MOLD in Buildings

Creates New Frontier in Construction Defect Litigation, Definition of Pollution

At the center of what could become one of the fastest growing areas of both construction defect litigation and toxic tort litigation is an extremely common organism found in virtually every home and building. Mold.

Over the past few years, the presence of mold in buildings has increasingly been cited as the cause of health problems for people who interact with so-called ‘sick buildings.’ While the actual number of judgments favoring such plaintiffs is not especially high, the implications of the increase in sick building claims are potentially far-reaching. It is an issue of growing concern among insurance companies and attorneys who are closely watching the cases as they pop up across the country.

Two examples of what can happen are unfolding in Visalia, Calif., population 96,750, and Dripping Springs, Tex., population 10,800.

The judge files suit
On March 27, 2000, California Superior Court Judge Elisabeth Krant filed a lawsuit against Tulare County in which she alleged that a variety of ongoing medical problems she was experiencing stemmed from mold contamination in her chambers in the county courthouse located in Visalia, Calif.

Since then, approximately 275 claims have been filed against the county on behalf of individual employees of that courthouse. A great number of those claims-alleging that exposure to toxic mold in the courthouse sickened employees-were rejected, opening the door for those claimants to file personal injury claims. In fact, a second lawsuit on behalf of 101 plaintiffs was recently filed.

One of the mold types found in the court
house was Stachybotrys chartarum (also known as stachybotrys atra and stachybotrys alternans), a potentially dangerous strain that has reportedly been linked to a wide variety of adverse health effects, ranging from allergic symptoms to pulmonary bleeding fatalities among children.

According to the Centers for Disease Control and Prevention in Atlanta, six varieties of mold are common in houses and buildings, and three can produce toxins. The CDC linked one of them to 10 cases of lung disorder in infants five years ago and 100 cases since. Unfortunately, it’s impossible to distinguish between toxic and benign molds just by looking at them—they all look like black or gray sooty patches—without a professional sample being taken.

However, all molds, even the toxic ones, can be cleaned up with a mild bleach solution if they exist in small quantities.

Many environmental scientists believe cases of toxic mold in buildings are increasing due to new forms of building materials being used and the relative air-tightness of new construction.

Alexander Robertson IV, a Woodland Hills, Calif. attorney who represents the plaintiffs in both lawsuits and the majority of individuals who have filed claims against the county, said he currently represents 1,000 plaintiffs in mold cases throughout California.

Those cases involve school districts (for portable classrooms), a hospital, the courthouse in Visalia, as well as single-family homes, apartments and condominium projects.

Robertson, who frequently teaches and gives lectures to the legal community, said, “[e]very time I do that as part of a panel—either a toxic tort seminar or construction defect—it’s standing room only. Everybody’s trying to get in on it right now.”

While the claims filed against the public entity on behalf of the employees represents the largest single group of potential plaintiffs, claims have also been filed on behalf of individuals who used the courthouse, including vendors and attorneys who are not employed by the county. In addition to Judge Krant’s lawsuit, two other judges have filed claims. A number of workers’ compensation claims have also been filed.

“I understand the plaintiffs’ attorneys have represented to their clients that they can avoid the workers’ comp exclusivity rule based on the sections provided for in the Labor Code,” said Michael Woods, an attorney from McCormick Barstow Sheppard Wayte & Carruth LLP in Fresno, who was retained by the Tulare Board of Supervisors to defend the County.

The exclusivity rule, Woods explained, is one that generally states an individual can not sue his/her employer in civil court. “Your exclusive remedy is provided for under the workers’ compensation law,” he said. However, there are certain grounds, often having to do with concealing the cause of the injury, on which one can get around that exclusion. In the Krant case, the judge alleged that the cause of the injury and the dangerous condition were concealed from her, and that county employees misled and failed to totally inform her of the presence of mold.

Not all claims fall under the exception. The Superior Court judges, for example, are state court employees, and, therefore, do not have a potential workers’ comp bar with suing the county.

Woods maintained that this type of case is particularly expensive to litigate because of the lack of scientific evidence and proof that there is a causal connection between exposure to fungi and symptoms. On the medical side alone, a veritable army of experts can be involved. These include mycologists, microbiologists, industrial hygienists, occupational environmental doctors, toxicologists, immunologists, allergists and neuropsychologists. Recently conducted air sampling tests cost the county approximately $35,000.

“Then you get into some of the explanations for why there is water present,” Woods said. “You then get into structural engineers, mechanical engineers, roofing engineers, the whole aspect of construction of the building or the area where there is mold.”

Another aspect of the expense comes into play if a construction defect case is thrown into the mix. “Then it gets very expensive because everyone who is in any way associated with the construction is typically named as the defendant,” Woods said. That is happening in this case, where in the amended complaint filed by Judge Krant, additional defendants, in one way or another involved with the design, construction or maintenance of the courthouse, have been added.

According to Robertson, whose career as a construction defect attorney spans 15 years, prior to the last six years or so, such cases dealt solely with a property damage aspect, such as a leaking roof or windows. The personal injury component—when mold grows and makes the occupants of the building sick—did not enter the picture.

“Construction defect comes into play because you don’t have mold growth without typically a leak,” Robertson said. “We have to identify the defect which caused the leak to occur, fix the leak, stop the water from coming into the building, and then remediate the mold. Otherwise the mold just keeps growing back.”

Classifying mold
Insurance companies are more and more often refusing to pay bodily injury claims resulting from exposure to toxic mold in buildings, claiming the substance falls under policy pollution exclusions.

