Turning the tide against mold claims: the apartment industry made significant inroads in 2005 to reverse the early damage done by the media in overstating the health dangers associated with mold.

After years of struggling with personal injury and property damage mold claims, the apartment industry won several important cases in 2005. Residents of apartment communities and the plaintiffs' trial bar have made many claims against owners and managers during the past half-decade. Too frequently, the claims asserted are exaggerated personal injury and property damage lawsuits that force management to expend considerable resources defending or settling what are often unmerited claims.

The apartment industry is well aware that mold is likely to begin growing any time there is persistent moisture or a humidity problem in an apartment. The causes of moisture are many, including leaky roofs, broken pipes and improper use of HVAC systems. Regardless of what causes the moisture, residents sometimes try to capitalize on the situation by asking to terminate their leases or receive compensation for illness or contamination of their belongings by attributing the injury to mold growth in the apartment. Sometimes mold is present. Other times it is imagined. Regardless of what motivates residents' claims, management must respond promptly and properly.

Black Mold Makes Its Debut

Fortunately, the National Apartment Association (NAA) and its members identified the potential for mold litigation at an early stage. In November 2000, NAA sounded the warning that apartment owners and managers could be the future targets of high-stakes lawsuits by their residents. The cause for concern came not long after the 1999 filing of a widely publicized case, Allison v. Fire Insurance Exchange, 98 S. W. 3d 227 (2002), involving Texas homeowner Melinda Ballard, who sued her insurance company for water damage to her hardwood floors. The case evolved to include a claim for mold contamination throughout the house.

In June 2001, a Texas jury awarded Ballard and her husband Ronald Allison $32 million against their insurance carrier. The Texas Supreme Court eventually reversed the case in part; however, the trial court was still directed to reassess awards for damages, attorney's fees and costs against the insurer. Ballard and her husband had discovered a kind of mold called Stachybotrys growing in their home. In the course of litigation, they popularized the name "Black Mold" to describe the Stachybolrys fungus.

One of Ballard's treating physicians diagnosed her with a type of brain injury called "toxic encephalopathy" and attributed the disease to Stachybotrys. Although the court disallowed any testimony from the doctor that Ballard's medical illness was caused by mold, the damage was done. The media seized the term "Black Mold" as though it were a deadly new disease and began broadcasting the horrors associated with exposure to mold.

Damp Indoor Spaces Study

From the start, NAA and industry leaders pointed to the lack of scientific and medical evidence that demonstrated any relationship between mold exposure and serious illness. Some reputable physicians and medical groups pointed out that there was little evidence to show that mold caused serious medical illness. Then, in April 2005, the Institute of Medicine (IOM) of the National Academy of Sciences published a long-awaited study that reviewed published medical literature on the connection between mold and medical illness.

The IOM study, "Damp Indoor Spaces and Health," confirmed what the apartment industry had contended from the beginning: While there was some evidence of an association in normal, healthy individuals between mold and upper respiratory symptoms, such as coughing and wheezing or the triggering of an asthma attack, the symptoms were deemed short-lived and usually went away as soon as the person was no longer exposed to mold. The study found only limited evidence that mold caused the development of asthma. More significantly, the IOM study found totally insufficient evidence that mold caused the serious kinds of medical illnesses being alleged by plaintiffs in lawsuit after lawsuit. There was no evidence to confirm that the mold caused cancer, memory loss, arthritis, miscarriages and many other serious medical conditions.

Four Pivotal Cases

There were four important federal cases addressing mold claims decided in 2005, in which apartment owners ultimately prevailed. While it may be hard to keep an accurate scorecard, the apartment industry did well while defending mold claims in several major federal cases.

In the first of several significant court cases, a resident of an apartment community in Savannah, Ga., sued her former landlord for illness and property damage she attributed to mold exposure while living in the apartment. Although the apartment community made repairs after receiving notice of mold, the resident moved out and began living in a tent on a piece of undeveloped property (Jazairi v. Royal Oaks Apartment Associates L.P.).

