Mold case award slashed by 75%

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Mold case award slashed by 75%

By Peggy Fikac

Chief, Express-News Austin Bureau

Web Posted : 12/20/2002 12:00 AM

AUSTIN - A state appeals court Wednesday cut an eye-popping $32 million

award to a homeowner who sued Farmers Insurance Group about its handling of

a mold claim.

The 3rd Court of Appeals threw out $17 million in punitive and

mental-anguish damages and ordered $8.9 million in attorneys fees be

recalculated.

The court affirmed an award for $4 million in actual damages, in addition to

$2.5 million in interest and about $2 million in attorneys fees.

" The actual judgment will still be, I think, the largest mold judgment I'm

aware of in the country, " said Fred Hagans, who represents homeowner Melinda

Ballard.

The case has drawn particular attention as high insurance premiums have

outraged homeowners, prompting action by regulators and promises of more to

come by state leaders and lawmakers. Insurers have said they were coping

with losses that included huge claims for mold-damaged homes.

Hagans said he expects both sides to seek further court consideration.

Ballard said she plans to appeal.

" This case was never about the money. It was always about justice, " said

Ballard, who with her family left their 22-room Dripping Springs mansion,

citing the infestation of toxic black mold.

Her case began with a single claim for water damage to a hardwood floor, the

appeals court said, and grew to include mold contamination of the entire

house and outbuildings.

" Was justice served? No. This was a decision that hurt every Texan

homeowner, " Ballard said. " It was bad behavior before, and now it's bad

behavior without penalties. "

Farmers spokeswoman Levy said the company is reviewing its legal

options, but added: " We are pleased that the court agreed with what we have

said all along - that we did not commit fraud and did not knowingly act in

bad faith. "

The 3rd Court said it found sufficient evidence to uphold the jury's

findings that the insurance company breached its duty of good faith and fair

dealing toward Ballard. But the court found no evidence that the company did

so " knowingly, " prompting it to throw out the award for punitive damages and

mental anguish damages.

The court did not find sufficient evidence to support a jury finding of

fraud but found enough evidence to uphold a finding that the company

committed a violation of the Deceptive Trade Practices Act.

Hagans said the court, like many others, has made it difficult to uphold a

jury finding that conduct is " knowing. "

He drew this analogy: " If I take a gun and fire it into a crowd, obviously

that is intentional conduct, but I don't know that it's going to hit a

specific person. The court has effectively analyzed that word to mean I've

got to know it's going to hit that particular person, and that is my

intent. "

Dan Lambe of the consumer group Texas Watch said that by eliminating

punitive damages, the court " sends a message to insurance companies that it

is A-OK to delay, deny, hassle and mistreat Texas families in the claims

process, and the only thing they're going to be held responsible for is the

original claim. It's taking away incentives for insurance companies to

handle claims promptly and properly. "

The Alliance of American Insurers sees the potential for a positive effect

on the state's insurance market, saying the ruling " could bring some sanity

to the feeding frenzy among plaintiff attorneys " on the issue.

Joe Woods of the insurance trade group said, " While the Ballard case is more

about bad faith than mold, the original inflated award has been the trigger

for the mold hysteria that has swept Texas and the nation.

" The appellate court's ruling injects a note of reality into the debate over

mold-related claims. "

pfikac@...

Staff Writers Aissatou Sidime and Bob Richter contributed to this report

12/20/2002