The Fungus That Ate Sacramento

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http://www.forbes.com/forbes/2002/0121/032.html

The Fungus That Ate Sacramento

Ellen Egan, Forbes Magazine, 01.21.02

How mold grew from little black specks into a fee-producing tort.

on built a tidy law practice in California suing

contractors and insurance companies for construction defects. But he really

hit the jackpot in 1995. Clients complained that some slimy black stuff in

their house, commonly called mold, was making them sick. Now on is

raking in millions in fees from mold litigation: He sues contractors and

insurers, claiming that mold in his clients' houses or apartments is causing

everything from headaches and dizziness to neurological damage. His firm has

pending about 1,000 of the estimated 10,000 mold suits piling up.

Line up, tort lawyers. This could be the next asbestos. Yes, there's a bit

of difference: Asbestos fibers are known to cause disease and death. Whether

household mold can do so is, to put it charitably, a matter of debate. But

that hasn't slowed the litigation over mold. Explains on, " Juries

look at anecdotal evidence. They don't require 100% proof. "

Mold is the visible growth of any of 100,000 species of fungus. These

organisms are everywhere, indoors and outdoors. Indoors, their spores can

show up in showers, inside walls, on ceilings--wherever there's plenty of

water and a food source such as cellulose, a component of wallboard. There's

no question mold can damage property.

There's also no question that certain species of fungus can invade the human

body, sometimes fatally. Patients with serious fungal diseases tend to be

debilitated from other causes or have weakened immune systems.

But can household mold make you sick? This is where the legal battle is

being fought. Enough mold can provoke an allergic reaction, such as watery

eyes, scratchy throats and headaches, among certain people. Certain types of

mold, like aspergillus and stachybotrys, contain a mycotoxin that can be

fatal in extremely rare cases. Mycotoxins occasionally poison people who eat

moldy grain, or farmworkers in undeveloped countries who inhale

extraordinary amounts over long periods.

on was heading to trial on a construction-defect case in 1997 when he

got his first taste of mold's legal possibilities. He was representing an

unnamed actor and his wife who maintained that shoddy materials had allowed

mold to grow within the walls of their Malibu home and that the fungus was

causing headaches and fatigue. He sued the home's builder, the

subcontractors and the insurance company that sold the couple their

homeowner's policy.

On the eve of the trial the Centers for Disease Control & Prevention

coincidentally published a report on whether mold was responsible for

instances of bleeding lungs in eight infants in Cleveland. Epidemiologist

Ruth Etzel wrote that the sick children were more likely to live in homes

with stachybotrys than were children from a control group. The work was

reprised in medical journals and quickly became the seminal piece on " toxic

mold. "

on wasted no time in using the study as leverage against the Malibu

defendants. As he tells it, " Once I provided them with the CDC report and

other research, they realized they hadn't adequately prepared. " Although

home insurers don't cover personal injury, contractors and builders aren't

immune. The Malibu defendants settled for $1.4 million: $940,000 for

construction defects and emotional distress, and $460,000 in fees to

on.

The lawsuit was widely covered by the media, and before long on was

inundated with calls from homeowners. Mold litigation spread across the

country. School districts in Illinois and Ohio were hit by suits from

students claiming health problems. A Texas jury last June awarded $32.1

million to Melinda Ballard, a Dallas public relations executive: $6.2

million to replace her family's 22-room mold-infested home and possessions;

$5 million for mental anguish; $12 million in punitive damages; and $8.9

million for legal fees. Fire Insurance Exchange, a subsidiary of Farmers

Insurance Group, is appealing. (The gist of the suit is not personal injury

but failing to act promptly on a water damage claim.)

While plaintiff lawyers were salivating over the numbers, the scientific

underpinning of the litigation was crumbling. The CDC recanted its findings

from the Cleveland infants' study. A new report, issued in early 2000, said

that the earlier study was flawed for a number of reasons, including

unorthodox collection techniques, and that there is no proof stachybotrys

causes health conditions such as bleeding lungs or memory loss. It conceded

that mold can cause allergic reactions like watery noses.

on is not dismayed. " Mycologists aren't medical doctors, " he retorts.

" They don't understand mold's effect on the body. " In any event, he can

always argue that the second CDC report does not rule out a link between

mold and illness; it only says there is no proven link.

Insurers are moving to protect themselves by capping liabilities for mold

removal, especially in Texas, where there's a confluence of high humidity

and wacky judges. Insurers estimate they paid out $670 million for

mold-related property damage in Texas in 2001, more than double the total in

1999. Mold itself (unlike water damage) is not a covered event on a typical

homeowner policy, but it can seep into water damage claims.

If the insurance industry escapes, the lawyers will find other deep pockets,

just as they did for asbestos. In November a Sacramento, Calif. jury awarded

$2.7 million to a family claiming mold in their apartment gave them

headaches, constipation and asthma. The defendant was their landlord, who

unsuccessfully argued the family's cats were responsible.

There are a lot of buildings in the U.S. and a lot of building owners who

can be picked clean. Expect more litigation.