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ABA 32nd Annual Conference on Environmental Law SESSION 6: Superfungi: New Developments in Toxic Mold Litigation and Remediation Regulations/Standards, Insurance and Due Diligence By: John W. Traeger, Esq. I. Establishing Regulations and Standards There are currently no established legal standards for what constitutes an unacceptable amount of mold in a home or the work environment.N1 The CDC, EPA, OSHA, and state environmental and health agencies nationwide are aware of the concern and potential health issues driven by mold but have not developed rules, such as those found in other laws, like the Safe Drinking Water Act, to specify thresholds for indoor air concentrations of mold and mold spores. Nevertheless, EPA and CDC have extensive internet sites detailing the risks associated with molds and the methods to address the presence of mold in buildings. The Department of Labor does recognize a problem with indoor air quality and has identified several sources discussing mold and air quality on its web site.N2 The Department of Labor cites the New York City Department of Health & Mental Hygiene Bureau of Environmental & Occupational Disease Epidemiology publication, "Guidelines on Assessment and Remediation of Fungi in Indoor Environments."N3 There are plenty of guidance documents available from regulatory agencies and industry specific associations. EPA’s publication, "Mold Remediation in Schools and Commercial Buildings," is a good source of information that addresses remediation of mold. The EPA has also published, "A Brief Guide to Mold, Moisture, and Your Home"N4 This guide provides information and guidance for homeowners and renters on how to clean up residential mold problems and how to prevent mold growth. It is certain that in the coming months and years, standards regarding mold will be established and enforced nationwide. The EPA recognizes that, once mold growth has progressed to the point that the mold is visible, it must be removed. All mold remediation protocols should provide for: (1) cleaning or physically removing surface microbial growth on non-porous materials; (2) removing porous materials that show extensive microbial growth; and (3) eliminating moisture conditions that led to the fungal contamination.N5 As with any material that presents a health risk, especially materials presenting a risk in a residential setting, the challenge for the EPA and state environmental agencies is to develop realistic guidelines that adequately address the health risk while considering the economic issues impacting homebuilders, contractors, material suppliers, landlords, retailers, and areas impacted by mold claims. States may be the front line in the war on mold. California recently passed the Toxic Mold Protection Act. The Act does provide that standards for mold levels must be set, although the standards have not been announced. The Department of Health Services must report its progress in developing the standards by July 1, 2003. In an implementation update posted on the Indoor Air Quality page of CaliforniaN6 the DHS has posted an announcement stating that the statute, "charges DHS . . . to undertake a series of complex tasks. These include determining the feasibility of adopting permissible exposure limits for indoor molds and the development of new standards or guidelines to assess the health threat posed by the presence of indoor molds. . . . However, the implementation of this statute depends on additional funding to accomplish these tasks." During the 2001 legislative session, Maryland established a Task Force on Indoor Air Quality. The task force is charged with the task of, "studying the nature, location, and extent of health and environmental risks posed to workers as a result of molds, spores, and other toxic organisms located in the HVAC systems of office buildings."N7 In July 2002, the task force published its final report which provides draft legislation entitled, "The Healthy Buildings Act of 2003". The draft legislation would establish an Office of Indoor Air Quality which would enforce requirements established by the Act.N8 New Jersey passed a resolution in May, 2001 urging the Commissioners of Health and Senior Services and Community Affairs to provide information and assistance for infestations of stachybotrys atra.N9 New York has introduced, but not passed into law, legislation that would establish a task force for the development of safe levels for the presence of mold, so that permissible exposure limits may be adopted and enforced by the state.N10 For a detailed outline of mold related legislation proposed in 2001-2002 see http://www.mold-help.org/submenus/mold_and_legislation/legislation1.htm. In Texas, where mold claims have run rampant, the Department of Health has published, the Texas Department of Health Review of Practices for Mold Remediation - April 2002. This brochure summarizes various remediation publications relating to mold.N11 The Texas Department of Health also provides information to assist homeowners in protecting their homes from mold.N12 Environmental attorneys are accustomed to looking beyond state and federal law for guidance in the area of standards. The ASTM, with its Phase I standards, has been a frontrunner in setting standards for issues such as remediation. Currently, however, the ASTM does not have a published standard for the concerning toxic mold. However, Committee E50 on Environmental Assessment, Risk Management and Corrective Action has implemented a task group which plans to define a standard of care that will:
