Mold: Introduction for Insurance Agents

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Recent mold cases Public awareness about mold has been steadily growing over the past few years.... and it's no wonder. Cases sometimes involve stories of serious illness and even death, and claims have been made in the tens of millions. However, remediation over mold is usually not cut and dry. The Ed McMahon Case The Ed McMahon case is just one of the lawsuits that has caught the attention of homeowners. The following article was taken from the Los Angeles Times (Ann O'Neill, April 10, 2002). Entertainer Ed McMahon is suing his insurance company for more than $20 million, alleging that he was sickened by toxic mold that spread through his Beverly Hills house after contractors cleaning up water damage from a broken pipe botched the job. McMahon and his wife, Pamela, became ill from the mold, as did members of their household staff, according to the Los Angeles County Superior Court suit. The McMahons also blame the mold for the death of the family dog, Muffin. Their suit, the latest of many in recent years over toxic mold, was filed late Monday against American Equity Insurance Co., a pair of insurance adjusters and several environmental cleanup contractors. It seeks monetary damages for alleged breach of contract, negligence and intentional infliction of emotional distress. A spokeswoman for the insurance company declined to comment. The trouble began in late July, when a pipe broke in the couple's six-bedroom Mediterranean-style house, which was filled with memorabilia from Ed McMahon's long television career. The den was flooded. A month later, mold was discovered in the den. The McMahons charge in court papers that they were assured they were safe and could remain in the house during the cleanup, even as the mold spread through the heating and air conditioning ducts to their bedroom. It invaded the closets, contaminating their clothes. It also was found under the Jacuzzi in the master bathroom. The McMahons questioned the contractors' cleanup methods, including simply painting over the mold. As the job became more expensive and complex, the insurance company and its contractors abandoned it, the suit charges. "They covered it until they realized how expensive it was, and then they covered up," said McMahon lawyer Allan Browne. "What they did was spread the mold by allowing it to go into the air conditioning and heating ducts. When they screwed up, they started saying, 'Maybe we're not responsible for this job.'" "When your family loses its health and your home is a wasteland, that's a colossal disaster," McMahon said Tuesday. The McMahons' 8,000-square-foot house overlooking Coldwater Canyon stands gutted as the entertainer, his insurance company and the environmental cleanup contractors argue over who should pay to finish the cleanup, according to court papers. The McMahons are renting a $23,000-a-month house and, Browne said, have no idea where their insurance company has stored their clothing, furniture, artwork and memorabilia. "Hopefully, it's safe, but we don't know where it is," Browne said. Awareness of toxic mold has increased in recent years because of a spate of lawsuits. Among the most prominent litigants is Erin Brockovich, who discovered mold in the house she bought when the story of her legal crusade on behalf of pollution victims was turned into a movie starring Julia Roberts. In response to the increased litigation, insurance rates have spiked in some states. Insurers in some areas have stopped writing policies or offer only bare-bones ones that don't cover mold problems. In June, for example, Farmers Insurance Group lost a $32-million lawsuit filed by a Texas family that claimed toxic mold in their home caused severe health problems. The jury found that the insurer failed to pay for needed repairs for a water leak, which allowed mold to grow rampant in the house, making it uninhabitable. In California, Gov. Gray Davis signed the 2001 Toxic Mold Protection Act, which went into effect in January. The law requires anyone selling, leasing or transferring property to disclose any potentially dangerous mold problem. "The mold that grew in this case was the poisonous variety, stachybotrys chartarum," Browne said. "This is the most dangerous mold of all. It can cause death in people who are susceptible to respiratory ailments." The McMahons' dog, a mutt who resembled a sheep dog, was in perfect health until she suddenly became sick at about the same time the mold was discovered, Browne said. "She was a sweetheart of a dog, incredibly smart, as frisky as you can imagine," the lawyer said. "All of a sudden she got this terrible respiratory ailment, and they had to put her down," Browne said. And then, McMahon's and his wife's health began to suffer. McMahon, best known as the affable sidekick to talk show host Johnny Carson, spent most of the fall coughing, sneezing and congested. "Nobody could figure out why he was unable to breathe," Browne said. He spent four months on antibiotics and had to cancel several speaking engagements. Finally, his doctor ordered him out of the house and his health improved. Settlement The Ed McMahon suit was settled the end of April for $7.03 million dollars. The court imposed a public disclosure of the litigants and settlement amounts. The hearing transcript showed that Travelers and American Equity Insurance companies and other related insurance entities settled with McMahon for more than $5 million. The rest of the sum was paid by four mold cleanup firms and two insurance adjusters. Recent cases The Ed McMahon case is just one of many mold exposure cases. The following is a sampling of cases and results that should help broaden your understanding of mold claims and litigation. Florida Courthouse In l992 employees of a Florida courthouse were evacuated. Approximately 80% of the nearly 600 employees complained of respiratory problems. Alleging that construction defects facilitated the growth of mold to which employees had been exposed, the county sued the general contractor, subcontractors, architects, and engineers. Result: The county recovered approximately $13 million and $29.9 million in and out of court settlement and a suit against its builders risk insurer. Further, some of the county employees and spouses sued the defendants again and recovered approximately $8.8 million. Southern