sued their landlord to address water leaks and the resulting mold; $1.3 million to a California homeowners group who sued their builders and contractors due to the presence of mold; and in a commercial setting, $11.5 million to Martin County, Florida, which prevailed in an action against the architect and builders of the $13 million Martin County Courthouse for persistent mold in the new structure.
In addition to property damage claims, the risk of personal injury claims is substantial. In July, 2001, the Village of Mundelein, Illinois stepped in to protect the residents of an apartment building where "black mold" had been identified, ordering that the residents be relocated to alternative housing. The Village even considered a condemnation action against the property owner. Village officials arrived in gas masks to escort tenants out of the building, warning that tenants should not remain in their mold infested apartment building for more than ten minutes without a breathing apparatus.
It is estimated that there are more than 100,000 species of mold, several of which can allegedly produce hazardous byproducts known as mycotoxins. The most common "toxic" molds include Stachybotrys, Aspergillus, Penicillium, Fusarium, Trichoderma and Memnoniella. The most notable toxic mold, referred to as "black mold," is Stachybotrys. Like other molds, Stachybotrys is a slimy, greenish-black mold which grows on cellulous products (e.g., wood, paper and certain types of drywall) that have been exposed to water or consistently high levels of moisture. It is believed that these black molds generate volatile vapors which can lead to moderate health effects, including runny nose, eye irritation, cough, congestion and the aggravation of asthma. For persons who are susceptible to respiratory conditions and allergies to fungi and microbes, or those otherwise in poor health, the health risks from black molds are a greater concern. Black mold has also been linked to more significant allergic reactions and respiratory conditions. In 1994, the Center for Disease Control (CDC) concluded that there was a strong association between the Stachybotrys mold species and acute idiopathic pulmonary hemorrhage (bleeding lungs) in infants. A 1999 expert panel, however, opined that the causal link between the mold and the health ailment was not proven.
Uncertain Standards
To make the matter of mold more confusing, there are currently no legal standards for what constitutes an unacceptable amount of mold in a home or the work environment. The CDC, United States Environmental Protection Agency (EPA), Occupational Safety and Health Administration (OSHA) and state environmental and health agencies nationwide are aware of the concern and potential health issues driven by mold but have not developed rules, such as those found in other laws, like the Safe Drinking Water Act, to specify thresholds for indoor air concentrations of mold and mold spores. Nevertheless, EPA and CDC have extensive internet sites detailing the risks associated with molds and the methods to address the presence of mold in buildings. Furthermore, although it may not have standards, the United States Department of Labor recently cited the presence of mold and fungus in a workplace as a basis for a "serious" violation of the OSHA "housekeeping" standards. In OSHA parlance, a "serious" violation is one where there is a substantial probability that death or serious physical harm could result and the employer knew or should have known of the hazard.
The absence of regulatory "bright line" standards has not stopped aggrieved homeowners, tenants, employees and businesses from making claims against anyone and everyone who might be responsible for defects leading to the presence of mold in their home or workplace. Homeowners and others have argued that their architects and builders should be responsible based on negligent construction and breach of warranty claims. Tenants in moldy buildings may have claims based on the same legal theories, as well as claims based on the terms of their leases, constructive eviction and, in most states, a breach of the implied warranty of habitability. In many cases, home owners, employers and landlords have looked to their insurance for coverage. As a general rule, most policies exclude coverage for the presence of mold and fungus based upon the argument that such conditions typically arise out of faulty maintenance or the ordinary wear and tear of building ownership. However, where the mold develops as a result of a covered loss, such as a burst pipe or water infiltration, recovery against such insurance has been successful, such as in the $32.1 million Texas judgment. In an effort to avoid coverage for such losses, Farmers recently petitioned the Texas Department of Insurance to exclude all mold coverage from its homeowner's policies, regardless of the cause.
Managing Risk
In many respects, preventing or coping with a mold problem in the context of new construction, property transfer, the landlord/tenant setting or a workplace environment is a question of managing exposure to risk. Parties to construction contracts should be sensitive to the language of their agreements related to indoor air quality and mold or fungus attributable to the construction work. Similarly, while there may not be applicable standards, multi-family property owners must be vigilant in preventing the potential for mold growth. At a minimum, mold can cause tenant complaints, and in the worst case, personal injury claims, involvement by municipal building inspectors and health agencies, as well as the attendant adverse public relations. In the workplace setting, the existence of mold leading to adverse health effects can trigger employee complaints, worker downtime, and more seriously, employer citations and penalties by federal, state and local occupational safety and health agencies, not to mention personal injury claims.
To protect everyone involved, buyers and sellers of single and multi-family residential, commercial and industrial properties and businesses should consider including mold as a component of any home inspection and as a part of an ASTM Phase I Environmental Site Assessment with improved property. It is not clear whether federal, state or local agencies will develop standards for mold exposure and cleanup or whether, if developed, such a standard would require strict compliance or might simply go the way of the radon test.
What is certain, however, is that the Erin Brockovichs of the world can smell the musty odor of a whole new universe of property damage and, potentially, personal injury claims. Moreover, some government agencies, like OSHA and tenant-friendly municipalities, are prepared to demand that employers and landlords provide workplaces and apartments which are free of mold. Finally, the insurance industry, still coping with the over $20 billion legacy of asbestos, must be prepared to deal with this new scourge. Just like death, taxes, and the litigious nature of our society, mold appears to be here to stay.