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Containing mold: avoiding costly litigation.

Most people have heard about the $32 million Allison v. Fire Insurance Exchange Texas mold case or Hawaii's own Hilton Hotels' $60 million dollar, 13 month mold remediation project of the Kalia Tower. Mold is the newest buzz word and a growing trend in the world of litigation as consumers become more concerned about exposure to "toxic mold." But what do these huge awards and settlements really mean and is mold the demon we are making it out to be? What follows is an overview of mold, how to avoid it and sources of information about it.

What is it and where is it?

With well over 100,000 different species, mold (aka fungi) is a microscopic organism, related to mushrooms, yeast and mildew, that produces enzymes to digest organic matter. While people dislike the thought of mold being all around them, it is necessary to human survival by breaking down organic matter, such as leaves, wood and plant debris. Mold becomes problematic for humans in a moist indoor environment where it eats organic material, such as wallboard, wood, paste under wallpaper or stored files, and spreads via spores.

Hawaii's year-round warm temperatures and high humidity make it an ideal breeding ground for mold, and consequently for mold litigation. Mold can be found almost everywhere in Hawaii where there is an adequate food source, a continuing source of moisture, appropriate temperatures and less than ideal air circulation.

The Challenges of Mold

Mold poses four primary challenges for building owners, managers or consumers: 1) health; 2) liability; 3) insurance; and 4) community perception.

While there are no conclusive studies advising what levels of mold are hazardous to human health, and no definitive scientific studies showing a causal link between exposure to certain types of mold (such as Stachybotrys, Aspergillus, Penicillium or Fusarium) and a particular ailment, there are correlative studies used by experts to support the position that exposure to mold is detrimental to one's health. Each person will react differently to an exposure, so there are no rules about how much mold one can be exposed to before they will manifest a health problem. Complaints can range from runny nose and eye irritation to Organic Dust Toxic Syndrome and Hypersensitivity Pneumonitis.

According to legal experts, mold liability is based on claims that are a blend of real property, contract, tort, construction defect, environmental law and insurance law. Cases are expensive to prosecute or defend and often result in costly settlements or awards. The perception of wrongdoing often gives rise to large awards. The crux of the Allison v. Fire Insurance Exchange case, whose $32 million dollar award was later reduced to $4 million, was not the actual mold damage, but the breach of good faith and fair dealing on the part of the insurance company for failing to properly investigate the water damage, its resultant mold, and then to remediate the damage. In the fall of 2005, Hilton settled plaintiffs' failure to disclose claims for $1.8 million.

Insurance becomes the next problem in mold claims, and most policies now have specific mold exclusions. Buying insurance to cover a potential mold problem is very costly, and once a building or home has been identified as having had mold, obtaining insurance is difficult. Furthermore, claims for water damage often become mold claims at which point, an insurance company may point to the mold exclusion to limit or deny coverage and liability. Having appropriate protocols in place for preventing, discovering and remediating mold has helped persuade insurance companies to be more willing to write policies that include coverage for mold events.

Community perception is the last battle to be considered in a mold exposure incident. People are reluctant to purchase, lease, live in, stay in or be around buildings known to have mold problems. The label of "sick building" is negative publicity difficult to overcome, can make use of such a building even more problematic, and may result in lessening of the value of property that does not present a health threat.

The Best Defense is a Good Offense

The best way to avoid a mold claim or litigation, which can be expensive, time-consuming and wrought with negative publicity, is to create a good offensive plan, including the following elements.

Inspections: Building inspections should be regularly scheduled and immediately done in response to any known or suspected problem. Particular attention should be paid to problem areas, such as roofs, pipes, and areas routinely exposed to water (e.g. walls subject to regular irrigation overspray). The timing of inspections should be based on the use and age of the building. New buildings with HVAC (heating, ventilation, and/or air conditioning) and plumbing systems coming online should be inspected often, until all of the "kinks" are worked out. Inspections are also appropriate after a water event, such as a flood, heavy rain, or leak.