Jazairi went to a hospital and complained to her physician about memory loss and fatigue. The former resident also reported symptoms of coughing, wheezing, chest pains and shortness of breath. Her treating physician noted that Jazairi possibly had obstructive lung disease but determined the condition was not the result of exposure to a fungus. Instead, the doctor concluded Jazairi's condition was suggestive of chronic bronchitis caused by excessive cigarette smoking over 20 years.

Using an analysis applied by the courts in toxic tort cases, in June 2005, the court ruled in favor of the Savannah apartment owner. The federal trial court concluded there was insufficient evidence that the former resident was exposed to mold in sufficient quantities capable of causing her injuries. Likewise, there was insufficient scientific evidence that the injuries were caused by exposure to mold.

Applying a similar analysis, a federal trial judge in Atlanta reached the same finding in Diagnostic Strategies Inc. v. Worthing Cameron Crest L.P. In July 2005, NAA, the National Multi Housing Council and the Atlanta and Georgia apartment associations filed an amicus brief supporting the apartment owner's motions to dismiss the plaintiffs' claims for lost business profits, personal injuries and property damage. After conducting an all-day Daubert hearing (see sidebar, page 54) on the medical basis for linking mold exposure to the former residents' claims for damages, the federal trial court found insufficient evidence to sustain the lawsuit and granted summary judgment in favor of Worthing.

In the Diagnostic Strategies case, a registered nurse lived for two months in a corporate apartment in Atlanta. She claimed to suffer from a multitude of symptoms (headache, chronic fatigue, muscle soreness, joint swelling, memory loss, hay fever, watery eyes, sinus infection, laryngitis, insomnia, vertigo and fibromyalgia). All symptoms were attributed to a common mold found virtually everywhere called Aspergillus fumigatus. The former resident's treating physician claimed that her injuries were the result of exposure to mold in the apartment--even though there was virtually no evidence of excessive mold--that caused a delayed systemic reaction in the patient. Relying in part on the recent IOM study released three months earlier, the Atlanta federal trial judge granted judgment in favor of Worthing as to the most serious of the plaintiff's personal injury claims, finding a lack of sufficient medical evidence to support those kinds of personal injuries.

That same month, July 2005, still another federal court ruled in favor of one of the largest apartment owners in the country In this Arizona lawsuit (Killian v. Equity Residential Trust), the former resident claimed that she suffered from exposure to toxic mold, which caused her to have brain injury, seizure disorder, movement disorder, neuro-cognitive impairment and an immune system disorder. The federal trial court cited the National Academy of Sciences study and found "insufficient evidence of an association of neuropsychiatric symptoms and the presence of mold." While noting that the IOM study showed some relationship of upper respiratory tract symptoms (such as sinusitis), the plaintiff had no complaint about upper respiratory problems.

In its written opinion, the Arizona federal court stated, "Plaintiff's (Killian's) case is lacking in fundamental credibility. Much of the evidence showed that plaintiff was behaving unreasonably and with one eye on litigation. Her failure to appear at the trial or to allow the court to come to her and weigh her credibility confirms this court's finding that the case is lacking in credibility. This lack of credibility extends to every portion of this case, including the plaintiff's expert witnesses."

Mold Reaches the Supreme Court

Lincoln Property Co. v. Roche began with a favorable federal trial court decision in 2003. The case involved a lawsuit by former apartment residents against a Virginia community managed by Lincoln Property Co. The court completely rejected the former residents' claims that mold in the apartment caused the illness. The plaintiffs' medical expert failed to use proper medical methodology to rule out other possible causes of Roche's illness. The trial judge relied on a 2002 publication, "Adverse Human Health Effects Associated with Molds in the Indoor Environment," by the prestigious American College of Occupational and Environmental Medicine (ACOEM) in ruling that there was an insufficient basis for finding that mold exposure in the apartment was the specific cause of the Roches' medical problems.

Unfortunately, one year later, in 2004, the U.S. Court of Appeals for the Fourth Circuit reversed the Roche trial court's well-written findings and opinion, based on a technical jurisdictional issue related to whether the case should ever have been in a federal court or should have been left in the state court system, due to a lack of what is called "complete diversity of citizenship."