California Home In 1997 a city contractor caused raw sewage to back up into a Southern California home. The lawsuit filed by the family against the city alleged that personal injuries such as brain damage and respiratory infections had been sustained. Medical examinations confirmed the presence of mold antibodies in family members' bloodstreams. Result: The city settled with the family for approximately $600,000. Motel In 1997 a newly opened motel was quickly closed because of flooding caused by ruptured plumbing. During the ensuing investigation, the owner discovered mold in the building, as well as construction defects. Result: After three years of mediation the suits were settled for $6.7 million. Charles Blum, et al. v. Chubb Custom Insurance Co., et al. Texas homeowners Charles and Leigh Blum sued Chubb Custom Insurance Co., Chubb Group of Insurance Companies, and Texas Windstorm Insurance Association, claiming that the insurer(s) denied, delayed, or failed to pay or properly investigate claims stemming from accidental plumbing leaks and roof damage. Result: The case went to trial, and after 2-1/2 weeks the case was settled for $1.5 million on December 18, 2000. Centex-Rooney Construction Co., Inc. v. Martin County, Florida In an earlier lawsuit, Martin County sued its construction manager for dampness that promoted mold growth and excessive humidity in a courthouse. Fifteen employees in the building alleged injuries caused by exposure to the mold. The source of the water problem was the exterior insulation finish system (EIFS). Result: On an appeal, the appeals court affirmed the $14 million verdict against the construction manager. Martin County also secured out-of-court settlements worth $3 million from other defendants. Verdicts pending The cases keep coming in. The following are some mold cases that, at the time of this writing, are still unresolved. Erin Brockovich In California, the toxic mold issue leapt into the national spotlight when activist-turned-celebrity Erin Brockovich announced that she, her husband, and their three children are battling mold-related illnesses due to the fungus that has contaminated their home. She owns a million-dollar home and claimed she needs $1,000,000 for remediation costs. Steven and Karen Porath Here's a case of extreme mold abatement. On Valentine's Day, February 14, 2001, the Poraths had their house burned to rid their property of mold. They had purchased the home from the Department of Veteran Affairs and moved it onto their land. They needed to recoup their high testing and remediation costs by selling their 5.5 acres of land in Forest Hills, California. J.J. Acquisition Corp. v. Pacific Gulf Properties Employees of a California newspaper filed suit in September 2000 against the owner of their building, seeking $10 million for illnesses resulting from exposure to several types of toxic mold. Spectrum Community Association v. Bristol House Partnership The Spectrum homeowners association sued the developers and contractors in June 2000, alleging that construction defects caused the growth of toxic mold in walls and ceilings of the housing units. The homeowners claim that exposure to mold resulted in a variety of adverse health effects. Andrejevic et al. v. Board of Education of Wheaton-Warrenville School District No. 200, DuPage County, IL This class-action suit was filed by approximately 1700 students, parents, and teachers. The plaintiffs are seeking $67 million for injuries caused by exposure to toxic mold and other indoor pollutants following a flood at the elementary school. The lawsuit, filed in July 1999, claims that the school district did not properly remediate flood damage, resulting in growth of the mold. MacDonald v. Dufferin-Peel Catholic District School Board The plaintiffs in this proposed class action lawsuit in Ontario Superior Court include students exposed to mold at various schools between September 1995 and June 1999, as well as their parents. The lawsuit alleges that the children's exposure to toxic molds resulted in a variety of ailments. The plaintiffs are seeking $1 billion in general damages, $500 million in special damages and costs, and an additional $500 million in damages to the parents. Thomas Anderson v. Allstate Insurance Company On October 3, 2000, a California jury ordered Allstate Insurance to pay a policyholder $18.5 million in a coverage dispute over mold in the plaintiff's home in Placerville, California. The award included $500,000 in damages and $18 million in punitive damages. The trial judge reduced the award to $3 million. The case is being appealed. Elisabeth B. Krant v. County of Tulare, et al. Claiming that she was exposed to mold, Superior Court Judge Elisabeth Krant sued the defendants for dangerous condition of public property against public employee, fraudulent concealment, battery, intentional infliction of emotional distress, negligent infliction of emotional distress, negligence by construction defendants, and continuing nuisance. Saddler v. County of Tulare Approximately 100 employees at a Visalia County, California courthouse filed a lawsuit against multiple defendants, alleging that the workers experienced adverse health effects from exposure to toxic mold in the building. The suit says that various contractors negligently designed and built the courthouse and that the county did not properly maintain the building. Defendants include: the County of Tulare, Kitchell Capital Construction Management, Garcia Construction Inc., Bakersfield Glass Co., Superior Academy Granite Co., Fresno Marble and Tile, San Francisco Lathing Co., Pacific Electrical & Mechanical Co., E.H. Moore & Sons, Kitchell CEM, Beaver Construction, Forcum/Mackey Construction Inc., C.W. Forcum Construction Inc., and Turrupseed Electric Service Inc.

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Not only are policy forms, clauses, rules and court decisions constantly changing, but forms vary from company to company and state to state. This material is intended as a general guideline and might not apply to a specific situation. The authors, LunchTimeCE, Inc., CEfreedom, and Insurance Skills Center, and any organization for whom this course is administered will have neither liability nor responsibility to any person or entity with respect to any loss or damage alleged to be caused directly or indirectly as a result of information contained in this course.