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A TOXIC THREAT: PREVENTING INVESTMENT DOLLARS FROM MOLDING AWAY.

When Erin Brockovich of eponymous movie fame testified before the California Legislature last spring about her most recent toxic investigation, it was personal: In investigating why she and her family had been feeling sick since moving into their new $1,000,000 home, she identified the most recent contaminant to affect the property management industry--toxic mold. As have many others, she has gone to court seeking hundreds of thousands of dollars in property damages as well as damages for personal injury and lost income allegedly due to mold infestation.

The "Classic" Case

On May 7, 2001, the Delaware Court of Appeals decided what may be the paradigm of the toxic mold case in New Haverford Partnership v. Stroot, et al., 2001 WL 493216 (Del.Supr.). In Stroot, two residents of an apartment complex sued their landlord for negligence, alleging that poor maintenance practices led to the accumulation of toxic mold in the apartment units. A jury award of $1,000,000 in compensatory damages to one resident and $40,000 to the other (reduced by the trial court by 22% to reflect contributory negligence) was upheld.

The court found that during the time the plaintiffs resided in the complex, there was a history of mold forming in and around areas where excessive moisture had accumulated. Repeated complaints to the landlord failed to resolve the problem. Expert architectural evidence established that the landlord had failed to meet a "national standard" of due care in maintaining its buildings. Expert mycologist opinion established there was "excessive and atypical" mold buildup due to long-term leaks. Medical opinion established that it was the mold that aggravated one plaintiff's pre-existing asthma, and caused the other plaintiff to develop upper respiratory problems and an allergy to Penicillium. Finally, a ropsychologist testified that one plaintiff developed significant and permanent cognitive impairment in attention, concentration, memory and executive functions as a proximate result of mold exposure.

The Culprit

Known by such names as helminthosporium, aspergillus and stachybotris, these purportedly toxic molds are alleged to cause health impacts ranging from simple clogged sinuses and sore throats, to chronic fatigue syndrome, asthma, pneumonia, vertigo, temporary loss of hearing, migraines, memory loss and other cognitive dysfunction, and hemorrhaging. These organisms also are highly destructive to structures and can be very expensive to remove if they can be removed at all. These molds are omnipresent indoors and outdoors, and become a source of problems when allowed to "bloom" in warm damp conditions. Building areas with a history of leaks, poorly ventilated crawl spaces and HVAC equipment are prime target areas.

A Government Solution

The U.S. Environmental Protection Agency (EPA) has issued a "guidance document" entitled "Mold Remediation in Schools and Commercial Buildings" offering guidance on identifying, remediating and preventing mold buildup. (The document can be downloaded from the agency's Web site at www.epa.gov/iaq/molds/). The EPA's guidance document does not, however, offer any standards for Permissible Exposure Limits (PELs).

While experienced regulatory agencies such as the EPA may be reluctant to tackle so daunting a task, state legislatures may not be so shy. In California, at least three toxic mold bills have been introduced. Of these, SB 732 (the "Toxic Mold Protection Act of 2001"), considered by many to have the best chance of passage, would require the State Department of Health Services to adopt, if feasible, Permissible Exposure Limits for indoor mold for sensitive populations. If PELs are not feasible, the department would develop guidelines to be used to determine when the presence of mold constitutes a public health threat. The Department would also be required to develop identification and remediation standards. Finally, the bill would require renters and sellers of commercial, industrial and residential property, including public entities, to disclose any known or reasonably suspected presence of mold to prospective purchasers and to both current and prospective tenants.

I've Been Sued!

The threat of toxic mold litigation is particularly severe given that there are no established PEL standards, and that the nature and measure of alleged damages appears to be completely open ended. So what can one do?

First, prepare for litigation by obtaining and following to the extent practicable whatever reasonable standards do exist for reasonable care. If there are published guidelines which are not followed, document the reasons why.

Second, took to insurance carriers to defend and indemnify against such claims. The typical CGL coverage against third-party claims for personal injury and property damage may apply. Although carriers may be expected to argue that mold exposure claims fall within the so-called "pollution exclusion" contained in most policies, several courts have rendered opinions which hold or suggest the contrary. (See Leverence v. United States Fidelity & Guaranty, 1991 WL 150497 [Wis.App. (unpub.)] (mold is not "released", but rather "forms" naturally in certain environmental conditions); See also Keggi v. Northbrook Property and Casualty Ins. Co., 13 P.3d 785 (Ariz. 2000) (bacteria contaminated water did nor fall within pollution exclusion because it would occur naturally).

Finally, do not hesitate to put on a vigorous defense. In cases such as these, the first case may just be "the tip of the iceberg", particularly in multi-tenant complexes. And there are very substantial defenses which can be raised to negligence claims as well as to the causation and damage elements of these claims, which in many cases may be based on so-called "expert" testimony which can effectively be challenged under current evidentiary standards.

If more convincing evidence is necessary that toxic mold is a growing problem of property owners and managers, home test kits by Home Diagnostics are now on sale at shopping malls for $30, allowing homeowners and residents to test for toxic mold themselves.

David W. Alden and Robert D. Infelise are partners in the San Francisco office of Cox, Castle & Nicholson LLP. Cox, Castle & Nicholson, with additional offices in Los Angeles and Orange County, California, represents clients in all aspects of real estate law and litigation. Its Web site can be found at www.ccnlaw.com.
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Copyright 2001 Gale, Cengage Learning. All rights reserved.

Article Details
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Author:Alden, David W.; Infelise, Robert D.
Publication:Journal of Property Management
Article Type:Brief Article
Geographic Code:1USA
Date:Jul 1, 2001
Words:999
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