Recent media coverage of large-award indoor air quality (IAQ) lawsuits has led to a flood of homeowner and building occupant lawsuits. These lawsuits have triggered coverage changes in policies intended to protect insurance companies from huge claims.

The vast majority of these complaints involve both property damage and personal injury claims resulting from fungal (mold) exposures. The typical property damage claim entails extensive removal of contaminated building materials such as drywall, carpets, and ceiling tiles, all done under carefully contained atmospheres resembling asbestos abatement procedures.

Often, personal property must be discarded or carefully cleaned and disinfected. Such cleanups often do not satisfy the occupant because they feel that his symptoms have not subsided after the cleanup has been completed.

Personal injury claims often allege toxic effects from exposure to mycotoxins ("mold poisons"). Symptoms include damage to the immune system, personality changes, short-term memory loss, and pulmonary hemosiderosis (bleeding from the respiratory system).

Claims can also arise due to the development of sensitivities and allergies. Due to the size of the awards, avoiding IAQ liability has become a major concern to all stakeholders, especially those professionals with responsibility for the design, operation, and maintenance of buildings. The vast majority of these problems are preventable.

Recent Lawsuits

In June 2001, Melinda Ballard and Ron Allison, of Dripping Springs, TX, were awarded $32 million for bad faith in claims handling practices in regard to water damage and resultant mold growth in their 22-room mansion. In addition to the damage to the structure, the couple requested damages from neurocognitive injuries to both Allison and the couple's son, Reese. Allison claimed cognitive impairment, resulting in loss of his job as an executive-level investment advisor. Farmer's Insurance was accused of delaying action on the claim and inadequately warning the homeowner of the risks of exposure to toxic molds, including Stachybotrys chartarum. The case is currently on appeal.

In Nov. 2001, the largest mold-related injury award to date was made to a Sacramento, CA, family. The Mazza family was awarded approximately $2.8 million in a landlord/tenant dispute. Because the family was a tenant, no property damages were claimed. Two family members had only transitory symptoms and the third required treatment for fungal infections to his mouth.

Other mold-related cases are springing up all over the country. One attorney in California has over 1,000 cases pending in his firm. In an ironic twist, Erin Brockovich, a legal aide who was crucial in the resolution of a toxic chemical lawsuit (and the title character in the film based on that lawsuit), has had to abandon a home purchased by the settlement funds from that lawsuit because of toxic mold contamination.

Health Symptoms

The medical literature reports that health effects from mold exposure can be wide-sweeping and dramatic. Health effects associated with mold exposures include allergies, asthma, hypersensitivity diseases, infections, and toxic effects. Allergies are hypersensitivity diseases where the body overreacts to certain environmental stimuli, including molds. Typical allergic symptoms include coughing, sneezing, itchy eyes, runny nose, headaches, and congestion.

Asthma is a disease in which there is an airway restriction, and can be fatal. There is an alarming increase in childhood asthma and an equally alarming increase in adult-onset asthma. Experts opine that these increases are due, in part, to mold and bacteria exposures.

Hypersensitivity diseases include inflammation of deep airways, sometimes with lesions in the lungs. Hypersensitivity diseases are typically associated with outdoor occupations and are commonly known as Farmer's Lung, bagassosis (sugar cane worker's disease), Brown Lung (cotton workers), and Pigeon-Fanciers disease. It is also known as Organic Dust Syndrome in office workers where the ventilation system has been identified as the source of the particulate matter.

Fungal infections are of great concern in hospitals where pulmonary at-risk patients are treated. For example, the literature suggests that Aspergillus fumigatus is a highly opportunistic mold that can readily colonize the lungs of immunocompromised people, chemotherapy patients, transplant recipients, and respiratory disease sufferers. Antibiotics are basically ineffective against such fungal infections; treatments usually consist of anti-inflammatory drugs that promote the body's natural defenses against the infection.

No other effect has received as much attention as the toxic effects of molds. A spate of infant deaths in the Cleveland area focused attention on Stachybotrys chartarum, a black mold. Investigation has shown that this mold is capable of producing up to eight different toxins, virtually all of which are very potent in even small quantities. The effects of exposure to these toxins can vary widely and can be devastating. The infants, all under six months of age, died of bleeding from the nose and mouth.

In adults, very recent studies suggest that exposure can cause cognitive impairment so severe that those affected cannot hold jobs and function normally. Short-term memory can be dramatically impaired to the extent that memory retention is reduced to only a few seconds. Dramatic personality changes can occur. There is also evidence that exposure to toxins can damage the immune system. At present, victims seem to partially recover after leaving a contaminated building, but some symptoms may linger indefinitely. Additional new research has shown many molds are capable of producing mycotoxins.

