Mold: Should your client be worried about it?
Don't dismiss the danger
By John M. Simon and Thomas J. Trautner Jr.
Is toxic mold the new asbestos when it comes to
litigation?
This past decade has seen multimillion dollar verdicts in
toxic mold cases resulting in a consumer media blitz. By way
of example, more than 8,000 articles and stories about toxic
mold have appeared in the media since 2000. See Gordon
Stuart Gordon, "Was the Media the Medium for the Mold
Crisis," National Underwriter, Property &
Casualty/Risk & Benefits Management Edition, p. 24
(Feb. 17, 2003). Even a celebrity like Ed McMahon has joined
the chorus of outcries against the toxic mold menace,
claiming its responsibility for the death of his dog
"Muffin."
The media's focus on toxic mold may just be getting started.
One can't help but consider the episode of "48
Hours" featuring Erin Brockovich. She claimed her home
was overrun by mold, making her sick, and making her house
uninhabitable. Is this a signal of things to come? Given the
movie profits and Oscar-nods received for telling the story
of her past litigation struggles, it is entirely possible
that somewhere in Hollywood right now, somebody is thinking
about a movie sequel staring toxic mold.
Warranted or not, this level of media attention has created
an avalanche of insurance claims and lawsuits that will not
soon go away. By way of example, while there were
approximately 9,000 mold and mildew-related cases filed in
the United States and Canada between 1990 and 2000, Farmer's
Insurance reported 10,150 mold-related claims in the first
10 months of 2001 alone. See Del Williams, "Toxic Mold
Claims Demand Insurer Action," Claims, No. 8,
Vol. 50; Pg. 69 (Aug. 1, 2002).
Given this level of increase, if you haven't already, it is
probably only a matter of time before you receive a phone
call from a client facing a mold dilemma. No doubt your
client will be panicked having read or seen too many media
articles on the subject. As your client's trusted adviser,
it is your job to know what to do. Unlike most script
writers in Hollywood, however, your job will require you to
be able to answer the question: What is toxic mold?
As a matter of simple biology, certain molds produce toxic
chemicals to inhibit or prevent the growth of other
organisms competing for their environment. See "The
Truth About Toxic Mold; Indoor Mold May Cause Health
Problems, But There Is More Fear Than Fact To Toxic
Mold,'" Harvard Health Letter, No. 3, Vol. 28,
Pg. 0 (Jan 1, 2003). Collectively, these chemicals are known
as "mycotoxins" and indeed, some of them are
harmful to people.
By way of comparison though, of the more than 100,000
species of mold in the world, only about 50 or so are toxic
to human health. See David F. Blundell, "Proliferation
of Mold and Toxic Mold Litigation: What is Safe Exposure to
Airborne Fungi Spores Indoors?," 8 Envtl. Law.
389, 391 (Feb. 2002). Of that number, only about three
species are typically the cause of toxic mold litigation
— stachybotrys, penicillium and aspergillus. Thus, the
term "toxic mold" is not scientific in origin, but
was rather haphazardly coined to refer to the few molds
found in homes and buildings that produce toxins.
Although toxic molds do exist, it is important to keep in
mind that most, if not all, homes and buildings in the
United States have some form of mold growing in them.
Contrary to the inference created by the media, the simple
presence of stachybotrys, penicillium, or aspergillus in
some of these homes and buildings does not mean that the
occupants have been harmfully exposed to toxic mold.
Fundamentally, there is a tremendous lack of understanding
in the scientific community as to what level of exposure to
toxic mold will result in physical harm. See Harvard
Health Letter. Typically, indoor molds are measured in
"colony forming units" (CFU) through various
methods of indoor air-quality analysis. While the total
number of indoor versus outdoor CFUs of a harmful mold
species can be compared as a potential benchmark to suggest
whether harmful levels of toxic mold are present inside a
building, no definitive standards have been set forth to
clarify the question.
Bearing this in mind, you can tell your clients not
to live in fear that the discovery of mold will
automatically equate to million-dollar lawsuits and
emergency building evacuations. Nevertheless, because toxic
mold can cause your clients to face liability or loss, your
first step in protecting them should be to simply advise
them how to avoid a problem in the first place. Toward this
end, your clients should:
Immediately fix water intrusions (plumbing leaks, roof
leaks, etc.); Regularly inspect and maintain heating, ventilation and
air conditioning systems (for example, drip pans should be
kept clean and unobstructed); Maintain indoor relative humidity to between 20 percent
and 60 percent (by dehumidifier if necessary); Fix drainage and grading problems so that building
foundations do not stay wet; and Clean up and dry wet spots within 48 hours.
See Daniel Woody, "Address Water Intrusions To Stop
Toxic Mold," Business Insurance (Nov. 25,
2002).