In the November 2002 Tracking Report for the Committee E50, it states that the Committee is working on a standard entitled "Standard Practice for Transactional Screening of Readily Observable Mold in Commercial Buildings." The purpose of this standard is to define good commercial practice for conducting a transactional screen of a commercial building with respect to the presence of readily observable mold. As such, the standard is intended to allow the user to assess the potential need for further assessment or action beyond that identified in this standard.N14 Without standards, how can one prepare for a mold claim? Better yet, how can one prevent a mold claim? This presentation will address these issues in turn looking at the various groups that may have a need to address mold issues. II. Insurance Coverage – How do you Find it? Can you afford it? Insurance may be one way to address concerns about mold claims. However, fearful that growing mold litigation might continue to spiral out of control, insurers are beginning to exclude mold-related claims from general liability policies. From landlords to subcontractors to major corporations, there is a mad rush to find coverage that could provide protection against mold litigation. At the same time, the insurance industry is feverishly raising premiums and looking for ways to reduce its liability. insurers have reported triple-digit increases in the frequency of mold-related claims in commercial buildings over the past year. The cost of these claims is difficult to quantify because mold is lumped into categories such as construction defects or water damage, not broken out separately," according to Robert P. Hartwig, chief economist at the Insurance Information Institute.N15 Major insurance companies are adding mold to pollution exclusions and attempting to get out of the mold insurance business altogether. Allstate Insurance Co. stopped selling new policies on homes that have had water damage in the past three years. Farmers Insurance Group also decided to stop selling new homeowner insurance in Texas, Progressive stopped selling new policies in cases in which there are concerns about water and mold damage.N16 M any other insurers are quick to follow suit. State insurance departments are trying to protect homeowners and reach deals with the insurance industry. The Texas Insurance Commissioner Jose Montemayor issued a bulletin requiring all property and casualty insurance companies in Texas to "fully and clearly" explain to their customers any changes in the types of coverage and premium costs at renewal time for residential property policies.N17 Mold cases often present difficult issues of proof with regard to causation and damages, primarily due to the lack of standards for mold. Many businesses carry commercial general liability (CGL) insurance, and this is where a company should look first for coverage. A typical CGL policy should provide coverage for many mold claims. However, CGL policies now generally contain a "pollution exclusion," which precludes insurance coverage for bodily injury and property damage claims which arise out of "the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of pollutants." Insurers have invoked pollution exclusions as a basis for toxic mold claims. Though courts have recently decided that mold, which is naturally-occurring, does not constitute a "pollutant" as that term is defined in a typical CGL policy. Businesses may request clarification of their CGL policies concerning mold through their broker, or consider the purchase of separate (and usually very expensive) Pollution Legal Liability or similar environmental coverage, which offers both first and third-party coverage under typical CGL policies. According to the Independent Insurance Agents of America, "all risk" policies generally cover mold damage, but most others will include it only if damage was caused directly by a leaky pipe or other water damage. Mold is not covered if damage is due to a flood. With the trend to exclude mold claims, businesses should look closely at their policies at renewal time to see whether mold is still covered.N18 III. Addressing the Risk – Due Diligence Lawsuits involving exposure to mold and property damage caused by mold will continue to grow as we learn more about the health effects relating to mold exposure, however significant or insignificant such exposure may be. From a defensive or risk abatement standpoint there are many things one may do in order to minimize risk exposure and to defend against mold claims. While education of the general public on the topic of normal existence of mold, fungi and bacteria in our environment is a key ingredient to managing frivolous claims and faulty perceptions of the dangers relating to mold, homebuilders, landlords, contractors, retailers, are well advised to establish a maintenance and housekeeping protocol for industrial, commercial and residential structures to determine baseline levels of mold, potential pathways for moisture and the growth of mold, and preventative measures that can be taken once mold is detected at more than deminimis levels. The following addresses a few of the key areas where due diligence can reduce liability exposure to mold claims. Real Estate Transactions: In real estate transactions involving the sale or lease of industrial, commercial or residential properties, buyers or lessees should include in their due diligence the investigation for the existence of mold or pathways for moisture intrusion that may lead to mold growth. Due diligence efforts performed prior to the date of sale or lease, along with the appropriate representations, warranties and indemnification may protect the homebuilders, buyers, and lessees against mold claims. Once a baseline condition is established for the property, future inspections will provide data relating mold levels that can be compared to the baseline information. Remember, there will always be mold in the outside ambient air, as well as the indoor air, and certain parts of the country will be more conducive to mold growth. The following are some of the key elements of due diligence that will assist in establishing the responsibilities of the parties.
