When we attended law school during the 1980’s, we mastered classes in torts, property, contracts, construction law, environmental law, and insurance. Our classes covered the waterfront, comprehensive in subject matter and scope. Our instructors challenged us to examine every factual detail with exacting scrutiny. The Socratic method guaranteed that we left no stone unturned. We studied cases dating back hundreds of years as well as disputes that were only recently decided. Yet not once was the topic of mold ever mentioned. Now, mold cases and controversies are featured on the national news and are highlighted on special news programs such as CBS’s 48 Hours.
Today, mold claims and suits are exploding in number. Currently, large monetary verdicts for plaintiffs in mold cases are occurring more frequently and are widely reported when they occur. Mold litigation is rapidly growing. In Texas, one of the states facing a disproportionately high amount of mold litigation, the number of mold-related insurance claims jumped from over 2,400 in 2000 to over 14,700 in 2001.1 Although many mold suits are concentrated in California and Texas, such suits have been filed in many different jurisdictions across the United States. Mold litigation is not a regional problem; it is a national problem. Indeed, the American Bar Association Journal recently noted that mold litigation may "surpass asbestos in terms of case volume and value."2
The goal of this article is to provide a snapshot in time of recent mold claims and suits. Perhaps if we can better understand the status quo, we might better predict how mold claims will impact the construction, manufacturing, real estate, housing, risk management, insurance, and legal communities in the future. So let’s get started on a very topical subject — one that we neglected to cover in law school.
I. Overview of Today’s Mold Regulations
The recent surge in mold claims and litigation has prompted state governments, federal regulatory agencies, and the U.S. Congress to consider new statutes governing human exposure to mold. However, at the present time, there are no mold exposure or remediation laws or regulations which are universally recognized. The U.S. Environmental Protection Agency (USEPA), in a pamphlet on mold in homes, offers a confusing answer to the question of when cleanup of mold is complete:
Ultimately, this is a judgment call;
there is no easy answer.3
This type of evasive answer offers no magic bullet solution, but instead prompts even more genuine questions.
Various states are beginning to fill the statutory/regulatory void by promulgating new laws and regulations. In October 2001, California became the first state to pass legislation dealing with mold exposure. The new law is called the California Toxic Mold Protection Act of 2001 and convenes a task force of various business and health experts to advise the Department of Health Services (DOHS) on several topics: 1) the development of a permissible exposure limit to mold, 2) a standard for assessment of molds in indoor environments as well as more stringent mold standards for hospitals, child care facilities, and nursing homes, and 3) standards for identification of mold and its remediation.4 The law likewise directs DOHS to determine the feasibility of adopting some type of exposure limit to indoor mold as well as to develop an assessment of the health threat posed by mold in indoor environments.
The California Mold Task Force, when funded, will only study the mold problem and make recommendations to the Legislature on exposure limits and cleanup rules. At present, the state has not allocated any tax dollars to fund the Mold Task Force, but the state is accepting voluntary contributions to fund these activities. As of August 6, 2002, approximately 130 individuals have volunteered to serve on California’s Mold Task Force, but the State of California is still waiting for additional monies before the first meeting is convened.5
On the other coast, New York City, through its Department of Health & Mental Hygiene, has developed "Guidelines on Assessment and Remediation of Fungi in Indoor Environments."6 Once again, these guidelines are not legally binding and do not establish any threshold levels for mold exposure that may be considered safe or unsafe.
Similarly, other states are also studying the need for legislation to address indoor air quality and mold exposure issues. Last year, the State of Maryland enacted a new law which created a task force to "study the nature, location, and extent of health and environmental risks posed to workers as a result of molds, spores, and other toxic organisms located in ... (HVAC) systems" in Maryland office buildings.7 The State of Washington has also considered legislation directing its Department of Health to investigate the health effects of ordinary house dust including mold, smoke, dust mites, pesticides, lead, cadmium, and carcinogenic materials.8 Furthermore, Texas has instructed its State Board of Health to "establish voluntary guidelines for indoor air quality (IAQ) in government-owned buildings...." and is considering similar programs for public schools and district buildings.9
A new federal bill, called the U.S. Toxic Mold Safety and Protection Act of 2002, may have a broad and significant impact on future mold litigation. Under this bill, USEPA will be forced to create thresholds for mold exposure and a system for tracking reported mold exposures.10 Additionally, mold inspections would be required in multi-use residential properties as well as properties using federal funds for purchase or lease.11 The bill would also create a national insurance program, administered by the Federal Emergency Management Agency, to protect homeowners from major mold losses.12 Congressman John Conyers, Jr. introduced this bill on June 27, 2002, and the Congressman has been successful in convincing many of his colleagues and key committee chairmen to join him in co-sponsoring this bill. This bill should be on everyone’s radar screen.
