Got Mold?

Source: XL Group Insurance, Construction Insider, January 2013
By: Kimberly MacDonald & Marlin Zechman

Chances are everyone reading this article has observed or experienced mold in some form or another. Whether it was a damp, dark basement where you could smell the musty odor or your college dorm bathroom where cleaning was not at the top of your priority list, you knew it by sight and smell. There are upwards of 300,000 species of mold and mold spores that can be found everywhere. In fact, you breathe them in every day with little or no affect.
Mold has plagued society for thousands of years. The Book of Leviticus describes the first known mold remediation program where it states that mold should be cleaned from stones of a house and that if the mold returns, the house should be demolished and taken to a dump site. Today, the total demolition of a house as a mold remediation remedy would be considered extreme, but it would certainly solve
the problem.
Mold serves a purpose in nature by aiding in the breakdown of dead material and recycling nutrients back into the environment. However, throughout history, mold has made its mark on the human race. One example is the great potato famine of Ireland in the mid-1800’s, which was a result of a fungus called Late Blight that destroyed the potato crop and led to over 1 million starvation deaths. But not all molds should be feared. For example, mold is how blue cheese gets its characteristic marbling and taste. And the wonder drug Penicillin is derived from the Penicillium fungi, a common bread mold.
Mold rapidly propagates with three key ingredients: moisture, temperature and a food source. That food source is anything organic, such as drywall, carpeting or wood framing materials. As a result, there have been significant (in volume and severity) construction related insurance claims, involving commercial and residential buildings, hospitals, schools, long term care facilities and myriad other similar sites where people work or live. Abatement of mold infested building materials is costly, as care must be taken to protect workers, habitants and property from direct contact or tangential damage. There is no question that the cost to the insurance industry to remediate property damage stemming from mold infestation is staggering.
Over the past 15 years, mold has surfaced as a potential health concern and a proliferation of claims have resulted. Up until May 24, 2004, the link between mold and health affects was unknown. On that date, the National Academies of Science (NAS) issued a report entitled: Damp Indoor Spaces and Health. The report concluded that available evidence does not exist to meet the strict scientific standards needed to establish a clear causal relationship between mold and a wide range of health complaints. The report did, however, conclude that mold can exacerbate existing symptoms of asthma and cause upper respiratory tract problems of healthy people, such as coughing and wheezing. The NAS report was significant in the promulgation of many court cases alleging bodily injury as a result of exposure to mold.
Four years ago, in the case Fraser v. 301-52 Townhouse, the Appellate Division, First Department, in New York rendered a significant blow to the plaintiffs’ bar, specifically those alleging bodily injury as a result of exposure to mold. The claim involved a family living in New York City in an apartment building which they contend contained mold. Plaintiffs sought millions of dollars in damages for a host of bodily injuries ranging from headaches to neurological injuries.
The defense countered by arguing that there was insufficient support for the medical theories connecting mold to bodily injuries and therefore the evidence presented was unreliable. That court agreed with the defense proposition and declined to accept plaintiff’s medical testimony in defense of the defendant’s motion for summary judgment.
Despite the fact that the holding in Fraser was arguably narrow, many legal analysts concluded that the ruling essentially tolled the death knell for personal injury claims stemming from mold exposure. Subsequent courts relying on Fraser in the years immediately following the ruling have routinely concluded that medical testimony given by plaintiffs has not risen to the level of medical certainty to cure the insufficiency regarding evidence to support general causation. Thus, the legal community and liability insurance industry largely concurred that Fraser raised the burden of proof, making it more difficult to prove causation in claims involving mold exposure.
In early 2012, however, the New York Appellate Division, First Department, breathed new life into bodily injury litigation stemming from mold exposure. In Cornell v. 360 West 51st Street Realty LLC, the Court again addressed the threshold question of whether medical testimony connecting mold exposure to medical ailments can suffice to allow these suits to go to the jury. In that case the plaintiff, Brenda Cornell, moved into her apartment located above a basement which was damp and vermin infested. After a steam pipe broke in her apartment, a small amount of mold appeared in her bathroom. When she entered the bathroom, she began to feel ill, got a body rash, shortness of breath, fatigue, disorientation and headaches. Subsequent renovations in the basement resulted in her experiencing dizziness, chest tightness, congestion, shortness of breath, a rash, swollen eyes and a metallic taste in her mouth. Plaintiff’s medical expert relied upon a number of scientific studies which were deemed “statistically sufficient” to support the conclusion that the identified ill health effects were caused by mold exposure. Ultimately, the Court went on to conclude that the exposure to toxic molds is “capable of causing” such ailments.
Though the ruling in Cornell is still fairly recent and thus lacking somewhat in precedential impact, many are bracing for an uptick, perhaps a significant one, in the volume of bodily injury claims alleging damage from exposure to toxic mold. If the potential to survive summary judgment and bring these matters to a jury of one’s peers has the psychological effect we would expect, the demands will also increase and insurers will be forced once again to spend large sums to muddle through and challenge voluminous medical testimony and scientific studies relied on in support thereof. While the ultimate loss payout may not be significant as there is no smoking gun in terms of new medical evidence in support of these claims, the cost to shut down the lawsuits and deter future suits will likely be formidable.
Water intrusion and mold prevention risks can be underwritten in a contractor’s pollution liability insurance program available through XL Group’s Insurance Segment. However, general contractors and trades should have a comprehensive water intrusion and mold prevention plan incorporated into their company’s risk management program. A written program combined with training for key job site personnel is key to preventing mold-related property damage, bodily injury and professional liability claims. Water intrusion and mold prevention starts during pre-construction planning and controls should be applied throughout a project’s life cycle. In addition, clear responsibilities and project documentation must be established. XL Group’s North America Construction team can assist you with a review of existing programs, development of new programs and the implementation of employee training programs. Water intrusion and mold prevention risk bulletins and other guidance documents are also available on our website at

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