From leaks to lawsuits: recently, mold has gotten the attention of apartment owners and managers as the courts have been awarding settlements in mold cases, but being proactive can be your best defense.

When Sallie Morgan left for a two-week vacation to the Bahamas, the last thing she worried about was the leak under her bathroom sink. In fact, Sallie wasn't even aware she had a leak. Unfortunately, when Sallie arrived home, she found her bathroom saturated with water. Furthermore, mold had secretly started to grow in the dry wall under the sink. After cleaning up her bathroom and having the leak fixed by her owner, Sallie didn't think much more about the problem.

As time progressed, Sallie discovered that she was suffering from an allergic reaction caused by mold. Angry that her property failed to perform the proper maintenance, Sallie sued her property owner for compensatory and punitive damages--and won.

Sound far-fetched? It's not. Stories like this are becoming commonplace within the multi-housing industry, prompting residents and property owners to think twice about the risk of mold in their apartment homes.

Growing Concerns

Mold is a natural part of our environment both indoors and outdoors--performing positive functions, such as breaking down dead organic material. We are all exposed to mold in our normal outdoor/indoor environment. Medical science has not yet resolved many of the questions concerning molds and their effects on human health, although some susceptible individuals can exhibit allergic sysptoms.

While there are more than 1,000 types of mold, one mold in particular--Stachybotrys--has received considerable attention. According to the New York City Department of Health, Stachybotrys grows on materials with high cellulose content--such as drywall, dropped ceiling tiles and wood--that are chronically moist or water-damaged.

In the last few years, litigation due to mold infestation has been on the rise, often leading to large settlements for plantiffs and their lawyers. Patrick Perrone, a partner at Newark-based McCarter & English, says that mold is a hot legal issue. Perrone--who specializes in construction defect, toxic tort and insurance coverage litigation--believes that lawsuits revolving around mold will continue to increase.

"Litigation based on mold is an area where plaintiff attorneys and their clients are making money," he says. "Substantial claims are being paid by insurance carriers. For example, a woman in Texas was recently awarded $32 million."

There have been several cases in which construction efforts, resulting in water leaks in apartment homes, have been blamed for mold infestation. In 1999, 140 lawsuits totaling $30 billion in compensatory and punitive damages were filed against two New York City apartment building owners. The case, involving approximately 500 residents, was settled this past November for a reported total of $1.18 million or about $200 per person after fees for expert testimony. In another case, three California families settled against their homeowner's association for $545,000. Residents claimed that leaky pipes caused mold to grow in the crawl spaces of their condo unit.

In another mold case, a judge recently finalized a $2.7 million award for health claims made by a California family. This precedent-setting case is the first in which personal injury claims were admitted into a mold trial. Most previous decisions were based only on property damage claims. Courts in several states (including Texas), have declined to hear testimony on health claims because such testimony does not meet the standard of generally recognized scientific fact.

"Many insurance companies are reviewing and changing policies on mold coverage," says Don Lee, District Manager of Farmers Insurance Group. "The liability section of the policy is being written to exclude mold and being submitted to the Department of Insurance in each state for approval."

According to the Texas Department of Insurance, the state Insurance Commissioner recently restructured the state's residential property policies after many residents tendered claims against insurance agencies in that state. The new order retains coverage for removal of mold related to certain water damage that is covered by residential property policies. But it eliminates coverage for high-priced procedures, such as testing, treating, containing or disposing of mold beyond that necessary to repair or replace property that is physically damaged by water. Policyholder will have the option to purchase additional coverage that includes these procedures.

Property owners aren't the only group with insurance concerns. "While residents often have renter's insurance, mold is not covered under primary peril," says Dirk Wakeham, CEO of LeasingDesk, an online renters and liability insurance provider. "Only if mold is caused by a primary peril, such as a roof or plumbing leak, will a resident likely be covered."

Although there continues to be a lack of federal regulations on mold, several states have enacted legislation aimed at providing more information to the public about mold. Three states--California, Texas and Maryland have all recently adopted legislation regarding mold and indoor air quality (IAQ). Other states are also considering legislation.