II. Regulatory Void Fosters Litigation Boom
As you can see, enforceable statutes and regulations regarding mold exposure and/or cleanup are not on the books yet, and guidelines are not legally enforceable. Couple this with the lack of reliable health studies and research linking mold exposure to serious illness, and you have an area of law open to debate, and therefore to litigation. Plaintiffs’ lawyers have moved aggressively to fill this legal gray area with intelligent marketing and legal strategies. Many of them are very knowledgeable on this topic and are experienced litigators who actively pursue clients for mold lawsuits. Here’s proof. Plaintiffs’ attorneys are soliciting business through media appearances and the internet; try www.atoxicmold attorneyforyou.com to select an attorney to handle your mold litigation. This website advertises its million dollar verdicts and settlements against various mold defendants as it seeks to entice new clients.
The plaintiffs’ bar is ready to tackle contractors, insurers, landlords, and any others that may possibly be held liable for mold contamination. While many in the plaintiffs’ bar have gone to great lengths to sensationalize the health ramifications of mold exposure, they are also current on recent legal opinions and findings in mold cases, and they actively monitor state and federal rules for mold exposure. They have proven to be and will continue to be difficult opponents, until the business community and the defense bar treats the area of mold litigation more seriously.
III. Macro Overview: Today’s Mold Lawsuits
Today’s court dockets are becoming increasingly flooded with new mold lawsuits. A macro examination of these lawsuits demonstrates that there is no such thing as a typical or generic mold plaintiff. Quite the opposite is true. Mold claims have been brought by a diverse cross-section of our population, representing all segments of our country. Likewise, the defendants named in mold lawsuits are also quite diverse. The class of defendants frequently include general contractors, sub-contractors, manufacturers and suppliers of building products, realty companies, developers, architects, designers, engineers, property managers, homeowner insurers, and the insurer’s home repair contractors.
In many mold cases, plaintiffs seek reimbursement for both property damage and bodily injury claims. The property damage claims frequently include: plaintiff’s move-out expenses, remediation expenses, ventilation replacement, floor, ceiling and wall covering replacement, loss or diminution of the inherent value of the home, inability to use the subject premises, loss of use of money, hotel and apartment rental expenses, and stigma damages.
Plaintiffs’ bodily injury claims, on the other hand, frequently seek compensation for medical injuries, including respiratory distress, episodic vertigo, headaches, tinitis, inflammation and rashes on the face, eyes and throat, acute pain in the abdomen, injury to the central nervous system, and emotional distress. In addition to these specific injuries, plaintiffs often seek additional damages to pay for periodic diagnostic medical examinations, and in certain cases also seek punitive damages. Given the magnitude of property damage and bodily injury claims that can be brought, careful attention must be paid to all future mold claims.
A. Tenant Suits
Interestingly, mold suits typically involve the same core set of personal or bodily injury claims, yet routinely involve markedly different types of properties, from small efficiency apartments, to larger buildings such as homes, schools and courthouses. Recent news reports have also identified hotels which have been temporarily closed due to mold contamination. So let’s examine the types of properties involved in mold suits – starting off with the smallest properties and working our way up in size.
One of the sub-groups of litigants who have initiated a measurable percentage of the mold lawsuits consist of apartment tenants. In their suits, renters have complained about deleterious levels of mold in their apartments and common areas. These lawsuits reference leaky pipes or deficient HVAC systems which allow mold to develop. Many of these plaintiffs have alleged serious medical and health-related problems.
The Stroot case in Delaware is a great example of a tenant suit involving mold.13 The plaintiffs were graduate students who needed modest apartment accommodations to help make ends meet. One of the plaintiffs had severe allergies and had been diagnosed with asthma when she was growing up.