Adequate Maintenance: A maintenance plan needs to be in place in advance of an incident and should include inspections as well as provisions for the repair and replacement of elements of the building (including appropriate funding). Attention should be paid to building elements that involve water or will be profoundly subject to water damage.

Emergency Plan: A water intrusion event requires an immediate response, the key element of which is to eliminate the source of the water. Most water intrusion/mold complaints can be diffused quickly by treating the complaint as an emergency addressing the following general elements:

1. Stop the water.

2. Notify applicable parties (a homeowner, tenant, maintenance or management company, and repair personnel).

3. Determine the scope of the water event (documentation with reports and photos, water removal and dehumidification, and containment).

4. Determine the significance and fix the problem.

A. Insignificant? Dry the area, remove wet objects or building materials and expose concealed areas. Consider testing if evidence of mold exists such as a continuing musty odor or visual mold.

B. Significant? Shut down the HVAC, consider occupant relocation, do not move impacted items, assess whether third parties, such as air testing experts or remediation specialists, need to be involved.

5. Consult a multidisciplinary team of experts (such as a certified industrial hygienist (CIH) for air samples, an independent microbiologist for microbial analysis, a specialized engineer and/or remediation contractor, and your attorney).

It is important to hire and work with properly trained professionals, as anyone can purchase the equipment to do air quality testing. To help protect the validity of testing and any remediation, look for a competent professional who meets the 2004 American Industrial Hygiene Association guidelines for competence (BS in a related science, competence in training and experience, two years of mold assessment work, and two years of related work under a CIH, CSP or PE).

Sources of Information

While there are numerous sources of information about mold remediation, very few sources provide preemptive regulatory or statutory guidelines to property managers, owners and landlords, making it is difficult to know how to best react to a mold complaint. That being said, the industry currently points to two primary documents for mold standards.

The first is the EPA's Mold Remediation in Schools & Commercial Buildings, published in 2001, which presents guidelines for the remediation/cleanup of mold and moisture problems in schools and commercial buildings, including measures designed to protect the heath of building occupants and remediators. Designed primarily for building managers, custodians and others responsible for the maintenance of the buildings, the paper includes a good overview of investigation, evaluation and remediation techniques, as well as an introduction to molds, a glossary of terms and lists of resources. This document can be found at oldremediation.pdf. The EPA's A Brief Guide to Mold Moisture and Your Home presents much of the same information for use by homeowners and renters. (Go to

In January 2002, New York City Department of Health (NYCDOH) published its revised and expanded Guidelines on Assessment and Remediation of Fungi in Indoor Environments that deals with policies for medical and environmental evaluation and intervention to address Stachybotrys chartarum contamination and all types of fungi that can produce mycotoxins, some of which have been identified as toxic agents. (Go to

Other states and agencies are compiling and publishing guidelines, and approximately ten states appear to be in the process of enacting legislation regarding acceptable levels of mold and appropriate responses to mold. California enacted the Toxic Mold Protection Act, effective January of 2002, to develop a task force to adopt permissible exposure limits to mold, as well as standards for the assessment of mold in indoor environments (Health and Safety Code [section] 26101). Due to lack of funding, however, little has been done.

To date, Hawaii has not enacted legislation regarding mold. In 2004, SB3160, which was held in committee, proposed legislation to create a toxic mold advisory board to establish permissible mold exposure limits and other standards for indoor environments and to set requirements for disclosure of mold and related conditions in commercial and residential real property and public buildings.

Mold is a fact of life and necessary to our very existence on this planet, but unnecessary to have growing on our walls or under wallpaper in our homes or work environment. Having a basic understanding about mold and how to mitigate potential damage are the first steps to preventing a problem that could lead to litigation, potential health problems, and the stigma associated with having a mold-infested building.

This article is intended to address issues of general interest and is not to be construed as legal advice.


Ms. Mehling practices in the Maui Office of Paul Johnson Park & Niles. She concentrates her practice in commercial litigation, construction defect litigation and insurance defense.
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Title Annotation:HBizlaw 2006
Author:Mehling, Keri C.
Publication:Hawaii Business
Geographic Code:1U9HI
Date:Jul 1, 2006
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