Is that yucky stuff that grows in buildings a real threat to business or just a litigation-driven hoax?
January, 2002
Jon K. Wactor

In the past two years, mold has emerged as the personal injury lawyer's 21st century equivalent of asbestos, lead paint, and construction defects.  The number of claims seeking monetary recovery for mold-related proper;y damage or personal injury has grown sharply.  And it's predicted that more claims against property owners and business operators nationwide will increase dramatically as knowledge of the issue becomes more widespread.

The definition of the stuff is exact.  Mold is microscopic fungi, which according to the Environmental Protection agency, grows on any substance where moisture is present.  But existing property or pollution insurance policies typically don't have specific mold exclusions.  AS a result, litigation against carriers who deny coverage is increasing despite the fact politicians and insurance industry leaders in California, Maine, Texas, Colorado, and Washington, D.C. have begged constituents to disregard the hype and not flood the system with mold related legal claims.  Last October, a Southern California jury awarded $10 million in damages against a major insurer for illness arising out of the improper handling of a mold- related claim.

Cases show that insurance coverage may be difficult to obtain.  In several states, there's fear that insurers will modify their forms to specifically exclude mold protection or mold coverage will be costly.  Rather than question why mold should cause alarm for CEOs and whole industries, evaluate your circumstances.  If your company or portfolio could be subject to mold-related claims, you need to know the following:

  • Mold will have an impact on many California businesses.  Ramping    up a control program now, before numerous claims strike is  sensible and would be cost effective in the long run.
  • Mold spores trigger usually minor, but sometimes serious, health concerns.  One problem is that exposure to molds through inhalation, handling, or ingestion can trigger asthma episodes in certain allergy-prone individuals.  About one out of 10 Californians have asthma symptoms, according to government studies.  The most common symptoms of mold- induced afflictions are cough, congestion, runny nose, eye irritation, and wheezing.
  • Indoor molds should be treated the same with respect to potential health risks even though some aren't considered toxins, according to the U.S. Centers for Disease Control.  But there are unanswered questions.  for example, OSHA places mold under the general duty clause to protect workers and building occupants.  Yet there are no specific federal environmental regulations for acceptable levels of mold.
  • Media attention is intensifying, as hundreds of personal injury law firms advertise for mold claimants.  In California, where progress was made in 2000 to limit run-away judgments for constructions defects, mold is the new hot button for personal injury law firms. 

What to Do

California is tying to find answers to the questions.  On Jan. 1, 2002, SB 732 went into effect in the state.  It requires the Department of Toxic Substances Control to determine if permissible exposure limits for mold are feasible and if so, to create such limits.  The bill also aims to identify and publicize remediation techniques.

Once these obligations are met, the law creates several actions must take place on the part of the sellers, transferors, landlords,and tenants of commercial, industrial, and residential properties.  These actions include disclosure in writing if they know that mold, or conditions such as chronic wetness that could cause mold, are present in their buildings or building systems.  Landlords, within a reasonable period of time, must assess the presence of mold, and to conduct any necessary remedial response.  SB 732's disclosure requirements also apply to brokers involved in transactions who have notice of mold problems.

The disclosure of obligations don't apply if a problem has been found and remedied.  Nor does the law eliminate disclosure obligations already applicable to various parties.  This likely mean s that if the presence of mold or mold supporting conditions is significant to a transaction, disclosure may be required under current laws governing property transfer.  Under the law, any public health officer, city attorney, or other government entity is authorized to enforce the disclosure requirements and seek penalties for parties failing to comply.

Since the new law doesn't trigger the new disclosure obligations until the Department of Toxic Substances Control act, property owners have time to inspect and remedy properties now before the specific disclosure requirements become effective.  In addition, since the law says that disclosure isn't required if remediation has been completed, action now may eliminate the need for disclosure later. 

Given the perceived and real health threats as well as the the impending legal requirements, it's important for businesses to identify and remover mold and mold favorable conditions promptly. It's also important to prevent mold growth through building maintenance and repair.

Like other indoor air quality complaints, if a claim is made, your first step is to investigate and determine whether the cause of the health effects is genuine or perceived.  After all, mold is a real issue that will have an impact on may California businesses in the years to come.  Ramping up a control program now, before claims strike is sensible and cost effective in the long run. 

Published in :  California CEO Magazine, April, 2002