When the plaintiffs moved into the Haverford Place apartments, they noticed discoloration on windowsills, water stains on the ceiling tiles in the bathroom, and subsequently observed periodic water leaks from the pipes or bathtub from the apartment on the upper floor. When the plaintiffs noticed the leaking water, they telephoned the property manager, and were told that the maintenance department would correct the situation. Unfortunately, the water seepage was not properly addressed and the problem only got worse. Mold soon spread throughout the plaintiffs’ apartment. Ceiling tiles broke free and fell to the floor in plaintiffs’ bathroom. The tiles were covered with black, green, orange, and white mold.
As a result of her exposure to mold in her apartment, Ms. Stroot’s asthmatic condition worsened. She was hospitalized seven times over a 21-month period, including nine days as an in-patient where she received intravenous steroids twelve times. Her medical bills exceeded $28,800. Ms. Stroot sued to recoup her medical expenses.
Following trial, the jury found that the building owner and property manager were negligent for allowing mold to contaminate plaintiffs’ apartment and also concluded that the defendants violated the state’s Landlord Tenant Code. The jury also awarded the plaintiffs an award in excess of one million dollars. The trial court judge affirmed the verdict and refused to reduce the jury’s award.
The defendants appealed the matter to the Supreme Court of Delaware, but on May 7, 2001, the Supreme Court of Delaware affirmed the jury’s award in all respects.14
B. Homeowner Suits
Mold lawsuits have also involved a wide spectrum of individual homeowners, including a diverse population of small, moderately priced and luxury scale homes. In the typical homeowner suit, the plaintiff claims that initial construction techniques were somehow flawed, that building products were somehow defective, or that installation of siding, roofing or sky lights was somehow improper. In the end, these alleged substandard practices or products cause serious water intrusion problems to the interior of the home. Plaintiffs then allege that the water intrusion fostered extensive mold and fungi contamination throughout the home. Homeowners next claim that they suffered a multitude of bodily injury claims from the mold exposure and seek recovery from their general contractors, suppliers of siding and/or roofing materials, sub-contractors, landscapers, their homeowners’ insurance carriers, and any other home repair contractors they can identify.
Now that we’ve covered the generalities of a typical homeowner suit, let’s probe a little deeper and look at mold suits involving modest homes, mid-level priced homes, and luxury homes. Let’s start with a suit filed by the Costanza family in Louisiana.15 The Costanzas and their three children reside in Mandeville, Louisiana. They purchased their modest home in 1995. Next, jump ahead to June 2001 when the National Hurricane Center began to track Tropical Storm Allison. As you probably guessed by now, Tropical Storm Allison then dumped torrential rains, causing large amounts of water to enter the Costanzas’ home.
The Costanzas’ claim that they then suffered serious medical injuries including: sustained elevated liver enzymes, migraine headaches, sinus infections, scarring of the sinus cavity, allergies, fatigue, and general malaise. They have attributed their injuries to toxic mold. The Costanzas filed suit in May 2002 and named as defendants the developer of their neighborhood, their general contractor, the sub-contractor that installed the exterior insulation and finish to their home, the company that manufactured the exterior insulation, and the insurance company that insured their home. Leaving no one in the clear, the Costanzas also sued the water damage restoration contractor that tried to assist in the aftermath of the tropical storm. This contractor was sued for failing to properly diagnose and repair their home and for failing to prevent, treat, remove, and contain the mold, fungus, bacteria, and rot which had developed inside their home, caused by the torrential rains of the tropical storm.
Moderate-sized and luxury homes have also been the focus of mold claims and suits. For example, the Thompson family in California hired a roof repair company to install a new roof on their home. Apparently, the roof repair efforts worsened the situation and massive amounts of water entered the home. The Thompsons sued the roofer as well as the insurer that provided homeowner coverage, asking for over $500,000 in damages. The trial court dismissed the case, but on July 16, 2002, the case was reinstated by the California Appellate Court.16
Luxury homes contaminated with mold, such as the Ballard family’s 22 room, 11,000 square foot luxury home in Texas, have also been the focus of suits,17 newspaper articles, and television news programs.18 The Ballards’ home reportedly developed water leaks from faulty plumbing. According to the Ballards, the water leaks caused a dangerous form of mold called Stachybotrys to develop. The Ballards submitted a homeowners’ claim to their carrier, but they were dissatisfied with the investigation, remediation, and repair activities pursued by their insurance company. Like the homeowners mentioned above, the Ballards then retained counsel and filed suit against their homeowners’ insurance company, alleging both bodily injury and property damage claims.
