When There’s Mold in Real Estate

image of house with mold in real estate

Mold litigation has expanded, and is now being brought by property owners/buyers, employees, tenants, or merely building occupants dealing with mold in real estate. These claims gained a lot of publicity (for example, the Ed McMahon lawsuit). Yet, the science regarding mold and whether it can cause significant or permanent health effects is not established. Specifically, when the exposure to mold stops, the symptoms disappear, like most allergies.

Mold 101

Molds are a type of fungi that thrive in moisture. They grow on other materials. Outdoors, molds are an integral part of natural processes, breaking down leaves, wood and plant debris. However, indoors, they can be unhealthy.  There are over 10,000 species of mold. Around 100 can cause allergies in humans, and approximately 50 are pathogenic (i.e., they can grow inside the human body). About 50 are capable of creating “mycotoxins,” which are released by the mold and cause toxic reactions in healthy individuals.

Toxic mold is different from regular mold. It normally exudes a dank, musty odor. It’s also capable of producing mycotoxins. Among the types that are considered toxic and which are the subject of most lawsuits, are: Stachybotrys chartarum, Aspergillus and Penicillium. The most common toxic mold encountered in lawsuits is Stachybotrys (“black mold”).

Common areas for indoor mold growth include bathroom tile, kitchen (appliances and sink), basement walls, areas around windows where moisture condenses, and near leaky water fountains or sinks. Common causes of water or moisture problems resulting in mold growth include: roof leaks; delays in proper building maintenance; condensation from heating, ventilation, and air conditioning systems; condensation associated with high humidity or cold spots in a building; flooding from plumbing failures or heavy rains; slow leaks in plumbing fixtures and pipes; and the malfunction of humidification systems.

Interestingly, mold infestation is an increasingly problematic issue in newer buildings and homes. More recently-constructed buildings and homes are much tighter and more energy efficient, and occupants rarely open windows, resulting in less ventilation of the indoor environment.

Mold Issues that Grow into Big Lawsuits

Mold cases start with blaming the defendants for creating the moisture that allows mold to grow. Some cases however, also allege knowledge and failure to disclose, and others allege failure to repair or eradicate the mold properly once it’s discovered.

Plaintiffs in mold litigation allege a variety of illnesses and adverse health effects: from headaches, nausea, fatigue, asthma, hay fever-like symptoms (runny nose and scratchy throat) and respiratory problems, to fibromyalgia, chronic fatigue syndrome, reactive airway dysfunction syndrome, difficulty with memory and other cognitive functions and even cancer. The more common allergic reactions in individuals are coughing, sneezing and breathing problems. The soft tissues around the nose, mouth, trachea, and lungs are extremely vulnerable to mycotoxin contamination.

Yet, there is a lack of scientific consensus on the more seriously alleged illnesses and what level of mold exposure may cause such illnesses. The U.S. Centers for Disease Control and Prevention (CDC) website states that a causal link between the presence of the toxic mold and pulmonary hemorrhage or memory loss has not been proven.

In addition to the illness to humans, the mycotoxins also cause a significant amount of property damage. Once inside, mold can contaminate anything in the surrounding area including clothing, furniture, and works of art. Once contaminated, these items usually have to be destroyed. Building materials and fixtures are also fertile ground for mold growth. Building material typically must be removed and replaced, which is quite costly.

Mold Disclosures

As a result of many mold cases and large verdicts, some insurance companies have changed their coverages and either exclude mold claims or offer sub-limits only for mold claim. In California, the California Association of Realtors® created a mold disclosure that each buyer receives during a purchase transaction, which explains that mold can arise where there is water intrusion;  buyers are recommended to obtain mold tests if they learn of past water intrusion. Some molds cannot be seen (they may exist behind drywall, in the carpet or under the sub-floor), so an air sample must be performed to detect mold spores in the air.