Factors Contributing to Mold Growth

Excesive moisture is necessary for mold to grow. According to the New York City Department of Health, "mold can grow anywhere there is water damage, high humidity or dampness." While moisture can enter an apartment unit through various sources such as floods, sewage backups or high humidity, small plumbing leaks are a source of moisture because they can go unnoticed. According to the American Water Works Association (AWWA), leaks (of all sorts) account for approximately 13.8 percent of all daily water use per capita in the U.S. Unlike water damage from a flood which is easily detected, leaks can go on for days--often missing the 24 to 48 hour window recommended for water cleanup by the EPA in order to prevent mold growth.

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"The increase in mold related claims to our industry has made us all more aware of the factors that contribute to mold, and the necessity of prompt response to maintenance requests made by our residents," says MaryJane O'Keefe, Risk Manager for Fairfield Residential, LLC and chairman of the California Apartment Association's Mold Task Force.

Peter Nelson, a Principal of Simpson Gumpertz & Heger, an Arlington, Mass-based engineering and consulting firm specializing in building moisture and mold issues says, "Mold is getting just as much attention as asbestos received 10 to 15 years ago. Not only does mold pose health risks to residents, but removing it may require special protection and can be a very expensive process."

Nelson says that mold often rises from areas beset with leaks. "For people with allergies to molds, it may not take much exposure to trigger their symptoms," he says. "Therefore, it's imperative for apartment owners to fix leaks as soon as possible. Since mold takes a day or two to form, immediately fixing leaks and drying up wet areas can circumvent potential problems."

Waiting to repair leaks can cost property owners a tremendous amount of money, Nelson adds. Once mold has taken root in damp walls and floors, removing it is a time-consuming and expensive process.

Protecting Your Property

Perrone is quick to point out that property owners can protect themselves by being proactive on mold issues. He says that owners should implement a "mold protocol," which entails documenting efforts to combat mold.

"In case of litigation, property owners need to prove that they have met reasonable standards of care," Perrone says. "By documenting efforts to prevent or combat mold, you're protecting yourself. Furthermore, owners need to let residents know that leaks can produce mold, and that leaks need to be reported as soon as possible. If residents fail to provide timely notice of moisture problems, the property owner should not be held responsible for resulting mold growth."

O'Keefe agrees that education is critical to prevention of mold growth. "Protecting against mold growth requires that steps be taken by both the resident and the property management team. Property managers need to educate their staff as well as their residents to the causes of mold and ways to reduce the probability of mold occurring." For example, O'Keefe says residents receive literature highlighting causes of mold and must agree to report water leaks or suspected areas of mold immediately to the property manager.

Residents are only the first step however. "The maintenance staff needs to be aware that reported water leaks must be repaired as soon as possible, as mold can occur within 24 to 48 hours after the leak begins," she adds. "They need to treat water leaks like they would a fire ... by responding immediately. And they need to know that thorough drying out of the wet material is essential to prevent mold from occurring. Each party's responsibilities should be acknowledged in an addendum to the lease."

In addition to education, performing routine checks for signs of moisture damage can eliminate conditions that could lead to mold. One cause of excessive moisture is plumbing leaks. Other things, such as improperly cycling HVAC, excessive humidity and resident behaviors, may also contribute to moisture problems. One water submetering company performs water audits prior to installation, which is a good time to thoroughly check for leaks in a property's infrastructure. "In many older properties the plumbing hasn't been looked at in years," says Brian Brittsan, President of Wellspring Wireless Utility Systems. "As we perform our water engineering audit we are checking every point of water entry into the apartment. By nature of the installation we replace any pipes or angle stops that are leaking. It is just a part of our process."

No matter what protocol a property has implemented, the best protection against mold is still prevention. Early leak detection decreases your risk of mold growth and structural deterioration due to excessive water damage. New water submetering technologies can now detect leaks--without relying on a resident's phone call.

Earlier this year Wellspring Wireless Utility Services introduced the Aqura[TM] advanced wireless submetering system, which measures water and energy consumption at each point-of-use in an apartment home. It is also capable of detecting leaks down to one-tenth of a gallon using its low-flow sensor. For example, when a faucet is leaking flow events will register in a continuous pattern. When a leak is detected, Wellspring immediately notifies the property. "With mold becoming a serious topic in the industry, we're glad that our product can assist in notifying the property within the critical 24-48 hour period," says Brittsan.

Stephen J. Lehtonen is a California plumbing industry executive and President of Omni Management, a construction defect remediation and fund administration company. Comments may be directed to [e-mail].