The matter proceeded to trial. The trial judge did not allow the bodily injury claims to be considered in his courtroom, but allowed the jury to decide the remaining claims. The jury returned a $32.1 million verdict in favor of the Ballards. This case has recently been appealed to the Texas Appellate Court by Fire Insurance Exchange, the Ballards’ insurer.
Here’s another interesting twist. Media celebrities who own real estate are also on the mold warpath. Mold suits have been filed by such media celebrities as Ed McMahon, former co-host of the "Tonight Show with Johnny Carson," and Erin Brockovich, the acclaimed environmental activist. Mr. McMahon’s lawsuit, filed on April 8, 2002, seeks damages in excess of $10 million for mold-related property damage and bodily injury claims.19 Mr. McMahon’s suit seeks recovery from the insurance company that insures his home, the adjusting company that investigated the extent of the mold contamination, and the air sampling, environmental remediation, and safety consulting companies that attempted to abate the mold inside the McMahons’ residence.
Ms. Erin Brockovich, the paralegal who helped achieve a major victory against Pacific Gas & Electric out west and was recently portrayed in a Hollywood movie, has also experienced mold contamination in her California home. Ms. Brockovich’s mold contaminated home was recently featured on the CBS evening news program called "48 Hours." During this news segment, Ms. Brockovich and the CBS camera crew conducted a room-by-room survey of the Brockovich home. The camera lens highlighted the elaborate air ventilation system now in the Brockovich home and remediation contractors working with full breathing apparatus and dressed from head to toe in special protective outer body wear.
The 48 Hours news segment portrayed Ms. Brockovich’s contaminated home in an extremely sensational and sympathetic manner for over 15 minutes of national airtime. In this timeslot, Ms. Brockovich’s story reached millions of viewers, many of whom may one day be called upon to serve as jurors in future mold suits. Trial lawyers and jury consultants concur that news programs like these may influence people’s opinions, viewpoints, and attitudes, and sharpen biases and prejudices. Litigants and their trial counsel involved in mold disputes should consider the impact of the media during future voir dire examinations.
C. School District Suits
In addition to suits brought by apartment tenants and individual homeowners, mold suits and claims have also been filed by school districts as well as the students of some of the schools. The Bethlehem Area School District recently brought suit against its insurers, Nautilus Insurance Company and Scottsdale Insurance Company.20 In this proceeding, the school district is seeking compensatory and punitive damages for mold that was discovered throughout the school building after Brothers Corporation completed roof repairs at one of the district’s elementary school buildings.
Closer to home, at St. Charles East High School in St. Charles, Illinois, school district officials closed one of the high schools in April 2001, after extensive mold was detected. The school district has spent over $9.5 million to remediate the mold in that school,21 and incurred additional charges as it modified transportation and education programs to retrofit different buildings for the displaced students and staff. In addition to mold eradication efforts at St. Charles High School, mold has also recently been detected at other Illinois schools: Andrew High School in Tinley Park, Woodland Elementary School in Carpentersville, Glenbrook North High School in Northbrook, and a dormitory at North Central College in Naperville.22
D. Courthouse Suits
Ironically, mold has also impacted courthouse structures, and mold plaintiffs now include sitting judges and hundreds of court personnel. In a recent lawsuit, Judge Elisabeth Krant alleged that the County of Tulare Circuit Center in California was contaminated with various forms of mold, including Stachybotrys chartarum, Aspergillis versiculor, Aspergillis niger, and Alternaria molds, due to a defective HVAC system and leaking pipes throughout the courthouse complex.23 Judge Krant and other courthouse personnel have complained of dizziness, respiratory distress, acute pain in the abdomen, and severe inflammation of the eyes, throat and mouth. Judge Krant’s suit is also noteworthy in that it is directly against her employer, the County of Tulare, plus 500 other John Doe defendants, including the developers, owners, general contractors, sub-contractors, designers, engineers, manufacturers, architects, builders, lenders, sellers, and realtors that had any contact with the courthouse complex. Judge Krant’s list of defendants also includes the County’s corporate counsel.