The following are some of the key groups that are facing mold claims and key options to reducing liability exposure: Landlords: In is important for Landlords to have a regular maintenance and inspection program for rental facilities, including the control and abatement of mold. An annual inspection program is recommended, including inspection of individual units upon lease termination. Parties should allocate responsibility for exterior and interior conditions that may lead to the growth of mold. Information relating to mold should be provided to new tenants of the building with a copy of the most recent inspection report. Landlord should also assess insurance options available for the defense of claims by tenants and third parties at the leasehold. While mold disclaimers may protect landlords in some jurisdictions, tenants should be careful to know what the responsibilities of the parties are relating to mold in the leased facilities in common areas (i.e. laundry rooms). Builders/Developers: Builders and Developers may wish to consider notices and disclaimers to minimize mold claims. While such disclaimers are not foolproof, they may offer some protection against mold claims. Builders and developers should also address liability relating to mold in contractual documents with general contractors and subcontractors. Especially important will be the plumbing and HVAC subcontracts. Also consider the types of materials specified in the construction of the facilities that may be more susceptible to mold growth. Are there other materials that are less susceptible to mold growth that are a better option?N19 Contractors: As stated above, most contractors in new industrial, residential and commercial construction may have liability exposure to mold claims, but especially the subcontractors supplying materials, installing HVAC, performing plumbing services or roofing contractors, all of which can lead to water intrusion and possible mold growth. These contractors should take great care to either have contractual protection or insurance protecting against personal injury and property damage relating to mold. HVAC contractors should take great care with not only mold related issues, but also with other pollutants that have been shown to infiltrate HVAC equipment, which may result in "sick building syndrome," which will not be covered in detail in this paper. Material Suppliers: Material suppliers should take care to notify customers as to materials that are conducive to mold growth if exposed to the elements (i.e., construction site). Some provision should be included in the purchase order or material supply agreement relating to such liability and purchaser’s responsibility to protect materials from such exposure. Assessment of the appropriate packaging for materials should be included in this risk assessment. Schools: In that children may be more vulnerable to the health effect of certain kinds of mold, schools and other public facilities should be on a regular inspection and maintenance program. Retailers and Public Institutions: Until standards and regulations are established for acceptable levels of mold in the indoor air, it is recommended that retailers and other public facilities be inspected on a regular basis to determine the levels of mold, and potential problem areas in the facilities. Inspection logs should be maintained at the facilities, even though they are not required in most jurisdictions at this time. The exception to this would be a department of health requirement in facilities where mold infestation may represent a public health hazard. Environmental/Safety Professionals: Health, environmental and safety professionals should take great care to make ensure that they are properly insured for the professional services that they are rendering, both CGL and Errors & Omissions. There may be exclusions for mold assessment and abatement services. Also, service agreements should clearly state that such services do not constitute in any form a certification that the facilities are "mold free." Hopefully, there will be a realistic standard in the near future for what constitutes an acceptable level of mold in a residential and work environment. Web Links
