Builder Sues Their Insurer Over Mold

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Mold Repair Tab Grows

by Accola

RockyMountainNews.com

By Accola

Richmond American Homes, Colorado's largest home builder, has spent nearly $19

million to repair Front Range homes plagued by mold and water damage.

Richmond's " water intrusion and mold " bills for 2,648 single-family homes over

the past decade were disclosed in a federal lawsuit against four liability

insurers.

Richmond alleges the insurance companies refused to reimburse the home builder

after it submitted repair claims under several general liability insurance

policies.

The lawsuit, filed in Denver's U.S. District Court last December, accuses the

defendants of deceptive sales practices and " unreasonably " denying coverage.

Although the complaint doesn't state the amount of disputed claims, Richmond has

since become more forthcoming in a series of follow-up documents.

In sworn statements, Rainey, head of Richmond's Colorado home division,

and a risk manager at parent company MDC Holdings Inc. acknowledge

multimillion-dollar losses related to the " investigation and remediation of

homes constructed by Richmond as a result of damage and, in some cases, personal

injuries, caused by excessive moisture, water intrusion and in some -cases,

mold. "

In his affidavit, Rainey indicated that hundreds of mold-related repairs involve

ventilation problems in basements constructed with suspended floor systems, a

common practice in Colorado, where expansive soils can lead to buckled and

cracked foundations.

As of December 2003, Rainey said Richmond had incurred $18 million in repair

costs and expenses subject to " water intrusion " claims.

But in May, one of Richmond's insurers - Interstate Fire & Casualty Co. - stated

the home builder has calculated " at least $18,780,182.84 in losses related to

mold. "

The homes, built between 1993 and 2002, " are located in a number of different

developments throughout the Front Range - in cities such as Superior, Aurora,

Highlands Ranch, Fort , Colorado Springs and Lakewood, to name a few, "

according to one court document.

Golden attorney Torgersen, Richmond's outside counsel, declined to

elaborate on the repairs or the specifics of the case.

" Obviously, what is in the court record is what it is, " Torgersen said.

Richmond is seeking triple damages - more than $50 million - under a provision

of Colorado's Consumer Protection Act for cases in which the alleged misconduct

is " willful or wanton. "

The attorney for lead defendant National Union Fire Insurance Co. said he had

been instructed by his client not to discuss the case.

" Some cases permit discussions; other cases don't, " said National's Denver

attorney, Senter.

Sullan, a lawyer who has represented thousands of Colorado homeowners in

defective construction suits against builders, expressed surprise over

Richmond's mounting repairs for mold and water seepage.

" I knew they were out there repairing homes . . . but that's astronomical, "

Sullan said.

In some parts of the country, homeowners have won multimillion-dollar

settlements and court judgments against builders after claiming mold had

triggered debilitating allergies and other illnesses.

Sullan, however, said toxic mold caused by excessively damp indoor spaces is

generally not a problem in arid Colorado. What Richmond appears to be addressing

is mold rot and water damage to basement walls, exterior stucco and ceilings, he

said.

" Congratulations to Richmond on voluntarily fixing their homes, " Sullan said. " A

lot of home builders haven't taken the approach that Richmond has and have left

the homeowners holding the bag. "

On the other hand, Sullan said Richmond's attempt to recover three times actual

damages is over the top.

He noted that parent company MDC spearheaded the lobbying effort last year that

led to a $250,000 cap on triple-damage judgments against home builders.

" Clearly they are going for the big bucks, " Sullan said. " Isn't it amazing that

when I file one of those cases, I'm abusing the system, and when they do it they

are seeking justifiable damages. "

Richmond's statement to its home buyers

.. Richmond American Homes' focus has been and is directed toward proactively

addressing the concerns of its home buyers. Some of Richmond's insurance

carriers have reimbursed Richmond for a portion of the costs incurred in these

efforts, but Richmond's other insurance carriers have refused to honor their

policies. This lawsuit has been filed in order to confirm the responsibility of

Richmond's insurers for this claim.

For additional information, contact:

Pure Air Control Services

800-422-7873, ext. 802