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Mold: Builders' Growing Foe

More homeowners are saying the fungus is making them sick

By JENNIFER HIEGER The Orange County Register April 2, 2002

The Orange County building industry faces a fearsome and costly enemy -- mold.

Mold is the new watchword for lawyers specializing in construction-defect lawsuits.

Toughened by years of legal fights over allegedly shoddy construction, builders and landlords are grappling with increasing accusations that mold - hidden behind walls or under carpets - is making homebuyers and tenants sick.

The costs can be staggering. Last year, a jury in a mold case awarded $32 million to a family in Dripping Springs. The judgment, against an insurance company, sent chills through the building industry.

"It's big and getting a lot bigger," said John Burns, an industry consultant in Irvine. "It's the next major litigation concern for builders."

Homeowners in Orange County also have won mold lawsuits or settled for large sums.

Last year, two families in Coto de Caza received $1.2 million in a mold settlement. The money was compensation for health problems, which included chronic headaches, seizures and hair loss, as well as the loss of the use of the homes while attempts where made to remove the mold.

The year before, 41 homeowners in Rancho Santa Margarita won $3.5 million in a mold and construction-defect case.

In that case, the homeowners received money to fix leaks in the roofs, windows and plumbing and to repair faulty concrete.

They did not allege personal injury.

Many other mold-related suits have been resolved out of court, the terms confidential.

Lynne Fishel, chief executive of the Building Industry Association of Orange County, said mold looms as the next wave of construction-defect lawsuits.

"It seems like every decade there is a new panic -- and the mold really has momentum," Fishel said.

Two causes

Mold first surfaced as a problem three or four years ago, primarily in California and Texas.

Public-health officials attribute the sudden rise in claims to two key changes: the increasing attention devoted to the issue by scientific researchers, trial lawyers and the media and, second, the use of new construction methods and materials that inadvertently promote mold growth.

Scientists have grown more interested in the health implications of wet and moldy buildings and are publishing their findings. In addition, lawyers and media outlets have seized on the issue. In the past two years, newspapers have printed more than 800 articles about what's called "toxic mold."

Builders also are erecting tighter, more energy-efficient homes that some say are not ventilated as well as their draftier predecessors. And some building materials foster mold growth. Mold is much more likely to grow on sheet rock than plaster, for example.

Health effects

But the scientific research is far from complete.

Scientists generally agree that wet or moldy buildings can cause sickness, most commonly with symptoms like hay fever. Given the right conditions, some 400 species of mold are capable of producing toxins. But the jury is out on whether mold can cause more serious problems such as fever, mood swings and memory loss.

From a scientific standpoint, it is difficult to determine whether a certain person's health problems can be linked to mold or are due to something else, said Sandy McNeel, research scientist at the California Department of Health Services.

"We firmly believe that there are circumstances where indoor mold can cause a number of health effects," McNeel said. "The difficulty comes in when you're looking at an individual and trying to determine whether their situation is due to mold."

Gov. Gray Davis recently signed a bill that asks the department to evaluate the feasibility of adopting exposure limits for mold.

Given the number of different types of molds, McNeel is pessimistic.

"The feasibility is pretty much nil," she said.

As the scientific debate continues, builders brace for lawsuits, while homeowners and tenants fret about their health.

The county Building Industry Association recently held a seminar on mold with presentations by scientists and lawyers. About 180 people attended.

Alex Robertson 's law firm, Robertson, Vick and Capella in Woodland Hills, is among the most active in filing mold-related lawsuits, with about 1,000 mold cases nationwide. Three years ago, the firm's mold caseload was one-tenth that size. Today, its biggest case is in Santa Ana, where about 200 condominium owners are suing the builder and subcontractors over mold and other problems.

The Spectrum condominiums, built in 1992, are mostly owned by low-income immigrants. In 2000, the homeowners association sued the developers, alleging defects in construction and mold problems. The complex is dilapidated, in part, because many owners have refused to pay their monthly dues.

The homeowners are seeking $35 million.

"Builders are nervous. And rightfully so," Robertson said.

Robertson receives so many calls about mold that he has established a "Microbial Investigations Department" at his firm to handle new queries.

Black splotches

One of his clients in Santa Ana is Celina Silva. Four years ago, Silva and her husband, Jose Luis, paid $75,000 for a small, two-bedroom condominium.

Shortly after they moved in, Celina Silva began noticing splotches of black mold on the walls and windows. No amount of scrubbing with soap and water helped. If anything, she said, the mold seemed to spread. The family has repainted the home six times in order to mask the fungus.

Robertson blames the mold on a series of problems -- a leaky roof, faulty plumbing connections and so on -- that have allowed water to seep into the ceiling and walls.

The mold is a health hazard, Silva said. But the family can't afford to move.

Both the couple's sons, Alejandro, 7, and Jose Luis Jr., 4, suffer from asthma, rashes and sore throats. Sometimes, she said, they cough blood.

"Alejandro used to love to ride his bike and play soccer," Silva said. "But now he has to stop and come inside for his (asthma) medicine. He just can't catch his breath if he plays for too long."

The next asbestos?

To Thomas Miller, whose Newport Beach law firm specializes in construction-defect cases, mold could be the next asbestos.

For the building industry, that thought is sobering. Lawsuits over health problems related to asbestos, a fireproof mineral contained in insulation and roofs, first surfaced in the 1970s and continue today. The toll is in the billions and the suits have helped push dozens of companies into bankruptcy, including Owens-Corning.

The terms of virtually all of Miller's settlements are confidential, but he says that mold is a factor roughly half the time.

Miller now hires an indoor environmental hygienist to check for mold every time a client complains of a leaky roof or some other type of water problem. He is not bothered that the scientific community has yet to establish any benchmarks for exposure.

"If a jury gets the impression that mold is growing inside a home and we have testimony about the health consequences, do you think they'll worry about the fact we don't have standards in place? I don't think so," Miller said.

Businesses' response

Shea Homes is trying to combat the threat. For the past few years, the builder has deployed a special team to test windows after they've been installed in a home. The team is called on if the builder is using a new type of window or if it has a new crew on the job. The team also tests windows at random.

And if a buyer contacts Shea with a complaint about water intrusion, the company is quick to respond.

"We jump on it right away," said Les Thomas, president of the builder's Southern California office.

Shea Homes doesn't receive many complaints about mold, Thomas said. But those it does get tend to be highly emotional.

The threat of a lawsuit is a frustration and worry.

"It would be nice to see some real science and establish some standards," Thomas said.

The fear of huge verdicts has spooked the insurance industry, creating another major headache for builders. Some insurers are inserting new language into their liability policies to reduce their exposure to mold claims. Others now exclude the coverage entirely.

The difficulty in obtaining mold coverage means builders must try that much harder to prevent the claims in the first place, said Jeff Masters, litigation partner at Cox, Castle & Nicholson in Century City, which advises many large builders. The firm is helping several clients prepare procedures for dealing with complaints from buyers.

"The new reality is that any water intrusion claim can become a mold claim," Masters said. "We're telling builders to have a specific, written plan in place for their customer service departments."

The firm also is advising clients to update their sales contracts and warranties to outline the buyer's responsibilities. For instance, a buyer ought to be obligated to inform a builder promptly of any water problems.

But Masters and colleague Sandra Stewart believe the threat is manageable. And because it is their money at risk, they said, the builders are ready to fight.

"Homeowners and their lawyers should think twice before they go on the warpath," Stewart said.