Currently there are no government or industry standards (including from the Environmental Protection Agency or EPA) that specify allowable or acceptable levels of indoor, airborne molds.  However, the EPA issued a guidance document for mold remediation projects that provides some general guidelines for evaluating and responding to an indoor mold problem.

Mold Lawsuit Challenges

Given this scientific uncertainty, toxic mold litigation frequently hinges on expert witness testimony. The ability of the plaintiff on the one hand to establish causation between the alleged injuries and the particular species of mold, and the defense expert rejecting that link will determine how the case goes. In some cases, judges don’t allow plaintiff’s testimony without a preliminary hearing that establishes solid medical evidence of such a link.

In addition to proving the existence of mold, plaintiffs must prove a chain of custody between the testing company and the results of the testing. An environmental testing firm or laboratory has to conduct mold sampling in the allegedly contaminated area at the time of exposure. A link also has to be established that mold existed at the time the defendant was involved (for example, if the claim involves a sale, that the mold existed in the structure before the sale). The hurdles of having a properly-certified testing and lab facility, a physical connection between the contaminated area and the exposed plaintiff, and a link to the defendant’s wrongful conduct are significant challenges.

The main defense focus is on convincing the court to exclude the plaintiff’s proposed “expert” testimony as scientifically unreliable.  This is a real possibility in light of the lack of scientific consensus regarding mold toxicity and the questionable methodology utilized by many environmental sampling firms.

The bottom line:  if litigation arises, it’s usually prolonged and costly.  And despite large verdicts, testing methodology and causation are difficult to prove.

Protect Yourself and Your Clients

It’s important to consider any water intrusion as a risk. Property owners (sellers) and property managers must also understand how to treat mold-infested areas once it’s discovered.

Disclose any visible water intrusion or mold, and any past water intrusion or mold problems.

Be sure to protect your business with CRES Real Estate E & O  + ClaimPrevent®. With access to legal expertise 7 days a week at no extra charge if you do face an issue, CRES will be there to help you through the process.

Authoring/Contributing Attorney: Rinat B. Klier Erich, Manning & Kass Ellrod Ramirez TresterMold litigation has expanded, and is now being brought by property owners/buyers, employees, tenants, or merely building occupants. These claims gained a lot of publicity (for example, the Ed McMahon lawsuit). Yet, the science regarding mold and whether it can cause significant or permanent health effects is not established. Specifically, when the exposure to mold stops, the symptoms disappear, like most allergies.

Mold 101

Molds are a type of fungi that thrive in moisture. They grow on other materials. Outdoors, molds are an integral part of natural processes, breaking down leaves, wood and plant debris. However, indoors, they can be unhealthy.  There are over 10,000 species of mold. Around 100 can cause allergies in humans, and approximately 50 are pathogenic (i.e., they can grow inside the human body). About 50 are capable of creating “mycotoxins,” which are released by the mold and cause toxic reactions in healthy individuals.

Toxic mold is different from regular mold. It normally exudes a dank, musty odor. It’s also capable of producing mycotoxins. Among the types that are considered toxic and which are the subject of most lawsuits, are: Stachybotrys chartarum, Aspergillus and Penicillium. The most common toxic mold encountered in lawsuits is Stachybotrys (“black mold”).

Common areas for indoor mold growth include bathroom tile, kitchen (appliances and sink), basement walls, areas around windows where moisture condenses, and near leaky water fountains or sinks. Common causes of water or moisture problems resulting in mold growth include: roof leaks; delays in proper building maintenance; condensation from heating, ventilation, and air conditioning systems; condensation associated with high humidity or cold spots in a building; flooding from plumbing failures or heavy rains; slow leaks in plumbing fixtures and pipes; and the malfunction of humidification systems.

Interestingly, mold infestation is an increasingly problematic issue in newer buildings and homes. More recently-constructed buildings and homes are much tighter and more energy efficient, and occupants rarely open windows, resulting in less ventilation of the indoor environment.

