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While the overall number of lawsuits being filed has been declining in recent years, there is one area that has been growing, well, like mold. Although molds have been around far longer than humans, and there is no industry promoting mold’s use like there was with tobacco or asbestos, there are still numerous approaches to filing actions in the area, ranging from personal injury to breach of contract to bad faith.
The ABA had a session at its annual meeting in San Francisco this year covering the topic, as does the California State Bar in September. In October the ATLA has a full two-day seminar devoted to mold litigation and the New York State Bar Association’s Torts, Insurance and Compensation Law Section is putting one together.
This article covers some of the litigation trends. On page two we cover some of the health issues associated with mold, and on page four is a list of resources for further information.
Behind the Rise
There is no doubt that the number of claims for mold damages have been rising. According to the Insurance Information Institute (III), repair and litigation costs related to mold claims topped $1.2 billion in 2001. The III estimates there were 10,000 mold-related lawsuits pending that year, a 300 percent increase in a two-year period. The state with the largest number of new cases was Texas, which accounted for seventy percent of all mold cases filed that year. This was accompanied by a fourteen-fold increase in the number of mold-related insurance claims in that state between the first quarter of 2000 and the fourth quarter of 2001, according to Texas Department of Insurance figures (http://www.tdi.state.tx.us/commish/news/molddata2.html).
Although the cynical would say that the rise in mold-related suits is primarily a method of keeping attorneys and experts fully employed, there are other factors which have led to its growth, including:
Population shifts – Problems with mold growth are concentrated in the southern and western parts of the country. These are also the areas with the greatest population growth. While the total United States population grew by 13.1 percent between 1990 and 2000, Florida grew by 23.5 percent, Georgia 26.4 and Texas 22.8 percent. So the population is shifting to areas likely to have mold problems.
New buildings – This population growth is necessarily accompanied by an increase in the number of housing units. These newer units are built using newer construction methods and materials which keep the building more airtight, lowering the heating and cooling costs. This air tightness, however, also tends to trap moisture inside the walls, resulting in more mold. The use of synthetic stucco also caused problems in many cases.
Rising Property Values – Double digit growth rates in housing prices means that any property damage is suddenly more costly. It is more inviting to pursue compensation for damages to a house that is now worth $300,000 than it was a few years ago when it was worth half that amount.
More plumbing – Homes are now built with more bathrooms than previously. This increases the potential for water damage and mold.
Advances in Medical Sciences – A greater understanding of potential health problems related to mold means that it is no longer viewed as just an eyesore, but as a toxin.
Increased public awareness – The I.I.I. last year did a Nexus search for toxic mold articles and found an increase from 1255 articles in 1998 to 3,685 in 2002 (based on data through May 17 of that year). Suits by prominent individuals including Ed McMahon and Erin Brockovich have added to the publicity.
Government Action – State legislatures and agencies have conducted hearings and passed new laws and regulations, most notably California’s Toxic Mold Protection Act (Senate Bill 732) which went into effect in January 2002. At the federal level, H.R. 1268 The United States Toxic Mold Safety and Protection Act of 2003 (the Melina Bill), currently in committee, commands a wide range of actions to be performed by the Environmental Protection Agency, the National Institutes of Health, the Federal Emergency Management Agency, the IRS, the Department of Housing and Urban Development, and other federal entities. Health and environmental agencies are also addressing the issue by conducting studies and publishing information. The references section on page four lists some of these.
Mold industry – The past few years have seen the establishment of a mold testing and remediation industry, complete with its own associations, which has an interest in promoting awareness of this topic. These companies promote themselves to realtors as well as to the general public.
Success breeds imitation – The last few years have seen several mold cases which have produced large returns, led by the Ballard case in Texas with its $32 million award. Large awards make it worthwhile to pursue litigation.
Causes of Action
Although no individual or company directly and intentionally causes the mold, there are still a number of ways to litigate the matter, and several different parties to seek recovery from. According to a 2001 report from Guy Carpenter & Company, Inc., Toxic Mold: A Growing Risk (www.guycarp.com/portal/extranet/pdf/mold.pdf?vid=1), of 9000 mold suits filed in the previous two to three years, five thousand were against insurance companies, one thousand against former homeowners, two thousand against builders and two thousand against home owners associations. Other targets include architects, engineers, building inspectors, property managers and real estate agents.
The causes of action are as varied as the defendants. Common ones include:
Property Damage – This would cover costs for remediation of water damage and attendant mold, as well as any lost business as a result.
Bad Faith – Actions against insurance companies for failure to pay for remediation.
Construction Defect – Failure to properly seal a home against water penetration, or for leaky pipes or air handling equipment.
Negligence – Against building owners or maintenance companies for failure to properly maintain equipment and premises so as to produce healthy indoor air quality.
Breach of Contract – This includes written and implied contract terms of usability for purchased or leased property or for maintenance services.
Product Liability – These are against manufacturers of products such as synthetic stucco or, in some states, the building as a whole can be considered a product.
Fraud – Failure by sellers or their real estate agents to disclose the presence of mold or conditions that could create it.
Given this combination of factors, it is no wonder that when the insurance information firm ISO Properties, Inc., conducted an informal survey which asked, “Do you think mold will prove to be the next asbestos?” fifty-six percent of respondents answered, “Yes, mold is a long-term crisis that will plague insurers for years to come,” and only forty-four percent saying it was “a minor concern that will fade away as the media hype subsides.”