Toxic mold--it's not the new asbestos. (An Advertising Supplement to the Los Angeles Business Journal).

Toxic mold has been called "the new asbestos". The popular press causes panic with articles warning of long-term health effects and catastrophic property damage. Building owners, apartment owners, developers and condominium associations have become constant targets of mold claims alleging millions in damages. A sober look at the facts shows that these claims are much more hype than reality. Armed with this knowledge, a responsible owner or condominium association can navigate through mold exposure and mold claims to a successful resolution.

The science of mold--A brief overview

The rise in mold claims can be traced to changes in building construction in the last thirty years. Building codes were revised so buildings would be built "tighter" and the industry saw a rise in the use of paper products in construction. These changes created more warm, confined spaces in walls, floors and ceilings surrounded by paper based food sources for mold and fungi. Add water intrusion from a poorly constructed exterior or a leaking pipe and presto! You have mold.

While there are a number of allegedly hazardous molds, the king of mold claims is Stachybotros, often called "black mold" or "toxic mold" by the popular press. Plaintiffs have alleged everything from respiratory tract problems to neurological damage and brain disease as a result of Stachybotros exposure.

Sound science does not support these claims. The Texas Medical Association just released its long awaited report entitled "Black Mold and Human Illness" in September 2002. In that report, the TMA concluded that "adverse health effects from inhalation of Stachybotros spores in water-damaged buildings is not supported by available peer-reviewed reports in medical literature."

How to avoid or minimize personal injury daims

Personal injury claims based on mold exposure have a checkered history. Jury verdicts have ranged from defense verdicts to seven figure awards based on alleged long-term health impacts. The largest personal injury verdicts have one thing in common which has nothing to do with science or the law--cold, unresponsive and uncaring defendants. The cases with large jury awards usually involve a builder, landlord or condominium association that ignored complaints of leaks and water intrusion, failed to remediate discovered mold or did not relocate people from mold-impacted housing. How do you avoid being that uncaring defendant? Act responsibly to repair the cause of water intrusion and remediate mold and do so when your tenant or unit owner puts you on notice of the problem, not years later.

Property damage daims are viable and compensible

In stark contrast to personal injury claims, claims based on property damage from mold exposure had been well received by the courts. Mold spores tend to settle on all available surfaces and are easily disturbed. That disturbance puts mold spores in the air, which can cause the allergies, irritations and infections scientists agree can be caused by mold.

The property damage to the building or home itself is generally treatable. There are available remediation techniques to remove mold from wall and floor cavities, wood framing, roof sheathing and hard surfaces. Impacted drywall, carpeting and other soft goods can and should be removed and replaced. The source of water intrusion can be located and repaired. In short, inhabitable space can be repaired for future use.

There are fewer options for damaged personal items. There are available methods to clean furniture and similar items which can work in instances of mild or moderate exposure. There is little that can be done with significantly exposed items.

Insurance may not provide much help

The logical place to look for financial assistance when dealing with a mold problem is property and liability insurance. Unlike asbestos, insurance carriers are not likely to provide much help without a fight.

Insurers will generally try to deny coverage for mold claims based on either mold and fungi exclusions or the pollution exclusions in property and liability policies. Insurers began writing mold exclusions into these policies in the late 1990's. Most property and liability polices purchased today will contain an endorsement purporting to exclude coverage for property damage or bodily injury due to mold or fungi exposure. While these exclusions have yet to be tested, it is unlikely these policies will provide significant help for the costs of remediation.

Policies without the "mold exclusion" may provide some assistance. These policies generally contain a pollution exclusion that may provide coverage if a policyholder can show an "accidental and sudden occurrence," such as roof collapse or catastrophic plumbing leak. There is some hope, however, that policies without a mold and fungi exclusion can be tapped to provide a source of funds for remediation, repair and tenant claims.

A practical approach to mold claims

If you are a multi-family dwelling owner, developer or condominium association, make no mistake about it - you are the target of these claims. What should you do when faced with these mold claims?

The answer is simple - act responsibly. Deal with mold claims directly and do it without undue delay. Relocate the inhabitants of mold-impacted units. Remediate affected units and repair any entry point for water or plumbing problems. Hard and treatable surfaces in the units should be cleaned and soft goods that cannot be cleaned should be replaced. All available insurance assets should be marshaled and carriers should be put on notice of any actual or potential claims. A timely response to the complaints and claims of tenants and unit owners not only decreases the likelihood of potential injury and damage, it substantially decreases the possibility of expensive and time consuming litigation.

Mold is not the new asbestos. Mold claims can be successfully managed by experienced legal and technical professionals. The key to successful management lies in a timely response. To ignore these problems is to act at your own peril.

Barry MacNaughton is a litigation partner at Ervin, Cohen & Jessup LLP. He authors a monthly newsletter regarding current issues in the real estate industry. For more information please contact Cynthia Kaiser at [e-mail] or [phone].