Mold: A Comprehensive Survey Of Defense Strategies, Coverage Exclusions, And Liability Implications Across The U.S.

Mold: A Comprehensive Survey Of Defense Strategies, Coverage Exclusions, And Liability Implications Across The U.S.

Ceiling Tile Damage With Mold

By Thomas F. Segalla Andrew J. Scholz Matthew R. Shindell Matthew D. Cabral

(Complete version of commentary with tables available to download here)

I. Introduction

Nearly three decades have passed since the first mold cases made national headlines with reports of million-dollar verdicts, and yet it appears the field of mold-related litigation is still burgeoning. Indeed, one only has to search the web to realize that the number of personal injury and property damage lawsuits brought by individuals, tenants, and others against property owners and entities involved in construction projects, including claims for defective construction and exposure to "toxic" mold, have dramatically increased over the years. Oftentimes, companion litigation arises between the entities involved in the underlying lawsuit and their insurers with respect to mold-related coverage issues under the relevant policies of insurance. The litigation of these types of claims must be vigorously pursued and dangers and pitfalls unique to mold-related claims must be carefully avoided. The experienced mold practitioner knows that the issues raised in the underlying mold litigation and in the related insurance coverage litigation are jurisdictionally and factually specific and present many complex scientific causation questions.

This first-of-its-kind article provides an overview of many of these jurisdictionally specific mold-related litigation issues, and includes a checklist of how to successfully defend against mold claims.

A 50-state survey of the three most critical and common legal issues arising from mold litigation will assist the practitioner and claims professional in developing the appropriate strategy to analyze and defend their positions. Absent a clear understanding of the liability and insurance coverage issues, those involved in mold litigation face tremendous exposure.

It is the intent of the authors to monitor both the liability and insurance coverage aspects of mold litigation and to periodically update this article to address new and evolving mold-related litigation issues on an ongoing basis. In the interim, please follow the publications of Goldberg Segalla's Environmental Practice Group (available at or contact one of the authors to subscribe to these publications.

II. Mold Claims - Overview And Litigation Strategies

A. Introduction: Mold litigation is a unique toxic tort litigation because, unlike toxic tort-related products cases, mold grows naturally as part of the environment. It grows from the combination of spores (e.g., penicillium, aspergillus, strachybotrys), water (e.g., defect from leaking pipe, roof, foundation), and a source (furniture, walls).

B. Who are the parties?

a. Plaintiffs/claimants: Individual premises owners, occupants/renters, and governmental bodies.

b. Defendants: Construction entities, building owners, managing agents, lessors, suppliers, architects/engineers, and insurers. To a limited extent, product manufacturers (roofing materials) are sometimes named.

C. What do they want?

a. Personal injury plaintiffs: Monetary damages for pain and suffering and economic losses, medical monitoring, fear of cancer, punitive damages.

b. Property damages plaintiffs: Cost of repair/remediation, lost rent, consequential damages, property losses for personal property.

D. Causes of action

a. Breach of contract (e.g., landlord-tenant, insurance coverage)

b. Trespass

c. Nuisance

d. Negligence (e.g., failure to maintain, repair)

e. Construction eviction

E. Defense strategies

a. Investigate promptly and properly: It is imperative for the defendant to act promptly upon receiving notice of a mold claim. The following are among the critical actions to take: (a) dispute/confirm the presence of mold, specifically including the types of mold; (b) identify other potential responsible parties; (c) identify, in the personal injury context, any other possible cause of the plaintiff's symptoms; (d) determine the various types of claims being made; and (e) bolster any of the below mentioned liability and damages related defenses.

ii. Investigate claimant: Determine claimant's background and lifestyle. In the personal injury context, there are many other causes of alleged mold-related respiratory ailments, including allergens, the flu, workplace environment, rodents, and pets. Identifying any other possible causes of the claimed respiratory ailment will bolster a dispositive motion.

iii. Statute of limitations and notice of claim: Early investigation may reveal that the claimed mold issue is long-standing, which may give rise to a statute of limitations or failure to give timely notice defense. If the claim is personal injury related, however, most states have promulgated a special limitations period for toxic torts, which typically extends the accrual date to the date the plaintiff first knew or should have known about the injury.

b. Obtain documents of prior testing of the building: The existence of prior testing of the building may support a defense that there is little or no increase in mold levels.