Judge Krant’s suit advances a host of charges including: allowing a dangerous condition to exist in a public property, fraud and concealment, battery, intentional infliction of emotional distress, negligence, and allowing a continuing trespass. Since then, at least five other suits similar to Judge Krant’s have been filed against Tulare County officials and companies involved in any aspect of constructing the courthouse complex. Approximately 275 courthouse employees who work in this mold-contaminated courthouse have also filed general liability and workers’ compensation claims against the County.24
E. Kalia: A Three-Mile Island Mold Claim in the Making.
From the case demographics we’ve discussed so far, it appears that most mold claims involve suits or claims brought by individuals against property owners or the business which built or repaired the mold contaminated building structure. However, large businesses have also experienced their share of mold-related corporate heartburn. Recently, the Hilton Hotel Corp. decided to close its 453-guest room Kalia Tower at Hilton’s Hawaiian Village in Hawaii after mold was detected. The Hilton has called in at least two environmental consulting firms, including CH2M Hill, to identify the nature, extent, and cause of the mold contamination as well as a plan for remediation.25 According to local news reports, Hilton Hotels estimates the cost of the investigation alone to be around $10 million. Just last week, Local No. 5 of the Hotel Employees Union said that it will commission its own tests at the Hilton to ensure that its Union members are safe.26
In this author’s opinion, the novelty of the Ballard verdict is about to be eclipsed. Kalia is a Three-Mile Island magnitude mold claim in the making. Just imagine the enormous challenge of estimating potential damages to eradicate mold in a 453 guest room hotel complex: lost revenues, consulting fees, legal expenses, engineering charges, remediation costs, construction charges, disposal fees for contaminated furnishings, replacement costs to redecorate and refurnish, stigma damages, and lost opportunity costs. What additional financial reserves would you establish to address the Union’s concerns and possible bodily injury claims from guests, other business invitees, and employees? The size of the hotel structure itself and the universe of potential bodily injury claimants may soon have us reminiscing of the good old Ballard days.
The topic of mold is filled with legal vagaries, inconsistencies, and dichotomies. From a legislative and regulatory standpoint, there are no statutes or guidelines to turn to. On the one hand, federal agencies such as the USEPA continue to proclaim that mold issues require individualized judgments. On the other hand, various states and members of Congress are leading the charge to develop a definitive set of statutes, rules and regulations for us to follow.
So what is the impetus for this recent flurry of state and Congressional action? Perhaps our elected officials have been examining the growing number of mold claims and lawsuits that have been filed in the past several years. As we have seen, these cases have been brought by apartment tenants, homeowners and their children, school districts, courthouse personnel and Hollywood celebrities. In these cases, the juries have examined mold claims under various legal theories and in the context of both bodily injury and property damage claims. Given the size of certain jury verdicts, it appears that many jurors have already been convinced that there is a cause and effect relationship between mold exposure and injuries to property and persons.
Whether mold litigation will continue to explode as much as it has in the past several years remains to be seen. Whether mold claims will eclipse those of the asbestos wave of litigation is also an unknown. However, if the frequency of claims and cases continues to increase at the pace it recently has, then we might very well be looking at the next major toxic tort subject matter. If recent verdicts and evening news programs are any indication of things yet to come, it may be prudent for us to monitor future developments at the Hilton Hawaiian Village – Kalia Tower, for a glimpse of what the future might bring.
1 Douglas Hanks, III and Melinda Zisser, "Mold Claims Soar," The Miami Herald, July 29, 2002.
2 Stephanie Francis Cahill, "For Some Lawyers, Mold is Gold," The American Bar Association Journal, Dec. 2001.
3 "A Brief Guide to Mold, Moisture, and Your Home," U.S. Environmental Protection Agency, Office of Air and Radiation, Indoor Environments Division, Document No. EPA 402-K-02-003.
4 State of California, Health and Human Services Agency. SB 732: "Toxic Mold Protection Act of 2001." Implementation Update, August 6, 2002. Available online at www.cal-iag.org//SB732 .
