Cut From a Dangerous Mold

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http://www.fortune.com/indexw.jhtml?channel=artcol.jhtml & doc_id=208147

Cut From a Dangerous Mold

Will mold turn out to be another asbestos?

FORTUNE

Monday, June 10, 2002

By O'Reilly

Deutsche Bank recently discovered a nasty problem at its 40-story skyscraper

near Ground Zero. No, not structural damage. And not asbestos in the air

either. It was something far more unexpected: mold. Spores invaded the

building after it was vacated on Sept. 11; now there's speculation that the

still-empty tower is no longer habitable. Deutsche Bank is yet another

casualty of mold, which is being blamed not just for building damage but

also for health problems such as hay-fever-like allergies, nosebleeds, and

possibly nerve damage. Almost overnight the same repulsive stuff that has

been sprouting in dank places since before the dinosaurs has become the bete

noir of homeowners, landlords, builders, and contractors across the country.

How bad is the problem? Jerry Carnahan, head of homeowner policies at

Farmers Insurance, says the number of mold-related claims against his firm

in Texas rose from 400 in all of 2000 to 2,500 in January 2002 alone. Says

Carnahan: " In my 23 years in this business, I've never seen anything ramp up

like mold. " In past years, he adds, insuring against it would be akin to

" insuring against dust. " Now Hartwig, an insurance industry

economist, estimates that Texas mold could cost carriers half a billion

dollars and says mold claims have been filed in virtually every state.

Mold began to grab headlines about ten years ago as scientists tried to

ascertain why new commercial buildings often caused respiratory and flu-like

symptoms. The usual suspects--lead paint, carbon monoxide, and adhesive

solvents circulating in tightly sealed buildings--were ruled out. Then gobs

of mold were found in a museum basement in New York and a Florida

courthouse. Spores flourish, it turns out, when the cardboard backing on

Sheetrock, which has been widely used since the 1960s for interior walls,

gets soaked. Wet ceiling tiles and wood sprout mold too.

One of the first mold lawsuits was brought in 1995 by an actor living in

Malibu who found it hard to breathe when he closed the windows of his new

ocean-view mansion. It turned out the builder had pumped shredded newspaper

behind the walls to serve as insulation, which was soon saturated by a leaky

roof. " We opened the walls, and there was this black Jell-O oozing out, "

says the actor's attorney, on. on won a $1.5 million

settlement from the builder and has since handled 1,000 other mold cases.

But it was a 2001 Texas case that created the biggest stir. Melinda Ballard

alleged that Farmers Insurance didn't move quickly enough to stop a

fast-spreading mold, which was so toxic that a guest went deaf in one ear

after spending half an hour in her house. A jury awarded Ballard an

unheard-of $32 million. Farmers Insurance announced a month later that it

would no longer cover extensive mold claims when policies came up for

renewal. That spawned the " mold chasers " : lawyers, insurance adjusters, and

contractors--sometimes working in cahoots--who offered to root out mold at

extravagant prices and sue insurance companies that refused to pay.

Lawyers say that while personal-injury mold cases will be hard to prove,

class-action suits against the corporations that make building materials are

likely. Although only one--involving Behr Paint's antimildew deck stain--has

been filed so far, the prospect of getting hauled into court has developers

rushing to rewrite warranties and repair mold-spawning defects.

So will mold turn out to be another asbestos? Probably not. While asbestos

litigation is predicted to cost insurers and manufacturers $60 billion to

$70 billion, the tally for mold is likely to be far lower. And, unlike toxic

asbestos, barely half a dozen of the thousands of mold varieties are

believed to cause health problems. Still, Congressman Conyers Jr.

(D-Mich.) is expected to introduce a bill shortly that would protect

consumers from toxic mold, and if a panel of scientists convened recently by

the U.S. government clearly links mold to serious illnesses, expect the mold

story to keep on spreading.