Mold is a favored word among lawyers and a feared word among building owners, employers and landlords.
Lawsuits arising out of mold and claiming "sick building syndrome" are common. Multi-million dollar verdicts are not unheard of. Mold, in the words of some, is becoming "the next asbestos."
An $8 billion class-action lawsuit was brought by 300 tenants in a large apartment building in New York. The Environmental Protection Agency (EPA) was sued by employees claiming they became ill because of mold exposure while working at EPA headquarters. Even Hollywood is involved: Ed McMahon sued his insurer for $20 million, claiming that toxic mold in his Beverly Hills home killed his dog.
Mold has even reached the attention of the U.S. Congress. Last year, Representative John Conyers of Detroit introduced a proposed bill, the "United States Toxic Mold Safety and Protection Act of 2002," intended to set standards for indoor mold levels and to provide for related research.
Due to increased public awareness, almost mounting to hysteria, the number of legal claims is sure to mount. Workers who believe they are being exposed to mold may not want to work, their productivity may decline and they may file worker's compensation and disability claims. As an employer and/or a building owner, what can you do to try to limit your legal liability?
Look for Signs of Mold
With all of this attention, you may think that mold infestation is something new or uncommon. It is not. Mold is present in all buildings in some form and quantity. However, certain species of mold spores, in large enough concentrations, can be toxic. Although the health problems of mold exposure are in debate, there is literature tying some health effects to mold exposure. People with immune-compromised systems may experience permanent health effects.
Physical symptoms related to exposure to mold or sick building syndrome include eye, nose and throat irritation; respiratory complaints; skin irritation; nausea; dizziness and fatigue. Alert your human resources department and/or office manager to be aware of any such symptoms. If numerous employees complain, or if employees complain of moldy smells, put the building owner on notice and request an investigation. If you own the building, consider hiring an air quality investigator. Although these symptoms could result from other factors, it is important to address them.
Look For the Cause
Mold needs water or moisture and oxygen to grow. Water does not have to flow into the building for there to be enough moisture to promote the growth of mold. Although one-time leaks or burst water pipes may not be a problem if repaired, even a one-time leak, if not properly addressed, can cause unacceptable mold growth. There are a number of potential causes of moisture or water entry:
- Lack of building maintenance
- Poor building design or construction
- Using wet building materials
- Leaky pipes, windows, or doors
- Regular, or even one-time flooding
- Simple plumbing mistakes
- Excessive humidity and condensation
- Improper landscaping design or maintenance outside the building, causing water to flow toward the building
- Any other serious water related problem
- Address Moisture or Water Issues Promptly
If your building is experiencing water penetration, consistent moisture or leaks, demand that the landlord investigate the cause and promptly provide you with an action plan. If the landlord does not act, put it on notice that you intend to act and that you will hold it responsible for the costs. Give notice to your insurer. Do the same if you are the building owner.
Call in professionals to make an assessment. To stop further mold growth, the landlord or you must investigate and fix the source of the water or moisture. Ask for the help of contractors, the building designer and environmental experts to assess, identify and repair the source. A number of companies investigate mold and will come up with action plans to address it. Responding to mold involves more than just determining and fixing the source of the water. Often several experts must be retained, including experts in toxicology and epidemiology. Expert testing may cost thousands of dollars. If mold is found in large enough concentrations, the building must be cleaned and remediated to ensure the safety of the occupants before they return. Once the problem is fixed, ask the expert to certify that the building is "clean," or demand such a certification from the landlord.
Advise Your Employees of the Steps You Are Taking
If you do have a mold problem, it is likely to cause great concern and anxiety among your employees. If you or the landlord has hired experts, consider having those experts provide you with a written explanation of the steps they are taking, and how the employees are being protected. Post or provide that information to your employees. Work on the building may necessitate relocation of employees; if you are leasing the building, demand that the landlord provide clean space while the work is ongoing and keep track of your relocation costs.
Investigation, repairs, the relocation of employees, and the cleaning of furniture, fixtures, equipment and other property, not only may cost thousands of dollars, but will cause lost productivity. If you are leasing your building, keep the landlord fully advised of the situation, and ask the landlord to give you a timely and prompt action plan. Demand that the landlord reimburse you for your losses. Also give notice to your insurer.
If you own the building, take prompt steps to address the problem, but also notify your insurer and your tenants of your action plan. Be aware, however, that your insurer may not cover your losses and may not defend you from a costly mold lawsuit. Today, more and more insurers are excluding mold and mold-related damages from their commercial insurance coverage. Owners, managers and builders have been surprised to learn that their insurance policies exclude mold claims.
What can you do to cover your losses?
- Check your insurance - Call your insurance agent to find out if your policy has a mold exclusion. If it does, ask if you can buy mold coverage. Compared to the expenses you will incur addressing a mold claim, buying this extra coverage will be well worth the cost. When your insurance is renewed annually, be sure to check your coverage, as your insurer may have placed a mold exclusion in the renewed policy.
- Put your insurer on notice immediately if a claim is made - Under most insurance policies, you are obliged to notify the insurance company promptly if a claim is made. Some insurance policies have very specific requirements for notification, so call your agent and read your policy carefully. Make sure that you follow the notice procedures, which may include placing the claim in writing and sending the notice via certified mail to a particular address. Send the notice even if a lawsuit has not yet been filed.
- Follow-up with your insurer - Stay involved with your insurer once notice has been given. Even before a lawsuit has been filed, your insurer may hire experts and legal counsel to address the mold claims. You should stay involved with these people, because you likely have knowledge that the insurer, experts or counsel may not have. Ask for regular updates on the status of the claims, and, if possible, accompany counsel and experts to the building when testing or other observations are made, and take notes of the condition yourself. Make sure that you are familiar with the background of the experts retained by the insurance company. If you do not feel that the experts are handling the matter appropriately, demand that the insurer replace them.
- Review your construction contracts and leases - If you are constructing a building, renovating your space or adding to a building, review your construction contracts to make sure that contractors or subcontractors are liable for any construction defects, including defects that may cause mold growth. Review your leases. If you are a landlord, make sure your tenant has obtained the appropriate type and amount of insurance, and ask the tenant to name you as an additional named insured, if possible. Also, make sure that your tenant has agreed to indemnify you for any claims resulting from mold. If you are a tenant, make sure that your landlord is responsible for water damage caused by acts other than your acts to your leased premises, and any mold related damage as a result, including relocation costs. Obtain an indemnity provision from your landlord.
Although there is no guaranteed protection from mold-related losses, taking these steps should limit your potential legal liability.
Marilyn A. Peters is a member of the Construction Team and Litigation Practice Group in the Bloomfield Hills office of Dykema Gossett PLLC. She has many years' experience in representing business owners, lessees, landlords and companies in commercial legal matters, including those arising out of real estate. E-mail: [email protected]