City couple sues insurer over mold cleanup

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City couple sues insurer over mold cleanup

2002-08-28

By Adam Wilmoth

The Oklahoman

When Mike and Carolynne Grogan returned from vacation last summer and found

more than an inch of standing water in their south Oklahoma City home, they

knew they had a mess, but they had no idea how much the cleanup would cost

or how long they would be unable to move back in.

The water was dried up within hours, but more than a year later, the Grogans

say they are still no closer to their homecoming.

Claiming bad faith and breach of contract, the couple this month filed one

of the first major lawsuits regarding mold in Oklahoma. They filed the

lawsuit against their homeowner's insurance carrier.

Mold claims, which were all but unheard of just three years ago, have

skyrocketed since 1999, becoming one of the hottest issues in the insurance

industry. A $32 million judgment in Texas, along with hundreds of smaller

cases, have caused insurance companies to clamp down on the way they write

mold policies -- or whether they cover mold at all.

The Grogans' mold problems began when their washer malfunctioned while they

were in California visiting their children and grandchildren.

But even before the couple returned, mold had begun growing throughout their

waterlogged house. GuideOne Mutual Insurance Co., which had insured their

home for 13 years, sent out an assessor and conducted an initial cleanup,

but little was done to kill the fungus that was already growing behind the

walls and under the linoleum floors, the Grogans claim.

The Grogans claim that they -- along with their two young grandchildren --

stayed in the house for more than two months before they were told that the

mold could be toxic. The family has not returned since, but it may have been

too late.

Mike Grogan now has the same species of toxic mold that was in the house

growing in his lungs and had to quit his job because of health problems

associated with the fungus, he said.

GuideOne spokeswoman Abbas said the company does not dispute that the

claim is covered by the insurance policy. But the insurance company believes

a cleanup cost of at least $60,000 -- which is what the Grogans want -- is

excessive.

The Grogans are seeking an unnamed amount. Not only do they want at least

$60,000 to clean their home, they want money to pay for the trailer they

have rented and lived in for nearly a year, the new clothes they had to buy

and Mike Grogan's medical care related to the fungus in his lungs.

They claim that GuideOne broke its contract by failing to repair and

remediate the property and by refusing to fully compensate them for their

financial losses related to the mold. They also contend that the failure and

refusal to pay for the damage constitutes bad faith.

The Grogans said the only thing GuideOne has reimbursed them for is the

rental of their trailer. At one point, GuideOne representatives said they

had sent a check to reimburse the Grogans for winter clothes, but when Mike

Grogan called two weeks later to ask why the money had not yet arrived, he

was told the company had changed its decision.

The lawsuit also claims that the insurance company acted negligently by

improperly inspecting the house, spreading mold throughout the house,

improperly repairing the property and failing to tell the Grogans' about the

mold's potential health risks.

GuideOne's Abbas said she could not comment on any specifics of the case

because it is ongoing.

According to court documents, the lawsuit is seeking unspecified damages,

but the Grogans' attorneys said the case is similar to one that received a

$4 million judgment in Arizona last year and the now-famous Texas case that

won Melinda Ballard $32 million for damage to her $6 million home.

Ballard's case is credited with sparking public interest in mold and the

rash of mold-related insurance claims that have swept across the country in

recent years.

According to Ballard's Web site, residential properties with mold-related

insurance claims nationwide ballooned from 2,567 in 1999 to 7,143 in 2001.

But Ballard said only 622 claims were filed in the first quarter of 2002

because insurance companies are now better equipped to handle water damage

and are settling claims faster and because insurance companies are

restricting coverage of mold claims.

Brad , director of the consumer assistance claims division at the

Oklahoma Insurance Department, said that of the nearly 7,000 formal

complaints his office receives about insurance claims every year, only

dozens of them relate to mold.

But even with that small percentage, mold is much more on the consumers'

minds in recent years, he said.

" Until just a couple of years ago, it just wasn't an issue, " said.

" It's probably a result of the big lawsuit in Texas that raised everybody's

awareness. Now with any water loss, even if mold is not a problem, people

are aware that it could be a problem, so it's always in people's minds. "

Ballard's Texas mold case heightened awareness to the dangers of mold and to

how quickly it can spread, but it also led to higher premium rates.

For more than a year after Ballard won her $32 million judgment, most Texas

insurance companies refused to issue new homeowner policies, and when they

did begin issuing policies, they restricted mold claims. The insurance

companies said a reason Texas homeowners insurance premiums shot up more

than 200 percent last year was because of mold claims.

Most homeowners policies in Oklahoma now cover mold only when it is related

to an insurable problem, such as a broken pipe or roof damage. Mold caused

by slow leaks over time is generally no longer covered in the Sooner state.

Oklahoma Insurance Commissioner Carroll Fisher said multimillion dollar

judgments can force insurance companies to hike rates or impose retrictions.

" I think it can very definitely have an economic impact on how the industry

views writing policies in Oklahoma, " he said. " That's always a concern to th

e insurance department when settlements are made. We'll just have to watch

closely what happens. "

Ballard, however, said the judgments are just excuses for insurance

companies to raise rates.

" Mold is gold with insurance companies because in Texas, they are able to

jack up rates to exorbitant levels while slashing coverage so they now have

less liability for more money, " she said.

But Fisher, the insurance commissioner, said the best way to avoid expensive

litigation is for both parties to work together properly and as quickly as

possible.

" There are some times a company tries to save a few dollars and limit

payment. An attorney gets involved, and a $10,000 claim becomes $25,000 in a

heartbeat, " he said.

Fisher recommended policyholders who are dissatisfied with their insurance

company's assessments call his office. The department's EAGLE program is

designed to quickly settle disputes without going to court.

Another option is to do what the Grogan's did and hire a private adjuster to

estimate the damage.

Brent , senior adjuster and president of United Adjustment Services,

said it will cost more than $60,000 to clean the mold out of the Grogans'

$175,000 house because they would have to replace wallboard and floors and

clean it from air ducts. He estimates that the cleanup would have run about

$30,000 if it had been done properly a year ago.

The Grogans' lawsuit is based largely on 's assessment.

" Having the washer malfunction while you're on vacation shouldn't be a

life-changing event, " said Bergin, the Grogans' attorney.