Litigation - $32 Million Judgment for Mold

06/01/2001

Ballard v. Fire Ins. Exchange:

On June 1, 2001, a Travis County, Texas jury awarded a married couple a verdict of $32 million against Farmers Insurance, the couple's home insurer, in Ballard v. Fire Ins. Exchange. The couple's home had developed a series of plumbing leaks that resulted in a massive infestation by mold, particularly stachybotrys, a variety believed to be toxic. The allegations against Farmers included negligence, negligent misrepresentation, fraud and breach of contract in failing to timely and adequately respond to the claims the couple made. As a result of the infestation, the home eventually will be decontaminated, razed, and rebuilt. The award included $5 million for mental anguish and $12 million for punitive damages, but it did not cover damages for the health problems the couple alleged-headaches, dizziness, fatigue, respiratory and sinus problems, profusely bloody noses, coughing up of blood and serious cognitive dysfunction; the court refused to allow expert testimony as to the medical effects of mold. The couple had been seeking damages in excess of $100 million.

Scope of the Problem:

Liability arising out of mold, mildew, and sick building syndrome is an issue not only for homeowners and their insurers, but also for owners and property managers of commercial and public buildings. For example, a courthouse in Tulare County, California is the subject of a lawsuit brought by a district court judge and 100 other employees for injuries allegedly caused by stachybotrys resulting from defects in the air-conditioning system. Recently a hotel in Houston was partially closed due to mold contamination. In addition to insurance companies, property owners, and property managers, landlords and employers are target defendants for mold litigation filed by occupants of their properties and their employees. In addition, building contractors, architects, engineers and suppliers are potential defendants in lawsuits arising out of construction defects alleged to have caused the problem.

Ironically, newer litigation involving mold, mildew, and sick building syndrome issues is becoming increasingly prevalent. Newer buildings appear to be more prone to mold and sick building problems because they are more air-tight, with air-conditioning and heating systems recirculating contaminated air. In addition, new building materials such as synthetic stucco products [EFIS], and wall coverings trap moisture behind the walls and provide an environment for the growth of mold and mildew.

What Can Be Done:

  • Mold, mildew and sick building syndrome issues are a fact of life for all owners and occupiers of modern buildings and should be addressed.
  • Any leaks in buildings, whether through the roof, the exterior walls, windows or plumbing, should be promptly addressed to remove and prevent growth of mold and to minimize liability.
  • Procedures should be established to identify and report mold and to notify insurance carriers.
  • Ongoing inspection and maintenance procedures for all properties should be implemented.
  • Procedures for handling the press and publicity should be in place because a major outbreak of mold, mildew or sick building syndrome can seriously diminish a building's value. Stigma damages are a significant exposure in these cases.

Haynes and Boone has formed an interdisciplinary task force of lawyers from its real estate, environmental, insurance, construction and litigation groups to provide a multi-dimensional approach to solving mold, mildew, and sick building problems. For further information, contact:

 

Jeff Civins
(Austin)
512.867.8477

Patrick Wielinski
(Dallas)
214.651.5271

Elizabeth Kohn
(Fort Worth)
817.347.6645

Andrew Fono
(Houston)
713.547.2062

Steve Waters
(San Antonio)
210.978.7406

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