6 New York City Department of Health & Mental Hygiene, Bureau of Environmental & Occupational Disease Epidemiology, "Guidelines on Assessment and Remediation of Fungi in Indoor Environments." Available online at www.ci.nyc.ny.us
7 Maryland Senate Bill 283 was introduced during the 2001 Regular Session by Senators Conway, Currie, Della, Exum, Frosh, Hollinger, Hughes, Kelley, Lawlah, McFadden, Mitchell, Pinsky, Sfikas, Teitelbaum, and VanHollen. This bill was signed into law on May 18, 2001.
8 Washington Senate Bill 5933 was introduced during the 57th Legislature, 2001 Regular Session, by Senators Kohl-Welles, Thibaudeau, Deccio, Fraser and Costa. This Bill was reintroduced during the 2002 Regular Session, and died in Committee.
9 John Parker Sweeney, Jennifer M. Schwartzott, "Toxic? Schmoxic! It’s Just Good Old Mold," For the Defense, August 2002.
10 H.R. 5040: "United States Toxic Mold Safety and Protection Act of 2002" or the "Melina Bill." This legislation contains 7 separate titles. Title I mandates research and public education on mold. Title II sets forth housing provisions for indoor mold hazard prevention and detection. Title III sets forth new standards for building products that are designed to retard the development of mold. Title IV creates financial grants to be made available to state and local governments to cover the costs associated with remediating mold growth in buildings owned or leased by such governments, including schools and multi-family dwellings. Title V amends the Internal Revenue Code and provides a tax credit for toxic mold inspections and remediation. Title VI authorizes the Federal Emergency Management Agency to establish a National Toxic Mold Insurance Program to enable property owners to purchase insurance against losses resulting from mold hazards in real properties located in the United States. Title VII authorizes states to provide medical assistance to individuals who do not have any health insurance coverage, or lack adequate health insurance coverage, to treat the physical harms associated with toxic mold poisoning. See also: "Mold Safety Bill will Help Homeowners, Michigan Congressman Says," Andrews Toxic Chemicals Litigation Reporter, July 11, 2002.
13 New Haverford v. Elizabeth Stroot, 772 A.2d 792 (Del. 2001).
15 Kelly Costanza. v. Allstate Ins. Co., No. 02-1492 (U.S. Dist. Ct. E.D. La., May 2002).
16 Thompson v. Fireman’s Fund Ins. Co., unpublished opinion issued by the California Appellate Court on July 16, 2002.
17 Ballard v. Fire Ins. Exch., was initially filed in Travis County, Texas under Case No. 99-05252. This matter is now on appeal before the Texas Appellate Court, the Third District.
18 "Silent Killers," CBS Television Network National Broadcast, 48 Hours, July 26, 2002, 8:00 p.m. C.S.T., Reporter Susan Spencer. Videotape available.
19 McMahon v. American Equity Ins. Co., No. BC 271423 was filed in the Superior Court of the State of California, Los Angeles County.
20 See Bethlehem Area Sch. Dist. v. Nautilus Ins. Co., et al., No. 00048 CV 2002004126, Court of Common Pleas, Northampton County, Pennsylvania.
21 "Backup Funds Key for Schools," The Chicago Tribune, TribWest, Section 2, p. 1, August 13, 2002.
22 "School Homes for Fresh Start: St. Charles East Reopening After Mold Cleanup," The Chicago Tribune, Tribwest, Section 2, p. 1, August 23, 2002.
23 Judge Elisabeth B. Krant’s suit against the County of Tulare, California was filed under Case No. 00-0190367, in the Superior Court of California, Tulare County, Visalia Division. Krant v. County of Tulare.
24 Donna Domino, "A Rash of Court Illnesses: Lawyers, Judges and Other Employees Say the Tulare County Courthouse is Riddled with Toxic Mold and Should Be Shut Down." The San Francisco Daily Journal, June 7, 2001.
25 Andrew Gomes, "Second Firm Hired to Tackle Hilton Mold," The Honolulu Advertiser, August 15, 2002.26 Howard Dicus, "Fungus Among Us Goes Beyond Hilton," The Pacific Business News, August 2, 2002.
Richard Hodyl, Jr. is an attorney in the Chicago office of Williams Montgomery & John Ltd. He represents contractors, developers, sub-contractors, architects, engineers, property owners, and insurance companies in environmental litigation, toxic tort matters and insurance coverage matters. He would like to thank his colleague, Margaret C. Leathers, an attorney at Williams Montgomery & John Ltd., for her assistance with this article.