Appeals court knocks down $32 million judgement in toxic mold case

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http://www.miami.com/mld/miamiherald/business/4776162.htm

Thu, Dec. 19, 2002

Appeals court knocks down $32 million judgement in toxic mold case

JIM VERTUNO

Associated Press

AUSTIN - In a high-profile case involving a mold-damaged home, a state

appeals court on Thursday reduced a jury verdict against Farmers Insurance

Group from $32 million to $4 million plus interest and attorneys fees.

The Third District Court of Appeals said a Farmers affiliate violated the

state Deceptive Trade Practices Act.

But the court rejected the jury's findings that Farmers committed fraud and

failed to deal fairly with Melinda Ballard, who had sued over water and mold

damage in her 22-room Southern mansion in Dripping Springs.

The appeals court left intact a $4 million award for actual damages but

threw out $17 million for mental anguish and punitive damages. The court

also threw out assorted small fees and ordered that $8.9 million in

attorney's fees be recalculated and likely reduced.

Ballard's case was probably the most prominent of many mold claims filed

recently against insurers in Texas. Ballard, dressed in a gas mask and

head-to-toe white protective suit, was pictured on the cover of the New York

Times Magazine last year.

The huge jury verdict for Ballard last year sent shock waves through the

homeowners insurance industry, which has blamed rising claims for mold and

water damage as a key reason behind escalating premiums.

Farmer's saw a measure of redemption in the appeal court's ruling Thursday.

" We are pleased that the court affirmed everything that we said all along;

that we did not commit fraud or knowingly act in bad faith, " said

Levy, a spokeswoman for Los Angeles-based Farmers.

Farmers is the state's second-largest home insurer with about 700,000 Texas

customers.

Ballard said she would appeal the reduced verdict, which could take the case

to the Texas Supreme Court.

Thursday's ruling means " an insurance company can rape and pillage without

any form of penalty, " said Ballard. " It's going to be a blood bath. If there

are no penalties to punish bad behavior, what in the hell is going to stop

them? "

Ballard and her husband, Ron , said they had to leave their home in

1999 after toxic black mold made it uninhabitable.

Their lawsuit against a Farmers affiliate, Fire Insurance Exchange, went to

trial in County. The couple said the company failed to adequately and

swiftly cover repairs for a water leak, allowing the toxic mold Stachybotrys

chartarum to overrun their home and damage their family's health.

The Alliance of American Insurers, a Downer's Grove, Ill.-based trade group

that counts more than 300 property-insurance companies as members, said

Ballard's case and its large award prompted " mold hysteria " nationwide

" The original inflated award has been the trigger for a mold hysteria that

has swept Texas and the nation, " said Joe Woods, the group's Austin-based

assistant vice president for the Southwest.

Insurance companies had pointed to the $32 million judgment as a target for

trial lawyers to bring even more lawsuits, prompting more expensive premiums

for policy holders.

" Enterprising plaintiffs' attorneys will discover that mold isn't as golden

as they once thought, " Woods said.

The consumer group Texas Watch criticized the ruling, saying it was bad for

policyholders.

" Unfortunately this decision sends a message to insurance companies that

says you will not be held responsible if you delay, deny, hassle and

mistreat Texas families or Texas claimants, " said Dan Lambe, the group's

executive director.

Ballard, who is also president of a group called Policyholders of America,

which claims more than 400,000 members, said insurance companies and not

claim-filing homeowners were to blame for rising premiums.