If one of your clients already has a mold problem, you
should advise to take immediate steps to investigate, and if
necessary, remediate the problem. This is especially
important if your client could be liable to building
occupants who may have been exposed to toxic mold. When it
comes to litigation, your client does not want to face an
angry jury for ignoring a problem to the alleged detriment
of someone's health.
Faced with the discovery of mold, your client should follow
the EPA's advice in its handbook on "Mold Remediation
in Schools and Commercial Buildings," U.S. EPA
Report, 402-K-01-001, by first assessing the size and
scope of the potential mold or moisture problem before
considering remediation options. As such, you should ask
your client whether the discovery of mold was prompted by:
the observation of visible mold growth; the presence of musty or moldy odors; or reports of health problems by building occupants.
Depending on the answers to these questions, your client's
next step is to determine whether or not there is an
existing moisture problem in their building, and if so,
whether the moisture is the result of a water intrusion
(plumbing leak, roof leak, etc.), or whether the moisture is
the result of excessive humidity (high enough to cause
condensation).
Although a visual inspection of the building is an important
first step, the extent of the potential problem is not
always easy to determine because molds thrive in areas such
as wall cavities, beneath wall and floor coverings, and
behind ceiling tiles.
To effectively investigate the matter, your client should
consider retaining a certified industrial hygienist to
perform a thorough investigation and, if necessary, oversee
the eventual remediation of the problem. Fortunately, there
is no shortage of companies performing this type of service.
It is important, however, to check references, and your
client should be wary of anyone who claims to be able to
diagnose a mold problem by simply doing a walk-through or by
taking air samples alone. See Woody.
Once the scope of the problem has been determined, you
should advise your client to develop a plan for remediation.
Once again, following the EPA's advice, if the source of the
moisture that resulted in mold hasn't been dealt with
already, fixing that problem should be an integral part of
the remediation plan to avoid a future reoccurrence of
mold.
Current approaches to mold remediation vary between treating
mold as hazardous material and eliminating it through
stringent — expensive — safety procedures, or
considering mold as basically harmless and taking no
specific precautions. See E.N. Light, "Mold
Remediation: How Complex Should It Be?," presentation
given at Mold Medicine and Mold Science conference in
Washington (May 14, 2002). These approaches are of course
influenced by the level of contamination and perceived
health concerns posed by toxic mold.
Published guidelines, such as the New York City Department
of Health's "Guidelines on Assessment and Remediation
of Fungi in Indoor Environments" (2000), and the EPA's
handbook on "Mold Remediation in Schools and Commercial
Buildings" base their findings on the need to control
molds like stachybotrys as toxic agents. Based on the size
and scope of the area at issue, these guidelines seek to
minimize health effects, establish standards for worker
protection, and create standards for the containment of
mold. See E.N. Light.
Keeping these guidelines in mind, and relying on
professional guidance by a certified industrial hygienist,
your client's remediation plan should focus on:
restoring building conditions through eliminating moisture
intrusions; cleaning and, where necessary, replacing building
materials where mold is present; protecting the workers performing the remediation as
necessary (respirators, disposable gloves, etc.); establishing building conditions acceptable for the
general population to minimize further health effects
(containment procedures for airborne mold); protecting extremely sensitive individuals from further
exposure where necessary; and verifying that remediation objectives have been
accomplished (that is, air monitoring).
E.N. Light.
Being able to provide advice about how to investigate and
remediate mold problems is only part of what your clients
need to know. Equally important is being able to provide
insight about insurance coverage for mold claims under both
first-party property insurance policies and third-party
liability insurance policies. This is a complex matter,
however, because insurance companies are continually
attempting to limit their exposure.
With respect to property insurance, both homeowner's and
commercial-property policies typically have some form of
exclusion for mold. For example, the 1991 ISO form for
homeowner's insurance excludes coverage for mold damage
unless caused by an otherwise covered event — such as
a burst water pipe. This exclusion was then expanded in the
2000 version of the form to limit coverage to situations
where mold is hidden and was caused by an accidental
discharge or overflow of water or steam from one of the
following covered losses: plumbing, heating, air
conditioning, automatic fire protective sprinkler systems,
household appliances, storm drains, or water, steam or sewer
pipes.
Commercial-property policies take a different approach to
limiting coverage for mold through an exclusion for wear-and-
tear damage (that is, rust, corrosion, fungus, decay, etc.).
As with homeowner's policies, the wear-and-tear exclusion
arguably does not apply to losses attributable to covered
events like burst water pipes. Accordingly, commercial
property policies typically go on to exclude damages
resulting from continuous or repeated leakage of water
occurring over a period of 14 days or more. The intent of
such a policy appears to seek to allow coverage for damages
resulting from sudden accidents like burst pipes, but to
exclude long-term damages resulting from lack of
maintenance.