This set the stage for a dramatic appeal to the U.S. Supreme Court. On Nov. 29, 2005, the U.S. Supreme Court reversed the Court of Appeals, which had thrown out the favorable ruling--finding in favor of Lincoln--on the technical and complex federal jurisdiction issue. Neither the Supreme Court nor the Court of Appeals addressed the ruling of the trial court that threw out the mold claim because that issue was not before either court at the time.

But, on April 7, 2006, the 4th Circuit U.S. Court of Appeals issued a ruling that completely affirmed the federal trial judge's original 2003 opinion. The Court of Appeals noted in its decisions that its initial ruling addressed only the technical jurisdictional issue, and not the evidentiary ruling regarding the reliability of medical evidence as causing serious illness in a mold case.

The U.S. appellate court concluded that, "The district court thoroughly analyzed the facts and legal principles respecting [the plaintiffs' medical expert's] proffered testimony in a well-reasoned 35-page opinion. As such, we are unable to say that the court's decision to bar [the plaintiffs' medical expert] from testifying was arbitrary or capricious ... Without [the medical expert's] testimony, the plaintiffs (the Roches) could not establish that the mold in their apartment was the proximate cause of their alleged respiratory ailments." The Virginia federal court ruling in Roche remains, perhaps, the only significant authoritative published precedent that supports the apartment industry's position on mold exposure in the apartment setting.

The Future of Mold Litigation

So, where does that leave the apartment industry today? Although residents and the plaintiffs' trial bar continue to file lawsuits against apartment owners and managers based on mold exposure, those cases have not been the source of huge jury verdicts and settlements that apartment residents thought would be coming after the 1999 Ballard case in Texas. The media-driven hype of the late 1990s and early 2000s has, for the most part, dropped off the radar (and the TV screen). When the media runs out of villains or is no longer able to generate a "state of fear" on a particular subject, the focus usually turns to the next great crisis.

Attorneys who typically take on mold cases are usually inexperienced with mold or tend to underestimate the amount of resources it will take to win such a case. These trial attorneys are often unaware that most insurance policies provide no coverage for mold-related claims. Even if there is an environmental rider providing for coverage, the policy typically has large deductibles of $100,000. Apartment owners and managers do not typically offer large settlements, and an unreasonably high demand for settlement from the resident usually leads to full-blown litigation.

The apartment industry is making inroads to reverse the early damage done by the media in overstating the health dangers associated with mold. Mold is no longer the captivating story that television, papers and magazines used to lure and shock listeners and readers. A significant body of case law is building in favor of housing providers. While the courts continue to throw out many of the personal injury and medical claims associated with mold, they have not always done so as to plaintiffs' lawsuits regarding contamination of residents' personal property and belongings. But the cost of victory is expensive. The industry will continue to see and defend mold related claims for a number of years to come, but 2005 may well mark the year that the tide began to turn.

Expert Witnesses: Are They Experts?

Federal trial courts typically rely on four factors in determining whether an expert witness' theory or technique in diagnosing the cause of an illness is scientifically valid. Those primary but non-exclusive factors are:

1. Can or has the theory or technique used by the expert been tested?

2. Has the theory or technique been subjected to peer review and publication?

3. Is there a known or potential rate of error for the method or technique at issue?

4. Is the theory or technique accepted by the majority of other medical or scientific peers within the relevant scientific or medical community?

This standard of admissibility for determining whether an expert's testimony is allowed into evidence before a judge or jury is based on the 1993 U.S. Supreme Court case Daubert v. Merrell Dow Pharmaceuticals Inc. The Daubert case itself did not involve a mold claim but did pertain to a toxic tort (breast implant litigation over leakage and the effects of silicone on women).

"Robin" (Robert P.) Hein Esq. is Senior Counsel for Fowler, Hein Cheatwood & Williams, P.A. His Atlanta-based law firm limits its practice to representation of apartment owners and managers. He serves on the Board of Directors of the Georgia and Atlanta apartment associations. With 29 years' experience, he provides training and seminars for corporate and onsite management. Hein is author of "Fair Housing for Apartment Managers and Owners," an Internet training course.