Minimizing the Risk of Mold Claims

Mold is everywhere. Mold has existed on this planet for as long as organic material and moisture have existed. In order to grow inside a structure, mold needs only four things: (1) an organic food source (e.g., wood, paper, sheet rock, insulation, carpet, etc.), (2) water (e.g., leaky roofs, windows, doors, air conditioners and plumbing; flooding; excessive humidity or moisture in the air, etc.), (3) the right temperature, and (4) time (mold usually only requires 24 to 48 hours to reproduce and spread after exposure to moisture). The allergenic and irritant properties of exposure to high levels of indoor mold (e.g., hay fever, asthma, hives, pneumonitis) have long been well known without causing much concern of significant health problems.

"Toxic" mold claims, however, are a new phenomena that have been with us for less than ten years. Typically, building occupants, both residential and commercial, are bringing suit against builders, architects, engineers, and building owners and managers for exposure to "elevated" levels of mold spores indoors which are allegedly causing "toxic" health effects, including fatigue, infection, pulmonary hemorrhaging and even loss of brain function. People often ask why has this new "mold epidemic" just recently struck the United States? Is it fueled by new or different exposures to mold or any new or different health effects from mold exposure? The answer at this time appears to be "no" -- there is as yet no established causal link between mold and toxic health effects in humans.

Despite the lack of a causal link, mold claims continue to be filed at ever increasing rates due to high jury awards -- the most notorious being a $32 million jury award in Texas.¹ A lack of standards for establishing a "safe" exposure level for mold, and a lack of general knowledge by the public in general have also fueled the fire. These mold claims cannot simply be ignored -- they must be dealt with in one way or another. In addition, it is important to note that claims and damages caused by mold are now excluded from most commercial insurance policies. Therefore, every dollar spent on investigating and remediating or defending a mold claim will most likely come directly from architects, contractors, property owners and managers and any other individual or business involved in the design, construction or maintenance of human inhabited structures.

Obviously, there is a strong financial incentive for these types of businesses to have a risk management plan in place to prevent mold related claims and minimize losses. Such a risk management plan should include the following:

• A quick, sympathetic response. As noted earlier, mold typically begins growing and reproducing 24 to 48 hours after an event introducing unwanted moisture into an indoor environment. In some of the major verdicts in mold related claims to date, owners or managers have typically been found liable because they responded too slowly to a mold complaint or they didn't appreciate and acknowledge the anxiety the inhabitants had concerning the potential problem. For businesses which are especially likely to receive these type of claims, it may be a good idea to keep on retainer the qualified experts needed to perform any necessary investigation, testing and clean-up in order to guarantee the fastest and most appropriate response. At the same time, the vendors performing the mold tests should not increase anxiety or cause alarm by showing up on site wearing clothing that looks like a "space suit!"

• Investigate for visible mold. An investigation should be conducted to find any visible mold (or other substance which may be mold). If you can see mold, then there is "too much" and it should be removed. Chemical treatment alone is not sufficient because "dead" mold can still cause allergic reactions in some members of the public.

• Investigate for invisible mold. If no visible mold is present, tests should be conducted to obtain three types of samples: (1) indoor airborne mold samples, (2) "swab" samples from the surface of indoor walls, and (3) outdoor airborne mold samples. Analyses of these samples will allow a comparison of the types of mold species and quantity of spore development indoors and outdoors. If the indoor types of mold are different, or if the spore counts are significantly higher inside, then there is a good indication of a potential mold growth problem inside which most likely is the result of a hidden water leak. In that event, a more thorough investigation is necessary to find the source of the water and to stop it from entering. Once the water problem is fixed, any problem areas with identifiable mold growth must be remediated by a qualified professional.

• Test. After any suspicious substance is removed from the inside of a structure, it should still be tested to confirm its composition if any one of the following three situations may be present: (1) the substance was in an area where individuals with "compromised" immune systems (i.e., in a health care facility, retirement center, etc.) may claim they were exposed, (2) the occupants may have already performed testing using experts of questionable quality, or (3) litigation is threatened in any way. It should be noted, however, that testing may not be helpful if it is likely to validate a plaintiff's claim concerning the presence of actual mold, because the plaintiff may be able to obtain those test results during the discovery phase of litigation.

• Keep Records. All work records and insurance records should be retained indefinitely, or at least for an extended period of time. Mold claims can come decades after a structure is built, or in the case of minor children, decades after alleged exposure to the mold. It is important to preserve whatever documentation may exist in order to prove that your business acted reasonably in its activities in connection with the design, construction or maintenance of the structure. At the very least, the records should be kept the appropriate number of years after the expiration of the applicable statute of repose. For example, in North Carolina, a homeowners' right to file a negligence action against an architect, designer, builder or any other person or entity involved in the improvement of real property, expires six (6) years after the date that the certificate of occupancy for the structure has been issued. In other states, including South Carolina, however, that time period is significantly longer.

Until science definitively proves one way or another whether mold can have "toxic" health effects on exposed humans, mold claims will continue to persist. For now, a risk management plan complying with the five simple steps outlined above should go a long way to minimize the potential significant financial losses a business may face in defending such mold claims.

¹ Ballard v. Fire Ins. Exchange, 98 S.W. 3d 227 (Texas 2002). While a Texas appeals court subsequently reduced the verdict in December 2002 to $4 million, the case is cited for getting the attention of the public (including plaintiffs' lawyers) and "jump-starting" the recent wave of mold-related personal injury claims.