EXHIBIT A MOLD NOTICE, DISCLOSURE AND DISCLAIMER What Homeowners Should Know about Mold Mold. Mold has been in the news recently because of general concerns raised as to possible health issues associated with exposure to mold. Mold is a type of fungus. It occurs naturally in the environment, and it is necessary for the natural decomposition of plant and other organic material. It spreads by means of microscopic spores transported by air movement, and is found everywhere life can be supported. Residential home construction is not, and cannot be, designed to exclude mold spores. If the growing conditions are right, mold can grow in your home. Most homeowners are familiar with mold growth in the form of bread mold, and mold that may grow on bathroom tile and other surfaces. In order to grow, mold requires a food source. This food source might be supplied by items found in the home, such as fabric, carpet or even wallpaper; or, by building materials, such as drywall, wood and insulation, to name a few. Mold growth also requires moisture, which is the only mold growth factor that can be controlled in a residential setting. By minimizing moisture, a homeowner can reduce or eliminate mold growth. There can many common sources of moisture in the home, including: spills, leaks, overflows, condensation, and high humidity. Good housekeeping and home maintenance practices are essential in the effort to prevent or eliminate mold growth. If moisture is allowed to remain on the growth medium, mold can develop within 24 to 48 hours. Consequences of Mold. All mold is not necessarily harmful, but certain strains of mold have been shown to have adverse health effects in susceptible persons. The most common effects are allergic reactions, which may include skin irritation, watery eyes, runny nose, coughing, sneezing, congestion, sore throat and/or headache. Individuals with suppressed immune systems may risk infections. Some experts contend that mold causes serious symptoms and diseases which may be life threatening. However, experts disagree about the level of mold exposure that may cause health problems, and about the exact nature and extent of the health problems that may be caused by mold. The Center for Disease Control states that a causal link between the presence of toxic mold and serious health conditions has not been proven. What the Homeowner can do. The homeowner can take positive steps to reduce or eliminate the occurrence of mold growth in the home, and thereby minimize possible adverse effects that may be caused by mold. These steps include the following:
DISCLAIMER AND WAIVER WHETHER OR NOT THE HOMEOWNER EXPERIENCES MOLD GROWTH DEPENDS LARGELY ON HOW YOU MANAGE AND MAINTAIN YOUR HOME. OUR RESPONSIBILITY AS A HOMEBUILDER MUST BE LIMITED TO THINGS THAT WE CAN CONTROL. AS EXPLAINED IN OUR WRITTEN WARRANTY, PROVIDED BY SEPARATE INSTRUMENT, WE WILL REPAIR OR REPLACE DEFECTS IN OUR CONSTRUCTION (DEFECTS DEFINED AS A FAILURE TO COMPLY WITH REASONABLE STANDARDS OF RESIDENTIAL CONSTRUCTION) FOR A PERIOD OF _____ YEARS. EXCEPT AS EXPRESSLY SET FORTH IN OUR WRITTEN WARRANTY, WE WILL NOT BE RESPONSIBLE FOR ANY DAMAGES CAUSED BY MOLD, OR BY SOME OTHER AGENT, THAT MAY BE ASSOCIATED WITH THE CONSTRUCTION OF YOUR HOME, TO INCLUDE BUT NOT BE LIMITED TO PROPERTY DAMAGE, PERSONAL INJURY, LOSS OF INCOME, EMOTIONAL DISTRESS, DEATH, LOSS OF USE, LOSS OF