c. Know your mold: There are thousands of species of mold. However, very few are considered to be toxic.

d. Medical expert defense: Respiratory ailments are the most common complaint in mold-related personal injury matters. For causation purposes, a medical defense is critical. Authorizations to obtain a plaintiff's employment, school, and healthcare records will be useful to establish that the plaintiff's conditions were not caused by the subject premises, but were caused by other events or by other environmental factors.

i. Depending on the symptoms alleged, defendants should also retain relevant experts (e.g., an allergist; toxicologist; ear, nose, and throat specialist; neurologist; and/or pulmonologist).

e. Spoliation: Spoliation is the loss or suppression of evidence. Spoliation requires a showing that the spoliator knew of pending or anticipated litigation and destroyed or failed to preserve relevant evidence. Remedies for spoliation vary from an adverse evidentiary inference to striking a pleading. In mold litigation, spoliation can arise when an unsophisticated potential plaintiff goes forward with a full remediation without notifying potential tortfeasors of the intention to abate.

f. Expert challenges: The critical issue in almost any mold claim (both personal injury and property damage) is causation and whether the plaintiff can survive a Daubert/Frye challenge. Defending a mold claim typically requires experts in the disciplines of immunology, mycotoxicology, industrial hygiene, and neuropsychology. In section V, infra, we provide a detailed discussion of the most common expert issues and challenges, plus an up-to-date 50-state survey of Daubert/Frye challenges in mold litigation.

g. Testing: It is imperative that mold testing be performed to quantitatively show the amount and types of mold spores present. Any testing and reports are, of course, going to be discoverable. There are many qualified environmental hygienists who will assist in ensuring that quality testing is performed. In performing the tests, keep the following in mind:

2. Collect samples.

3. Describe the specific locations where testing was performed.

4. Describe the scientific methods used during the testing/analysis.

h. Blaming other parties: By identifying the actual culprit, a defendant can shift all or some of the liability onto others. For example, an inspection may reveal that the mold is related to work being performed by others (i.e., a roof leak or deficient plumbing repair), which might identify a negligent contractor.

i. Damages

i. Establish that the plaintiff/claimant failed to mitigate his damages.

ii. Establish that the costs to remediate and/or valuation claims are speculative or excessive.

iii. In the personal injury context, establish that the plaintiffs' physical ailments are treatable.

iv. Uncover collateral offsets.

j. Settlement and ADR considerations: It is not uncommon in mold situations for the claimant to try to avoid litigation due to the complexity and expense of proving a claim. Some simply wish to have the property remediated to the condition it was before the mold was discovered. Depending on many factors (e.g., the severity of the contamination, the value of the property, whether there are personal injury claims intermixed), it may be cost effective to settle quickly by offering a percentage of the cost for remediation in exchange for a full release.

III. Coverage Issues

A. Applicable insurance policies

a. First-party claims: Loss or damage sustained by the insured (life, disability, health, fire, theft, and casualty insurance).

b. Third-party claims: Insured's liability to third parties (CGL; D&O and E&O policies). Insurers are targets of third-party claims from various entities, such as builders, contractors, engineers, architects, sellers, inspectors, and others. See Elizabeth L. Perry, Why Fear the Fungus? Why Toxic Mold Is and Is Not the Next Big Toxic Tort, 52 Buff. L. Rev. 257, n. 5, (2004).

B. Bad faith claims: Bad faith claims in the toxic tort context are difficult to prove. Typically, the insured must show that the insurer did one of the following: (1) misrepresented facts or policy rights/conditions; (2) did not act quickly enough; (3) unjustifiably denied the claim; or (4) made a deficient offer of settlement. See generally Daniel J. Penofsky, Litigating Toxic Mold Cases, 92 Am. Jur. Trials § 70 (2004).

C. Covered peril v. policy exclusion: For the past three decades, insurers and policyholders have litigated the critical question over whether fungus, mold, rot, and the like are covered perils under the policy, notwithstanding the fact that insurers, faced with increasing numbers of claims, have drafted specific exclusions to mold claims. Although the great majority of state insurance departments permit policy exclusions for mold (see generally Joseph Ziemianski et al., Emerging Property and CGL Insurance Claims Trends, 742 PLI/Lit 251, 258 (2006)), courts have been left to answer the question of whether the exclusions are enforceable.