Whether you are dealing with a homeowner's policy or a
commercial-property policy, you should always look to see
how the policy deals with water damage, as this will likely
become the central focus of any dispute concerning mold
coverage.
When dealing with a third-party liability policy, the issues
are somewhat different. For example, in interpreting whether
coverage exists for claims by building occupants for
ailments resulting from toxic mold exposure, the question of
coverage will turn on how the policy defines "bodily
injuries" and whether the alleged injuries are the
result of a covered "occurrence."
Typically, bodily injuries are defined as "injuries to
the physical structure of the body," while an
occurrence is defined as a "continuous and repeated
exposure" to a "harmful condition" over a
period of time. Based on these definitions, coverage will
turn on whether repeated exposure to toxic mold is
considered harmful, and whether the claimant's ailments rise
to the level of "injuries to the physical structure of
the body." Although coverage may exist, challenges may
surface because of the lack of standards on what level of
exposure to toxic mold is harmful.
Another common type of claim under a third-party liability
policy concerns a builder or seller being sued by a new
homeowner for damages resulting from "faulty
workmanship." If your client happens to be facing this
situation, be aware that insurers have attempted to argue
that mold damage resulting from construction defects
(leaking roofs, etc.) is excluded from coverage. See David
M. Pruessner & Steven J. Pawlowski, "Mold Claims:
Fact, Fiction and Coverage," The Risk Report,
Vol. XXIV, No. 8 (April 2002). The counterargument to this
exclusion, of course, is that it was intended to preclude
coverage for the cost of repairing a construction defect,
not the resulting damage from the defect.
In addition to the exclusions already mentioned, you should
be aware that insurers have attempted to deny mold claims
under both property and liability policies through the
"absolute pollution exclusion." As indicated by
its name, this exclusion applies to the dispersal and
release of "pollution," "irritants" and
"contaminants." Fortunately for your clients,
courts have so far refused to apply this exclusion by
reasoning that mold is not a pollutant within the meaning
the policy. See Sharon M. Stecker & Eric Harrison,
"Prevent Mold Problems Before They Start,"
Business Insurance, p. 10 (March 3, 2003).
Besides exclusions, another major consideration when dealing
with mold claims and insurance is: When did the loss occur?
Considering that mold is often discovered after it has been
growing for a long period of time, insurers under both
property and liability policies may argue that damage from
mold is a long-term loss that pre-exists the policy's period
of coverage.
The discovery of mold growth after a long period of time
also raises coverage disputes because the loss may have
occurred over multiple policy periods involving different
insurers. As these issues have previously been litigated
with respect to asbestos, analyzing coverage will likely
follow whatever law exists in the jurisdiction. Generally
speaking, there are three different theories for when
coverage is "triggered" and for whom.
The first theory holds that the loss occurred on the date
of the first exposure to the cause of the loss. Thus,
presuming the mold developed as a result of a water leak,
the date of the first exposure is the date when the water
leak first occurred. The second theory holds that the loss occurs on the date
of manifestation, or the date when the mold was actually
discovered. The third theory, which is followed by most jurisdictions,
is known as the "continuous trigger" theory. Under
this theory, all insurance policies in effect from the date
of exposure (the leak) to the date of manifestation (the
discovery of mold) will be responsible for coverage.
Unfortunately, this theory may raise additional questions as
to how coverage should be allocated between multiple
insurers. In such an event, guidance on allocation can be
sought through the relevant jurisdiction's asbestos case law
dealing with the same scenario.
Whether or not your client is facing the need to deal with
an insurance claim concerning mold, it is important to
understand that what holds true today, may not apply
tomorrow. In dealing with the increase in claims, insurers
have been quick to attempt to limit or exclude mold coverage
in an effort to avoid the kinds of losses incurred with
other mass torts.
This can be seen by the increasing efforts to include more
comprehensive mold exclusions to policies that even go so
far as to exclude remediation costs and personal injuries.
See Stecker & Harrison . As such, your clients may
wish to review their property and liability policies, and if
concerned about exclusionary language, may consider trying
to obtain some limited mold coverage for an increased
premium.
As seen in the rapidly changing dynamics of insurance
coverage, toxic mold's continuing effect on business and the
law is far from certain. Perhaps the only sure thing about
toxic mold is that Hollywood will be watching Erin
Brockovich's story with considerable interest. Until
standards and guidelines as to what constitutes
"safe" and "unsafe" levels of mold
exposure are in place — and science has a chance to
catch up with the hysteria — toxic mold will remain the
subject of increasing conjecture.
As a result of this uncertainty, each of us should strive to
keep abreast of the situation to better serve our clients.
Simon is a partner and Trautner an associate at Wolff
& Samson PC in West Orange, N.J. Simon's e-mail is
jsimon@wolffsamson.com
and Trautner's e-mail is
ttrautner@wolffsamson.com.
|
