November/December 2002

Toxic mold has been called “the new asbestos.” The popular press causes panic with articles warning of long-term health effects and catastrophic property damage. Building owners, apartment owners, developers and condominium associations have become constant targets of mold claims alleging millions in damages. A sober look at the facts shows that these claims are much more hype than reality. Armed with this knowledge, a responsible owner or condominium association can navigate through mold exposure and mold claims to a successful resolution.

The rise in mold claims can be traced to changes in building construction in the last thirty years. Building codes were revised so buildings would be built “tighter” and the industry saw a rise in the use of paper products in construction. These changes created more warm, confined spaces in walls, floors and ceilings surrounded by paper based food sources for mold and fungi. Add water intrusion from a poorly constructed exterior or a leaking pipe and presto! You have mold.

There are four types of human reactions to mold: (1) simple allergic reactions; (2) skin and membrane irritations; (3) infections; and (4) toxicity. Scientists essentially agree that mold can cause allergic reactions and irritations, and infections in those with compromised immune systems such as the elderly, infants or persons living with fly/AIDS. Scientists also agree that moving affected people from the mold-impacted environment causes most of these symptoms to disappear. The big controversy is whether mold causes long-term health effects, Le., the “toxicity” of mold.

While there are a number of allegedly hazardous molds, the king of mold claims is Stachybotros, often called “black mold” or “toxic mold” by the popular press. Plaintiffs have alleged everything from respiratory tract problems to neurological damage and brain disease as a result of Stachybotros exposure.

Sound science does not support these claims. The Texas Medical Association just released its long awaited report entitled “Black Mold and Human Illness” in September 2002. In that report, the TMA concluded that “adverse health effects from inhalation of Stachybotros spores in water-damaged buildings is not supported by available peer-reviewed reports in medical literature.” In short, the science does not support a leap between Stachybotros exposure and long-term health effects — the sine qua non of most personal injury claims.

It should be noted that the scientific jury is still out. Additional studies are presently being undertaken to determine the effect of Stachybotros exposure on long-term health. The results of these studies could go a long way to determining whether mold exposure claims have any liability in personal injury litigation.

Personal injury claims based on mold exposure have a checkered history. Jury verdicts have ranged from defense verdicts to seven figure awards based on alleged long-term health impacts. The largest personal injury verdicts have one thing in common which has nothing to do with science or the law — cold, unresponsive and uncaring defendants. The cases with large jury awards usually involve a builder, landlord or condominium association that ignored complaints of leaks and water intrusion, failed to remediate discovered mold or did not relocate people from mold-impacted housing. How do you avoid being that uncaring defendant? Act responsibly to repair the cause of water intrusion and remediate mold and do so when your tenant or unit owner puts you on notice of the problem, not years later.

In stark contrast to personal injury claims, claims based on property damage from mold exposure have been well received by the courts. Mold spores tend to settle on all available surfaces and are easily disturbed. That disturbance puts mold spores in the air, which can cause the allergies, irritations and infections scientists agree can be caused by mold.

The property damage to the building or home itself is generally treatable. There are available remediation techniques to remove mold from wall and floor cavities, wood framing, roof sheathing and hard surfaces. Impacted drywall, carpeting and other soft goods can and should be removed and replaced. The source of water intrusion can be located and repaired. In short, inhabitable space can be repaired for future use.

There are fewer options for damaged personal items. There are available methods to clean furniture and similar items, which can work in instances of mild or moderate exposure. There is little that can be done with significantly exposed items. In fact, most dry cleaners will not even take clothing with significant mold problems! These items may simply have to be replaced.

The logical place to look for financial assistance when dealing with a mold problem is property and liability insurance. Unlike asbestos, insurance carriers are not likely to provide much help without a fight.

Insurers will generally try to deny coverage for mold claims based on either mold and fungi exclusions or the pollution exclusions in property and liability policies. Insurers began writing mold exclusions into these policies in the late 1990s. Most property and liability policies purchased today will contain an endorsement purporting to exclude coverage for property damage or bodily injury due to mold or fungi exposure. While these exclusions have yet to be tested, it is unlikely these policies will provide significant help for the costs of remediation.

Policies without the “mold exclusion” may provide some assistance. These policies generally contain a pollution exclusion that may provide coverage if a policyholder can show an “accidental and sudden occurrence,” such as roof collapse or catastrophic plumbing leak. There is some hope, however, that policies without a mold and fungi exclusion can be tapped to provide a source of funds.

It is critical to identify and assemble the appropriate team of professionals to handle the legal, technical and insurance issues in a mold claim. It is critical to retain a technical firm with the resources necessary to handle all the technical aspects of the project from assessment to remediation.

Choosing the proper legal professional is also critical. The lawyer will have a variety of roles in retaining other professionals, defending tenant litigation, prosecuting insurance litigation and negotiating with governmental entities. The best approach involves a team of lawyers with significant real estate, governmental and litigation experience who can significantly limit the potential liability while maximizing recovery from insurance assets and other potentially responsible parties. A qualified and experienced legal team is critical to maintaining control over costs, publicity and result.

If you are a multi-family dwelling owner, developer or condominium association, make no mistake about it — you are the target of these claims. What should you do when faced with these mold claims?

The answer is simple — act responsibly. Deal with mold claims directly and do it without undue delay. Relocate the inhabitants of mold-impacted units, remediate affected units and repair any entry point for water or plumbing problems. Hard and treatable surfaces in the units should be cleaned and soft goods that cannot be cleaned should be replaced. All available insurance assets should be marshaled and carriers should be put on notice of any actual or potential claims. A timely response to the complaints and claims of tenants and unit owners not only decreases the likelihood of potential injury and damage, it substantially decreases the possibility of expensive and time-consuming litigation. Mold is not the new asbestos. Mold claims can be successfully managed by experienced legal and technical professionals. The key to successful management lies in a timely response. To ignore these problems is to act at your own peril.

A version of this article first appeared in the November 4, 2002 issue of the Los Angeles Business Journal.

If you have any questions regarding this bulletin, please contact Barry MacNaughton, Esq., at 310.281.6342 or bmacnaughton@ecjlaw.com. If you would like a copy of this publication sent to you directly, or if you would like to reprint this article, please contact Cynthia S. Kaiser at 310.281.6328 or ckaiser@ecjlaw.com.

Real Estate Reporter

Toxic Mold - It’s Not The New Asbestos