VALUE, AND ADVERSE HEALTH EFFECTS, OR ANY OTHER EFFECTS. ANY IMPLIED WARRANTIES, INCLUDING AN IMPLIED WARRANTY OF WORKMANLIKE CONSTRUCTION, AN IMPLIED WARRANTY OF HABITABILITY, OR AN IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR USE, ARE HEREBY WAIVED AND DISCLAIMED. THIS NOTICE, DISCLOSURE AND DISCLAIMER AGREEMENT IS HEREBY APPENDED TO AND MADE A PART OF THE CONTRACT OF SALE. THE CONSIDERATION FOR THIS AGREEMENT SHALL BE THE SAME CONSIDERATION AS STATED IN THE CONTRACT OF SALE. SHOULD ANY TERM OR PROVISION OF THIS AGREEMENT BE RULED INVALID OR UNENFORCEABLE BY A COURT OF COMPETENT JURISDICTION, THE REMAINDER OF THIS AGREEMENT SHALL NONETHELESS STAND IN FULL FORCE AND EFFECT. I/We acknowledge receipt of the notice, disclosure and disclaimer agreement. I/We have carefully read and reviewed its terms, and I agree to its provisions. Warning: This form is provided for informational purposes only and should not be utilized without careful examination by an attorney licensed to practice law in the jurisdiction in which the form will be executed or otherwise enforced. In that facts relating to any transaction vary, this form may not be appropriate for certain transactions and should only be used after careful review. N1 But see The Toxic Mold Bill, TOXIC MOLD, at:http://www.mold-help.org/submenus/mold_and_legislation/toxic_mold_bill.htm (discussing bill introduced by Congressman John Conyers, (D) Michigan, that would require EPA to define dangerous toxic mold levels, provide for a federal insurance program to pay for cleanup, and create a national database of infected homes). BACK TO TEXT N2 See http://www.osha-slc.gov/SLTC/indoorairquality (discussing indoor air quality issues and providing website links to various federal and state agencies addressing the topic of mold). BACK TO TEXT N3 See http://www.ci.nyc.ny.us/html/doh/html/epi/moldrpt1.html (providing a discussion of remediation techniques and guidance on addressing mold infestations). BACK TO TEXT N4 See http://www.epa.gov/iaq/molds/moldguide.html (discussing mold issues relating to homes). BACK TO TEXT N5 Protecting Your Business Against Mold Claims, AIG ONLINE, at: http://home.aigonline.com/content/0,1109,8754-531-risk,00.html BACK TO TEXT N6 See http://www.cal-iaq.org/SB732update.htm. BACK TO TEXT N7 see http://www.dllr.state.md.us/labor/indoorair.htm. BACK TO TEXT N8 see http://www.dllr.state.md.us/labor/indoorairfinal/iaqfinalreport.pdf. BACK TO TEXT N9 see http://www.njleg.state.nj.us/2000/Bills/sr/77_i1.htm. BACK TO TEXT N10 The Proliferation of Mold Contamination and Claims: States Have Responded with Legislation, TOXIC MOLD, at: <http://www.mold-help.org/united_states.htm. BACK TO TEXT N11 see http://www.tdh.state.tx.us/beh/IAQ/Mold_Rem3.htm#_Toc5762302. BACK TO TEXT N12 see http://www.tdh.state.tx.us/beh/IAQ/protecting_your_home_from_mold.html. BACK TO TEXT N13 http://www.astm.org/cgi-bin/SoftCart.exe/SNEWS/CURRENT/mold_jan03.html?L+mystore+meng8970+1042487810. BACK TO TEXT N14 http://www.astm.org/cgi-bin/SoftCart.exe/COMMIT/COMMITTEE/E50.htm?E+mystore (link to Tracking Document accessible from this page). BACK TO TEXT N15 see http://www.nrca.net/about/news/news.asp?ID=556. BACK TO TEXT N16 see http://realtimes.lycos.com/renews/20010913_mold.htm. BACK TO TEXT N17 see http://www.tdi.state.tx.us/commish/nr04122a.html. BACK TO TEXT N18 Id.; Business Fights Back on Toxic Mold Lawsuits, AIG ONLINE, at: http://home.aigonline.com/content/0,1109,10213-1426-legal,00.html. BACK TO TEXT N19 A sample Notice, Disclosure and Disclaimer is attached as Exhibit A for your reference. BACK TO TEXT |
Sunday, May 11, 2008
ABA 32nd Annual Conference on Environmental Law - Superfungi: New Developments in Toxic Mold Litigation and Remediation
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