In the ongoing battle as to the enforceability of mold exclusions, most courts adopted some form of "efficient proximate cause" analysis to determine enforceability. Under this approach, a mold claim is covered if a different peril which is covered by the policy (e.g., a sudden pipe leak) "proximately caused" the mold contamination. Stated another way, the pipe leak, not the mold, is deemed to be the cause of the loss.

Faced with unfriendly court decisions, insurers, in turn, added even clearer clauses, known as "anti-concurrent causation clause," with the aim of excluding a mold claim "regardless of any other cause or event contributing concurrently or in any sequence to the loss." See Insurance Services Office, Inc., Homeowners 3 - Special Form (1999), at 9. Insurers have been relatively successful in enforcing these clauses.

What follows is a state-by-state list of recent cases that have analyzed the question of enforceability of mold policy exclusions. (Complete version of commentary with tables available to download here)

IV. Causation And Frye/Daubert In Mold Litigation

In both the personal injury and property damage contexts, the issue of causation, both general and specific, presents the most vexing questions for the courts. In the personal injury context, plaintiffs assert a myriad of claimed ailments from mold exposure, including asthma, fear of cancer, reactive airways dysfunction syndrome (RADS), and toxic encephalopathy. The scientific community has not formulated a consensus regarding the risk associated with mold exposure. While most types of mold are innocuous, the issue is whether exposure to same is toxic.

Various forms of indoor molds have received attention because they have the potential to produce spores that contain a substance called mycotoxins. Many scientists opine mycotoxins such as stachybotrys chartarum, which is the greenish-black fungus at issue in most mold litigation cases, can become dangerous when released into the air. Furthermore, certain allergenic molds, such as penicillium and aspergillius, may be found in buildings and have served as the basis for cases involving substantial damages.

The mold debate revolves around what health issues are caused by mycotoxins. There is evidence that too much exposure to certain molds may cause or worsen conditions such as asthma, hay fever, or other allergies. The most common symptoms of overexposure are cough, congestion, runny nose, eye irritation, and aggravation of asthma. Depending on the amount of exposure and a person's individual vulnerability, more serious health effects such as fever and breathing problems may occur but are unusual.

Irrespective of whether a particular jurisdiction has adopted the standard in Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1995) or Frye v. United States, 293 F. 1013 (D.C. Cir. 1923), the court must serve as the gatekeeper to determine which scientific evidence may be presented to a jury. Below is a comprehensive list of recent case law throughout the United States that demonstrates how each jurisdiction has determined whether mold actually causes illness and/or property damage based upon a Daubert/Frye analysis. (Complete version of commentary with tables available to download here)

V. Mold-Related Legislative Action By State

As we discussed in the introductory paragraph to this article, over the nearly three decades since the first mold-related lawsuits made national headlines, there has been a precipitous increase in mold-related litigation. This is due, at least in part, to an increasing awareness of the human health dangers associated with mold exposure. The growing concern for mold-related health effects is reflected in the abundance of mold-related legislation that has cropped up in recent years at the state level. For obvious reasons, it is imperative for any practitioner working in the area of mold litigation to fully understand the mold-related statutory framework in place in his or her jurisdiction. What follows is a 50-state survey of the mold-related legislation currently on the books nationwide, adapted from the "Environmental Law Institute Database of State Indoor Air Quality Laws: Mold Excerpt," published by the Environmental Law Institute. (Complete version of commentary with tables available to download here)

VI. Mold Resources (Federal, State, And Academic)

1. United States Environmental Protection Agency:

2. Centers for Disease Control and Prevention:

3. National AG Safety Database:

4. National Institute for Occupational Safety and Health:

5. Occupational Safety and Health Administration: and

6. National Institute of Environmental Health Sciences:

7. Louisiana State University:

[Editor's Note: Thomas F. Segalla and Andrew J. Scholz are partners, Matthew R. Shindell is special counsel, and Matthew D. Cabral is an associate in the Global Insurance Services and Environmental Practice Groups of the law firm Goldberg Segalla. The firm has 11 offices in New York, New Jersey, Pennsylvania, Connecticut, and the United Kingdom. Any commentary or opinions do not reflect the opinions of Goldberg Segalla. Copyright (c) 2013 by Thomas F. Segalla, Andrew J. Scholz, Matthew R. Shindell and Matthew D. Cabral. Responses are welcome.]