Mold becomes growing problem

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http://www.bizjournals.com/denver/stories/2002/07/08/story6.html

July 5, 2002

Mold becomes growing problem

Johansen Denver Business Journal

Despite Colorado's predominantly high-desert climate, mold is becoming a

growing problem for businesses here.

Nationwide, insurance claims for mold have increased more than 80-fold over

the past three years. The construction, insurance, development and medical

professions are scrambling to address what has turned into a very expensive

problem.

Even in the middle of a drought, Colorado isn't immune. A database compiled

by a group called Policyholders of America found that 98 Coloradans retained

counsel for first-party mold-related insurance claims between the late '90s

and February of 2002. Most of these claims were made by homeowners.

" I think there's a general sense that Colorado is too dry to have mold, "

said Carole , executive director of the Rocky Mountain Insurance

Information Association.

said the majority of mold claims in Colorado result from water

damage, but mold is also caused by construction defects and maintenance

issues.

In fact, the remedy to Colorado's expansive soils problem has been a source

of mold problems for some homebuilders.

" A significant portion of the mold-related claims are really secondary

consequences of the building community's reaction to the expansive soils

claims, " said Dennis Polk, an attorney with Holley, Albertson & Polk P.C.,

who has represented builders in construction defect claims, including those

for mold.

Expansive soils have caused homes to shift and led to structural damage and

subsequent lawsuits against builders.

" Colorado, almost uniquely in the U.S., has addressed [the expansive soils

problem] with a structural wood subfloor system, " Polk said.

This subfloor is meant to allow for shifting without causing structural

damage to a home. Unfortunately, the crawl space below these subfloors

wasn't always ventilated properly, so mold grew there and resulted in

claims.

" Who knows how long there's been mold in crawl spaces? Probably always, "

said Kim Calomino, director of technical affairs for the Home Builders

Association of Metro Denver. The Denver HBA is working with its members to

address mold-related issues and is part of a task force that's crafting

potential building codes that address moisture management.

" Why is it more prominent now? Increased media coverage and more awareness

in the general public, " Calomino said. " Whether it's actually more

prominent, I don't think anyone has an answer. "

Nationally, claims alleging illness caused by mold exposure are becoming

more common. These claims range from memory loss to respiratory problems.

But the medical community has yet to establish a causal link between

exposure to mold and illness.

Bob Woellner, president of Quest Inc., does air-quality testing and helps

companies with risk management of environmental hazards. The company works

mostly in the commercial real estate arena, and Woellner has served as an

expert witness for several mold-related cases.

" I watch and participate in the medical side of things, " he said. " There

isn't a lot of data saying there's a lot of direct medical risks. By working

with the medical side of things, we can look at the perceived and the true

risks. "

One strain of mold, known as stachybotrys, has been called " toxic mold " and

is the strain behind many bodily injury claims. However, the Centers for

Disease Control and Prevention recommends the removal of any type of mold

from living areas, because mold allergies are common.

On its Web site, the CDC states that no causal link between stachybotrys

mold and alleged health risks such as memory loss or pulmonary hemorrhage

has been proven.

Overall, the question of mold is complicated by the fact that there are very

few official standards regarding how much mold is dangerous, how mold should

be cleaned up or what qualifies as " clean " when mold is removed. One of the

few " official " sources is a guide to mold remediation in schools and

commercial buildings put out by the Environmental Protection Agency.

U.S. Rep. Conyers, D-Michigan, introduced a bill this spring known as

the " Toxic Mold Safety and Protection Act. "

Among other things, the act would require that more research be done on the

health effects of mold and that standards be set for indoor air quality

regarding mold.

Calomino is concerned that homeowners are increasingly moving directly to

litigation rather than allowing home builders an opportunity to remedy the

problem.

" There are homeowners that think they need to sue. It's a sign of the times.

Litigation seems like first and best course of action. The builder, like any

other corporate citizen, wants to provide a good product and wants to make

the consumer happy, " Calomino said. " It's disappointing when we get the

attorney's phone call rather than the homeowner's. "

" Our approach continues to be and it will always be that if you have a mold

problem, you should take care of it, " said Bruce , director of

environmental health at Tri-County Health Department, which represents

, Arapahoe and counties. " We would prefer any day that it get

resolved on a cooperative basis, rather than getting into litigation. The

bottom line is, we need to take care of people's health. "

Tri-County is part of the task force looking at how building codes might be

changed to better address moisture and subsequent mold problems.

The group Policyholders of America was founded in 2002 by Melinda Ballard,

who was awarded $32.2 million in damages for a bad faith claim against her

insurance company after it failed to cure water damage that later resulted

in mold growth in her family's 11,500-square-foot Texas home. This is the

highest mold-related award to date.

Texas, California and Florida have been hit hardest by mold-related claims

with 53 percent of the more than 16,000 claims being tracked by the group

reported in those three states. In fact, some insurance companies are said

to be pulling out of Texas, because the high number of mold claims have made

it cost prohibitive to do business there.

" The difference is, in Texas, a number of large insurers are being forced

from the market because of mold, " said . " At some point, the company

can't price the coverage high enough. "

Many insurance companies are now grappling with how to address mold claims

and many -- especially homeowner's policies -- are excluding mold from their

coverage entirely.

" We're helping to create language that helps there be coverage. Insurance

companies tend to want to get out of it completely, but some are letting you

buy back coverage -- but not to the policy limits, " said Sloan, a vice

president in Marsh Inc.'s environmental practice group in Denver. Marsh is a

large commercial insurance broker that also provides risk management

services.

Sloan said homebuilders and smaller contractors, like plumbers, are finding

it increasingly expensive to get mold coverage, if they can at all.

" That's the heartbreaking part of this. You can sue anyone -- subs,

drywallers -- they can all be named, " said. " I guess we could sue

each other to death, or we could try to find out if it's a real health

concern. "