Mold Abatement Procedures

Removing mold contamination can be an expensive and time-consuming process. Removal is usually done by trained workers wearing Tyvek(r) suits, respirators, and gloves. The New York City Department of Health has published guidelines for removal of con-taminated building materials and most abatement contractors follow these procedures. Costs for abatement can be as high as $150/sq ft.

In addition to removal of building materials, mold abatements often require cleanup of other building areas near the site of removal due to the likelihood of cross-contamination. It is typical to completely vacuum all surfaces not removed using high-efficiency particulate arrestance (HEPA) vacuum cleaners. These surfaces are then further treated by wiping with one of a variety of biocides available for decontamination or generating a fogging mist of biocide into the space.

Personal possessions and clothing may have to be meticulously cleaned and treated, or discarded and replaced. The final step in an abatement usually involves cleaning of the air-handling system, because the air handler and ductwork likely become contaminated by moving mold- and bacteria-contaminated air throughout the building.

Liability Issues

The biggest liability threat is through a lawsuit. When property damage is alleged, the building has either been subjected to water damage or high relative humidity. These conditions favor the growth of mold on any support media capable of acting as a nutrient source: the paper on either side of drywall, cellulose ceiling tiles, the organic matter (dirt and debris) trapped in carpet, wood studs, plywood or particle board sheathing, cardboard boxes, and paper files. Sometimes the water and mold damage are so severe that the structural integrity of the building is threatened.

Claims and lawsuits have also been asserted against third parties such as architects, building contractors, subcontractors, maintenance companies, and expert consultants engaged to evaluate the complaints. In such claims, the building itself is viewed as a finished product and may be subject to claims of strict liability; that is, if the building can be shown to have injured its occupants, any party involved in any aspect of design, maintenance, and operation of the building can be held responsible for the injuries caused by the building. Major third-party claims have asserted construction defects, damage related to building product failures (windows, plumbing, etc.), floods, fires, and other water-related claims.

Insurance is Not a Guarantee

Many building owners rely on insurance policies to protect them from the liability exposures described above. This can be extremely risky because coverage may be vague or ambiguous, or worse, may entirely exclude coverage for mold-related claims. First-party insurers are faced with claims for both property damage and business interruption resulting from the presence of mold.

Carriers are also facing claims for personal injuries, as an extra-contractual claim. These claims stem from the assertion that the insurer failed to properly respond to an otherwise straightforward water damage claim in a timely and effective manner. They further assert that the failure to respond responsibly resulted in collateral damage to both the property and its occupants. Such complaints have tended to prevail and have resulted in large damage awards.

Coverage triggers are the key factors in settling mold-related claims, and triggers can be extremely complex. Such factors as the nature of the damage (structure vs. contents), causation, date of discovery of damage, policies in effect at the time of loss/discovery, whether damage is continuous or intermittent, collateral damage (e.g., business interruption costs), and personal injury, all influence insurance coverages. Professionals with experience in handling and settling such claims are essential to prompt, equitable settlement.

Avoiding IAQ Liability

The best ways to avoid liability exposure in these cases is two-fold: maintain the building in a clean, dry condition, and have adequate insurance coverage to handle all water-damage and mold-related claims in the event of catastrophic damage beyond the normal scope of building maintenance.

Adequate maintenance of roofs, building facades, windows, basements, and crawlspaces to prevent water intrusion is critical to preventing mold contamination. Proper operation of building systems also minimizes the possibility of chronic water damage triggering mold growth. Even small amounts of water or condensation can generate mold contamination.

In the event of accidental water releases such as plumbing failures, it is critical to aggressively remove water from the building as soon as possible. Standing water can generate heavy mold colonization in as little as 24 hrs. Therefore, removal of standing bulk water, aggressive dehumidification, removal of saturated building materials, and drying of wall cavities immediately after disaster strikes is extremely critical.

Another way to avoid mold-related IAQ complaints is to engage experts to test and inspect the building on a routine basis. An industrial hygienist or professional engineer with experience in IAQ issues can be engaged to inspect the building.

Visual inspections often reveal water leaks and mold growth. Moisture meters, fiberoptic imaging systems, infrared imaging, destructive sampling, and other techniques can be used to find "hidden" mold. Specialized air tests can be useful in identifying mold problems that cannot be pinpointed by the above methods. In the event of a mold-related complaint, the expertise of these individuals can be invaluable in avoiding large damage awards.

Scrutiny of insurance coverage is as important as the physical maintenance of the building itself. It is highly advisable to have an attorney experienced in mold claims review coverage before a loss to ensure that coverage is sufficient. After a loss, it is critically important to remove water and dehumidify the building as quickly as possible. When any indication of mold contamination is detected (e.g., odors or occupant complaints), it is highly advisable to engage experts to evaluate and manage the problem. In the event that the building owner becomes aware that complaints or claims related to IAQ may occur, an attorney experienced in mold litigation should be consulted. ES