GT Alert

The New Wave of Toxic Mold Litigation Against Building Owners & Operators

October 2001
By Ken Lapatine and Scott Greenspan, Greenberg Traurig, New York Office

  View or download the PDF version of this Alert here.

Recently, the plaintiffs’ tort bar has launched a wave of toxic mold litigation against building owners and operators. Numerous publications, as well as our research, confirm that the number of toxic mold lawsuit filings is escalating dramatically.

"The number of toxic mold lawsuit filings is escalating dramatically."

Mold is found everywhere – both indoors and outdoors. Significantly, a number of building materials, such as ceiling tiles, drywall, sheetrock, wood, carpet, wallpaper and upholstery, are ideal places where mold can grow.

Although most molds are harmless, some molds, especially in high concentrations, may be hazardous to health. These risks include: (1) allergic reactions; (2) exacerbation of asthma; (3) Hypersensitivity Pneumonitis (HP), which can cause permanent lung damage; (4) pulmonary hemosiderosis – potentially fatal lung hemmoraging – in infants; and (5) problems in memory, concentration and learning. The state of scientific research as to the health hazards of mold is still early and inconclusive.

Importantly, public awareness of the potential dangers of toxic mold is escalating. Toxic mold stories have very recently appeared on the front covers of the New York Times Magazine, the Daily News, and in Time Magazine. The CBS television program 48 Hours has featured a segment on the hazards of toxic mold.

The result of the growing public concern over toxic mold has been a wave of personal injury and property damage lawsuits against the real estate community and others seeking large damage awards.

Examples of recent toxic mold lawsuits against building owners include these:

• In New York, nearly 500 tenants of the subsidized housing project, Henry Phillips Plaza South, located in Manhattan, have filed personal injury lawsuits seeking over $12 billion in damages.
• In Oregon, a condominium association sued the developer and seller of new condominiums that allegedly were infested with toxic mold, seeking $1.9 million in property damages.
• In California, the staff of the California Job Journal, having moved its entire operations out of a building which it contends was contaminated with mold, is now suing the building owner.

Ominously, plaintiffs are winning huge mold verdicts. As examples: (1) a Florida jury ordered the builders of the Martin County Courthouse, which was infested with toxic mold, to pay $14.2 million to Martin County, a verdict that was upheld on appeal; (2) on May 7, 2001, the Delaware Supreme Court upheld a $1 million verdict against a building owner issued to 2 apartment residents allegedly injured by mold exposure; (3) on June 1, 2001, a Texas jury awarded a homeowner $32 million after finding that the homeowner’s insurance carrier acted in an unfair, deceptive and fraudulent manner when evaluating the homeowner’s property damage claim for mold; and (4) on January 16, 2001, a federal court in California ordered Allstate Insurance Company to pay $2.5 million in punitive damages to its homeowner policyholder for Allstate’s bad faith in handling the homeowner’s property insurance claim.

Real estate defendants have also paid out large settlements for mold cases. Polk County obtained $47.8 million in settlements from a number of companies involved in the construction of its courthouse (including the general contractor, subcontractor, architects and consulting engineers), which was infested with toxic mold. Over 100 courthouse employees and their families also sued this same group of defendants, recovering approximately $8.8 million in settlements. In another recent settlement, the homeowners of a 96-unit town home project in Ventura County, California settled a toxic mold lawsuit against the developers and contractors of the project for $1,329,224.

The insurance industry has begun to react to this wave of mold litigation. Insurance companies such as Chubb have inserted absolute mold exclusions into some of their insurance policies sold to building owners and are denying coverage for toxic mold claims. And the Insurance Services Office, Inc., which drafts most of the insurance polices sold in the U.S., is drafting an absolute mold exclusion.

Greenberg Traurig has marshaled its legal talent and formed a toxic mold response taskforce to assist building owners confronted with toxic mold complaints and lawsuits.

Greenberg Traurig has entered into strategic partnerships with leading environmental consulting firms and toxicologists to assist the real estate community with investigating toxic mold complaints and remediating problems, if they exist. Our toxic mold response taskforce consists of lawyers with decades of environmental tort, product liability and insurance coverage experience.

Experienced – and prompt – environmental and legal representation are the best defenses to a toxic mold complaint or lawsuit. A prompt environmental investigation may reveal that either that there is no toxic mold problem or that others are responsible in whole or part for the mold problem. And prompt legal representation can assist building owners in recovering on their insurance for the mold loss and in crafting a winning defense strategy.

We at Greenberg Traurig, by forming the toxic mold response taskforce, have pre-positioned the environmental and legal expertise to assist our building owner clients in handling and overcoming toxic mold claims.

© 2001 Greenberg Traurig

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