Toxic Mold: A Real, "Growing" Concern

Edward B. Witte
Tanya C. O'Neill
Foley & Lardner
Milwaukee, Wisconsin

When a source of moisture is present, an indoor environment becomes the perfect culture for growing mold. Although mold, including "toxic" mold, is nothing new, airtight structures have created a uniquely receptive environment for the development of and exposure to these molds. Mold spores may also enter a building through open doors, windows, HVAC systems, water-saturated or mold-infested building materials, or on people or animals (as well as inside the lungs of people and animals) entering a home or building. Mold especially thrives on wet cellulose materials, such as paper, cardboard, ceiling tiles, drywall and wood.

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 cellulose products that have been exposed to water or consistently high levels of moisture. It is believed that these black molds generate volatile vapors, known as mycotoxins, which can lead to moderate health effects, including runny nose, eye irritation, cough, congestion and the aggravation of asthma. (See New York City Department of Health, Guidelines on Assessment and Remediation of Fungi in Indoor Environments, Nov. 2000.) For persons who are susceptible to respiratory ailments, the health risks from black molds are a greater concern. In 1994, the Centers for Disease Control and Prevention (CDC) concluded that there was a strong association between the Stachybotrys mold species and acute idiopathic pulmonary hemorrhage (bleeding lungs) in infants. (See CDC, Question and Answers on Stachybotrys chartarum and Other Molds, Mar. 9, 2000 available at http://www.cdc.gov/nceh/asthma/factsheets/molds/.) However, a subsequent review by CDC experts opined that the causal link between the mold and the health ailment was not proven. (Report of the CDC Working Group on Pulmonary Hemorrhage/Hemosiderosis, June 17, 1999.) The U.S. EPA and the CDC have extensive internet sites detailing the risks associated with molds and the methods to address the presence of mold in buildings. (See http://www.epa.gov/iaq/molds/ and http://www.cdc.gov/nceh/airpollution/mold/.)

The absence of regulatory "bright line" standards has not deterred claims for defects leading to the presence of mold in the home or workplace, including negligent construction and breach of warranty claims. Tenants may also have claims based on leases, constructive eviction and the implied warranty of habitability. Insureds also seek insurance coverage for their damages. 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.

The U.S. 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 requiring the employer to undergo extensive investigation and remediation. 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. (U.S. Department of Labor Fact Sheet No. OSHA 92-36.) Melinda Ballard, of the aptly named Dripping Springs, Texas, obtained a $32 million verdict against Farmers Insurance Group for unfair and deceptive handling of a claim related to the presence of mold in Ms. Ballard's 11,500-square foot home - Farmers is appealing. (Heather Timmons, Can Toxic Mold Spoil a Stock Offering?, Bus. Wk. 89, April 29, 2002.) 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 commencing a condemnation action against the property owner. Village officials arrived in gas masks to escort tenants out of the building, warning that the tenants should not remain in their mold-infested apartment building for any more than 10 minutes without a breathing apparatus. (Dave Orrick, Tenants Told of Mold Danger, Mundelein Says Apartment Unsafe, Chi. Dly. Hrld., July 7, 2001.)

Because there are no published standards and the primary objective is risk management, skilled technical advice is invaluable. Consultants must have experience in industrial hygiene, mold sampling and mold remediation. Because of the wide difference of opinion on the health effects and impact on property damage caused by mold, interpreting sampling and analysis results is critical. Although the presence of mold might usually warrant corrective action, owners of properties and businesses with employees face special challenges in managing the identification of the mold. Either by contractual obligation under the lease or by disclosure obligations under the implied warranty of habitability, rental property owners should consider disclosing the presence of black mold to tenants and temporarily relocate tenants during remediation. Employers must also assess their legal obligations of disclosure to employees.

Removal of the source of moisture is a priority. This can be challenging where a building is poorly constructed or where such water damage is pervasive and irreparable. The U.S. EPA's "Mold Remediation in Schools and Commercial Buildings" provides many useful mold prevention and remediation insights. (See http://www.epa.gov/iaq/molds/.) In the most extreme circumstances, removal of the affected building materials under negative air pressure may be required. As a last resort, demolition or razing of the mold infested structure may be necessary.

Parties to transactions involving real property exchanges should be alert to the possible presence of mold. 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, with improved property, as a part of an ASTM Phase I Environmental Site Assessment.

California recently passed the Toxic Mold Protection Act which initially directs the California Department of Health Services to establish permissible exposure limits to mold, but a progress report is not required until July 1, 2003. (Cal. Health & Safety Code § 26100 et seq. (2002).) It also requires written disclosure in certain real estate transactions where mold exceeds the permissible standard.