Mold Issues that Grow into Big Lawsuits

Mold cases start with blaming the defendants for creating the moisture that allows mold to grow. Some cases however, also allege knowledge and failure to disclose, and others allege failure to repair or eradicate the mold properly once it’s discovered.

Plaintiffs in mold litigation allege a variety of illnesses and adverse health effects: from headaches, nausea, fatigue, asthma, hay fever-like symptoms (runny nose and scratchy throat) and respiratory problems, to fibromyalgia, chronic fatigue syndrome, reactive airway dysfunction syndrome, difficulty with memory and other cognitive functions and even cancer. The more common allergic reactions in individuals are coughing, sneezing and breathing problems. The soft tissues around the nose, mouth, trachea, and lungs are extremely vulnerable to mycotoxin contamination.

Yet, there is a lack of scientific consensus on the more seriously alleged illnesses and what level of mold exposure may cause such illnesses. The U.S. Centers for Disease Control and Prevention (CDC) website states that a causal link between the presence of the toxic mold and pulmonary hemorrhage or memory loss has not been proven.

In addition to the illness to humans, the mycotoxins also cause a significant amount of property damage. Once inside, mold can contaminate anything in the surrounding area including clothing, furniture, and works of art. Once contaminated, these items usually have to be destroyed. Building materials and fixtures are also fertile ground for mold growth. Building material typically must be removed and replaced, which is quite costly.

Mold Disclosures

As a result of many mold cases and large verdicts, some insurance companies have changed their coverages and either exclude mold claims or offer sub-limits only for mold claim. In California, the California Association of Realtors® created a mold disclosure that each buyer receives during a purchase transaction, which explains that mold can arise where there is water intrusion;  buyers are recommended to obtain mold tests if they learn of past water intrusion. Some molds cannot be seen (they may exist behind drywall, in the carpet or under the sub-floor), so an air sample must be performed to detect mold spores in the air.

Currently there are no government or industry standards (including from the Environmental Protection Agency or EPA) that specify allowable or acceptable levels of indoor, airborne molds.  However, the EPA issued a guidance document for mold remediation projects that provides some general guidelines for evaluating and responding to an indoor mold problem.

Mold Lawsuit Challenges

Given this scientific uncertainty, toxic mold litigation frequently hinges on expert witness testimony. The ability of the plaintiff on the one hand to establish causation between the alleged injuries and the particular species of mold, and the defense expert rejecting that link will determine how the case goes. In some cases, judges don’t allow plaintiff’s testimony without a preliminary hearing that establishes solid medical evidence of such a link.

In addition to proving the existence of mold, plaintiffs must prove a chain of custody between the testing company and the results of the testing. An environmental testing firm or laboratory has to conduct mold sampling in the allegedly contaminated area at the time of exposure. A link also has to be established that mold existed at the time the defendant was involved (for example, if the claim involves a sale, that the mold existed in the structure before the sale). The hurdles of having a properly-certified testing and lab facility, a physical connection between the contaminated area and the exposed plaintiff, and a link to the defendant’s wrongful conduct are significant challenges.

The main defense focus is on convincing the court to exclude the plaintiff’s proposed “expert” testimony as scientifically unreliable.  This is a real possibility in light of the lack of scientific consensus regarding mold toxicity and the questionable methodology utilized by many environmental sampling firms.

The bottom line:  if litigation arises, it’s usually prolonged and costly.  And despite large verdicts, testing methodology and causation are difficult to prove.

Protect Yourself and Your Clients

It’s important to consider any water intrusion as a risk. Property owners (sellers) and property managers must also understand how to treat mold-infested areas once it’s discovered.

Disclose any visible water intrusion or mold, and any past water intrusion or mold problems.

Be sure to protect your business with CRES Real Estate E & O  + ClaimPrevent®. With access to legal expertise 7 days a week at no extra charge if you do face an issue, CRES will be there to help you through the process.

Authoring/Contributing Attorney: Rinat B. Klier Erich, Manning & Kass Ellrod Ramirez Trester

This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.

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