“At this point, I think the court decisions are providing the [commercial] policy language,” said Allstate spokesman David Wolfe. The company views such claims on a case-by-case basis, Wolfe said. “The investigation is going to include a number of steps —factors particular in the case of liability issues—such as who’s had knowledge, what their knowledge was and what they’ve done.”

While no definitive precedent-setting cases have yet been decided, attorneys are increasingly debating the issue.

“There is a lot of controversy about this,” said Michael S. Quinn, an Austin, Tex. attorney and chair of the Insurance Law Section of the State Bar of Texas. “The insurance companies want very much to make mold a pollutant.

“It doesn’t matter one iota with property damage because mold doesn’t cause damage. The damage is caused by wetness,” he said “In most cases, when you repair the damage, you in turn fix the mold.”

The point of contention for most attorneys and insurance companies, Quinn said, falls under bodily injury claims.

“Let’s suppose you give the pollution exclusion as full a reading as possible,” he said. “If a mold is in some way toxic, then given its toxicity, how does it do it? If it’s like an irritant or contaminant then it’s excluded. But you’ve got to ask yourself what these words mean.”

Quinn focuses on the everyday language, questioning whether mold is commonly considered a pollutant or contaminant.

“Does a consumer have a pollutant problem in his kitchen if his bread is moldy? No. Of course not,” he said. “This doesn’t have to do with mold, this has to do with bold—insurance companies are becoming bolder in defining pollution.”

Beth Bradley, an attorney with Dallas-based Thompson, Coe, Cousins and Irons, disagrees.

“I tend to look at it as how it causes harm,” she said. “That person is claiming their body is being contaminated by those things, therefore, it can be defined as a contaminant or pollutant.”

Bradley suspects the issue will escalate, saying the area is “ripe for class actions.” She contends it is also ripe for intervention by state departments of insurance.

In Texas, the department of insurance is monitoring the situation closely. “It’s pretty high on our radar screen right now,” said David Nardecchia, director of personal and commercial lines for the department. “Anytime you have something like this where there’s a question of coverage that could significantly impact a lot of people, we’re interested in it.”

Of particular interest are cases involving water-damage repair covered under a homeowners policy. Is the insurer liable if the repairs do not eradicate toxic mold spores that later lead to resident health problems?

Mold in the heart of Texas
One case in Texas raising that question has been filed by Melinda Ballard and her husband Ronald Allison against Farmers Insurance Group subsidiary Fire Insurance Exchange. The case, asking for $100 million in restitution, stems from what Ballard and Allison claim was the insurance company’s improper handling of their claim.

The Ballard/Allison home, with a replacement cost rider of $3 million, was insured by Farmers beginning in 1992. According to court documents, in 1998, a plumbing leak occurred in a bathroom and Ballard had it repaired. Several months later, the hardwood floor of the house started buckling and Ballard filed a claim with Farmers.

According to the suit, in December 1998, a flooring contractor told Farmers that dangerous molds could grow in the plywood subflooring and that Farmers needed to have the subfloor pulled out immediately to avoid the problem.

Farmers allegedly ignored the warning and sent out an adjuster who stated there was a slab settling problem that was not covered under the policy at issue. Farmers also reportedly conducted a plumbing check and found no leaks. During the first quarter of 1999, Ballard, Allison and their three-year-old son, Reese, began experiencing a number of unexplained illnesses, including coughing up blood. Meanwhile, the floor’s condition continued to worsen and the water-logged subfloor caused damage to walls, windows and doors. During this time, Farmers offered to settle the claim for an amount that Ballard and Allison found insufficient to cover the increasing damage to the home.

The complaint also alleges that Farmers’ microbiologist, Dan Bridge of Rimkus Engineering in Houston, found the family to be living in space containing airborne Stachybotrys spores, yet neither Bridge nor Farmers informed the family of their discovery until the mold had caused irreversible health effects.

The family retained the services of Texas Tech University to conduct testing of the home and evacuated their residence immediately upon confirmation of the presence of toxic spores in their living areas.

“Our allegation is that Farmers didn’t handle the case properly,” said Paula Janecek, Ballard and Allison’s attorney. “Their illness is the result of a covered loss.”

Todd Hunter, representing Farmers, declined comment on the case, and Farmers officials did not return phone calls. The case is scheduled for hearing in April.

No definitive test
One thing attorneys on both sides of the California courthouse case accede to is that there is not a single standardized test currently recognized by courts in that state as a determiner of what type of mold a person has been exposed to—not to mention where or when that exposure took place.

Robertson said claimants go through a diagnosis by an occupational environmental medicine doctor, who looks at both an individual’s symptoms and the environmental exposure to mold, and then makes a diagnosis by basically linking the two. He also indicated that some of the claimants have undergone blood testing to determine what effect, if any, there has been on their immune systems.

“There is a particular test that one group of plaintiffs’ attorneys has recommended,” Woods said. “This particular test is not recognized by the FDA.”

“Regarding the micro-toxins that some fungi are physiologically capable of producing, there is no airborne test for those either,” said Chris Lozano, also an attorney from McCormick Barstow Sheppard Wayte & Carruth. “So testing people doesn’t really give you any answers. A more significant test would be to test the actual workplace, but that just gives you general levels. There are no state or federal guidelines as to what constitutes an acceptable or an unsafe indoor environment when it comes to mold.”

In the meantime, the courthouse has drastically curtailed operations due to a lack of personnel.

“I think the litigation is going to be extensive, and it’s going to be expensive,” Woods concluded.