Case Law Update: Mold in the Courts

Thomas P. Redick, Newsletter Editor
Gallop, Johnson & Neuman, L.C.
St. Louis, MO
tpredick@gjn.com

Mold Cases: Toxic Torts Chronology

Our sources for this chronology are the "Risk Alert" by the insurance broker, Marsh, "Toxic Mold Losses Grow Into Billion Dollar Problem" March 2002 (See www.marsh.com for full text of report) and Mealey's Litigation Report: Mold (See http://www.mealeys.com to order or review summaries online).

1997: Newly opened motel experiences plumbing break and subsequent flood. Construction defects allegedly caused mold growth when flooded areas did not dry out. After 3 years of litigation, plaintiff motel owner settles with builder for $6.7 million.

1998: The Journal of the American Medical Association reports that toxic mold growth in water-damaged homes is a potential hazard, endemic to areas undergoing flooding, and can be a serious health risk. Federal emergency managers were urged to take note of this risk. (http://www.fema.gov/hu98/d1246n09.htm)

1999: 125 apartment dwelling families sue two New York City landlords for various personal injuries (from sinusitis, chronic fatigue syndrome, death, etc.) seeking $8 billion in damages for mold in their dwellings.

1999: Not content to sue only builders, an owner suffering from alleged cognitive effects of mold sues his insurer for failing to warn of the mold risk when the insurer's people cleaned up after a flood.

2000: California biotech company sued by employee for $2 million for mold in the workplace.

2000: Toronto parents bring class action suit against local school board for failure to treat "toxic mold" threatening children in the schoolroom.

2000: California Superior Court Judge Elisabeth Krant and 275 employees sue County of Tulare for alleged injuries from mold in the Visalia courthouse. Stachybotrys mold found in the Visalia courthouse. Government rejects tort claims alleging that exposure to toxic mold in the courthouse sickened employees and workers' comp claims of the employees of the County, those with viable personal injury claims file in court.

2002: Illinois high school student alleges that mold contamination at school caused personal injuries. As early as 1997, school district investigations, inspections and tests found water damage and mold growth, along with poor ventilation and no respiratory protection program. The school was sued for allegedly disregarding several environmental studies showing elevated mold counts and failing to provide for and maintain a heating, ventilation and air conditioning unit that supplied adequate amounts of outside air. (http://www.mealeys.com/stories_tox.html#7)

Mold Insurance Coverage ABC's

Andersen v. Allstate, 2000 U.S. Dist. LEXIS 20847 (E.D. Cal. 2000). In this case, a 97- year old plaintiff sues for mold after pipe rupture flooded the entire interior thoroughly while plaintiff was gone. (Apres Deluge, Moi Mold. Ed.) The insurer questioned plaintiff's residency in the unit, and since residency was a condition precedent to coverage, the insurer denied coverage. Plaintiff sued for coverage and the jury award of $18 million in punitives was reduced by trial judge to just over $2.7 million, with one-fifth that amount (about $500,000) in compensatory damages. The case is on appeal to the Ninth Circuit.

Ballard v. Fire Ins. Exch. (Tex. Dist. Ct. No. 99-05252). Bad faith case against insurer hits jury verdict jackpot of $32 million, including $12 million in punitive damages (the insurer appealed). Plaintiff, a wealthy woman involved in public relations, takes her victory nationwide in a broad media campaign that captures the attention of various members of the plaintiffs' bar. (http://www.usaweekend.com/99_issues/991205/991205mold.html, site visited May 20, 2002.)

Cooper v. American Family Mutual Ins. 2002 WL 169276 (D. Ariz. 2002) No coverage for mold losses under Comprehensive General Liability (CGL) insurance "anti-concurrent cause" language in the preamble to the mold exclusion in the policy. Since most mold claims arise from flooding incidents relating to poor maintenance (not a covered cause), "concurrent cause" is a common defense to coverage.

State and Federal Officials React to the Perception of a Threat

In 2001, California enacted its "Toxic Mold Protection Act" to study mold and determine permissible mold exposure limits. While the Act is effective as of Jan.1, 2002, implementing regulations are needed to get started on enforcement. California Department of Health Services (DHS), assisted by a task force of volunteer stakeholders, is still hard at work on this groundbreaking effort. (http://www.cal-iaq.org/SB732update.htm, site visited May 20, 2002.)

In 2001, EPA released its report entitled "Mold Remediation in Schools and Commercial Buildings" to provide guidance to parties attempting to remove mold from buildings.

In 2002, the Texas Department of Insurance recently initiated an investigation of mold consultants that are allegedly "cooking" mold claims by spraying water and turning on the heat to grow mold while homeowners are residing in a nearby motel, awaiting remediation of their mold problem. Laura Elder, "Cooked" Houses Burn Insurers, Corpus Christi Caller-Times, May 5, 2002. (Mold follows water leaks; similarly, practices like this follow claims payments.) (http://www.callertimes.com/ccct/local_news/article/ 0,1641,CCCT_811_1128554,00.html, site visited May 20, 2002.)

In May, 2002, the Missouri Department of Insurance is reviewing insurer proposals to clarify mold coverage in residential policies. The Insurance Services Office Inc. (ISO), which promotes insurance industry standards, is offering policy language to pay only claims from "sudden and accidental" water discharge (burst pipes, washing machine hoses) but deny mold claims from slow leaks or maintenance problems. Brian Cookson, Fungus Among Us, Kansas City Business Journal, Mar. 29, 2002. (http://kansascity.bizjournals.com/
kansascity/stories/2002/04/01/focus1.html, site visited June 3, 2002.)

As this article went to press, Rep. John Conyers (D-MI) announced his bill the "United States Toxic Mold Safety and Protection Act" - national legislation for mold. Conyers' actions are driven by an office worker whose home was beset with by mold, allegedly sickening her young daughter Melina and forcing the family to move from their home. As a result, Conyers will call his legislation "Melina's Bill" to connect toxic mold to children threatened by it.