This is the second article in CONSTRUCTOR's three-part series on "toxic" mold. Part I, which appeared last month, examined the question "What is 'toxic' mold?" and discussed the practical steps contractors should take to avoid mold-related problems. This article, Part II, covers the legal and financial risks that "toxic" mold creates. Next month, Part III will discuss the ways contractors can ensure that their insurance adequately covers the risks associated with "toxic" mold.

If you are interested in or concerned about mold, take heart! You have a limitless supply of articles and information about "toxic" mold. Nearly every night, the television news broadcasts stories on "black" or "toxic" mold, about homeowners who lose their homes to mold, and about public schools that close because parents fear for the health of their children. As of August 2001, you could log on to more than 21,000 websites on "toxic" mold, covering everything from "Toxic Mold Survivors"¹ to the "Sick Building Syndrome."² At least one site, "Toxic Mold & Tort News Online," even provides state-by-state information about the lawyers engaged in mold litigation.³

PERCEPTION = REALITY

From the media hype, you would think that mold is a plague of biblical proportions that has recently descended upon us. Of course mold is not a new phenomenon. Mold is older than humankind, and our acquaintance with it can be traced at least as far back as the Bible. In fact, in Leviticus, Chapter 15, you'll find what might be the first recorded mold-remediation strategy: "He shall command…that the house be scraped on the inside round about, and the dust of the scraping be scattered without the city into an unclean place: And that other stones be laid in the place of them that were taken away, and the house be plastered with other mortar."

Mold isn't new, and neither is it easily confined. It is in the air we breathe, the food we eat, and all of our homes and workplaces. For this reason, there are many in the scientific community who believe that the hysteria over mold is vastly outpacing the scientific evidence.

Despite the very real debate as to the alleged health risks associated with mold, mold is a real problem for everyone in the construction industry. Whether or not the hysteria is justified, the fear is real, and it has created a multi-billion dollar mold industry. Not surprisingly, personal injury attorneys are at the center of this trend. The construction, insurance, and real estate markets are besieged by mold litigation and the never-ending quest to locate and eradicate mold. Although the true extent of the problem may be hazy, one thing is crystal clear: At this point, the truth doesn't matter. Perception is reality, and the public perception of mold is that it is highly toxic to humans.

MOLD = BIG $$ WON AND LOST

The sheer magnitude of the mold-litigation and -remediation industry should be enough to convince everyone in the construction industry that all risk management programs have to take mold into account. Nowadays, any mold problem that develops on a construction project is likely to spawn worker compensation claims, personal injury lawsuits, and demands for immediate and costly remediation efforts. For contractors, these things translate into huge financial losses, project delays, and very bad publicity.

In the vacuum of definitive knowledge about mold, owners often take the "better safe than sorry" approach. That is to say, they reason that if mold has any chance of being as deadly as some believe, then it must be eradicated, regardless of the cost.

If you are still unconvinced that "toxic" mold is a force to be reckoned with, consider the following cases of mold litigation around the country.

FROM COAST TO COAST MOLD CLAIMS SPREAD LIKE…MOLD

• New York. In New York City, 125 tenants have sued two apartment building owners for $8 billion in damages for a variety of mold-related personal injury and property damage claims.⁴
  
  
• Texas. A Texas jury has awarded a homeowner a $32 million verdict against her homeowners' insurance carrier for, among other things, fraudulent claims-handling in connection with a claim for water damage. Ultimately, the water caused mold to develop in the house, and the plaintiff and her family complained of various mold-related illnesses.⁵ Significantly, the judgment included $5 million for mental anguish.⁶
  
  
• Florida. Shortly after its initial occupancy of the Martin County Court- house in 1989, the county complained to the construction manager about leaking windows, excessive humidity, and the discovery of mold within the building envelope. A subsequent investigation discovered water infiltration through the exterior synthetic hardcoat system and various problems with the building's HVAC systems. By 1992, the county had received numerous health complaints, and about 25 percent of the building occupants had moved out. In September 1992, the county filed suit against the construction manager, the architect, the masonry contractor, and the construction manager's sureties. In December 1992, the county evacuated the entire building. It is instructive that the county elected to evacuate the building-a decision that greatly increased the county's damages-despite the fact that neither of its mold experts specifically recommended such an action.⁷ It later testified that it could not "in good faith and good conscience" allow people to enter the building under the circumstances. Before trial, the county settled the claims against the architect and masonry contractor for $2,750,000. In the trial of the construction manager and its sureties, the jury concluded that the mold and water problems were caused by construction defects and awarded the county $11,550,000 in damages. After the court took the earlier settlement with the architect and the mason into account and added pre-judgment interest, the judgment against the construction manager soared to $14,211,156.8
  
  
• North Carolina. Like the Martin County, Fla., case, the Buncombe County, N.C., case is notable for the knee-jerk reaction of the project owner. This case arose as a result of a sudden and catastrophic release of water into a nearly completed hotel. The contractor immediately attempted to investigate the cause of the water discharge, but the owner elected to terminate the contract and hire its own professionals, who conducted extensive and costly mold remediation throughout the structure. In response, the contractor sued the owner, and the owner counterclaimed for the damages caused by the water discharge, including mold-related damages. Ultimately, the case was settled when the contractor waived its claim for the contract balance and agreed to pay the owner $6.7 million in damages.
  
  
• Elsewhere. Besides the cases cited above, there are dozens of mold-related personal injury and property damage claims pending all around the country. Often these cases are brought as class actions by a group of plaintiffs who believe they were exposed to "toxic" mold. The defendants include contractors, design professionals, owners, developers, material suppliers, maintenance companies, and anyone else involved in the construction or maintenance of a building. As you can see from the preceding cases, even in the absence of personal injury claims, the damages assessed in mold cases often soar into the tens of millions of dollars.
  
  Even if you win a mold litigation case, you will likely spend hundreds of thousands of dollars on legal fees, expert witnesses, and other expenses associated with complex litigation.
  
  

ENDNOTES

1. http://groups.yahoo.com/group/ToxicMoldSurvivors.com
2. http://www.toxic-mold-news.com
3. http://www.toxic-mold-news.com
4. Vol. 8, Mealey's Emerging Toxic Torts, Issue 6, "New York Building Owners Face $8 Billion in Claims for Mold, Fungi Contamination" 6/25/99
5. Farmers Insurance News Alert, http://members.tripod.com/alanhawk/fi-447.html, citing Ballard, et al. v. Fire Insurance Exchange, et al., Index No. 99-05252, Travis County Dist. Ct.
6. Home Owners for Better Building, http://www.hobb.org/farmersverdict.shtml, citing Verdict Sheet from Ballard, et al. v. Fire Insurance Exchange, et al., Index No. 99-05252, Travis County Dist. Ct.
7. Centex-Rooney Construction Company, Inc. v. Martin County, 706 So.2d 20, 24 (4th Dist. 1997).
8. Centex-Rooney Construction Company, Inc. v. Martin County, 706 So.2d 20 (4th Dist. 1997).

FOR MORE INFORMATION
Contact Michael F. Dehmler.
Call: (716) 473-3100
Online: mfd@ernstromdreste.com