While panic and alarm are not warranted, the time is now for real estate owners, developers, lenders and borrowers to begin to pay attention to toxic mold and their potential liability for property damage or personal injury. Though the nationwide mold discussion chronicles back to 1995, when the Centers for Disease Control (CDC) linked a cluster of child-deaths in Cleveland to black mold, new momentum is pushing toxic mold issues to the forefront. Verdicts have fallen on the shoulders of insurance companies and property owners alike, leaving them to bear costs associated with the multi-million dollar verdicts and settlements.
It is undeniable that the mold debate is highly controversial, but it is still questionable whether mold litigation is going to take off in New Jersey. While the debate lingers on across the nation, recent multi-million dollar verdicts and settlements make a thoughtful discussion on mold timely.
Currently there is no coverage for mold in most of today's standard liability insurance policies. It is available for purchase, but typically at a high price. Obtaining mold coverage is advisable in certain, but not all, circumstances. This article will address the factors that real estate owners, developers, lenders and borrowers should consider when assessing their exposure to mold litigation and whether or not to purchase mold liability coverage.
Assessing the Threat
Toxic black mold, or Stachybotrys chartarum, naturally grows in indoor environments where there is constant moisture; it can grow on material with a high cellulose and low nitrogen content, like fiberboard, gypsum board, paper, dust, and lint. Mold cases typically arise when a leak, water damage, excessive humidity, condensation or flooding gives way to a condition that supports the growth of mold that, in turn, can cause property damage or personal injury. Claims usually allege negligence, strict liability, implied and express contract, constructive eviction, breach of contract, and/or nuisance. Property owners can also be found liable on a theory of constructive notice where they should have known of the defect.
Mold-related illness claims may be more difficult to prove. Mold can be distinguished from other injury-causing toxins, like asbestos, for reasons that make mold liability lawsuits potentially less damaging. First, the CDC and the bulk of scientific research have been unable to prove a causal link between mold and the injuries typically complained of by plaintiffs. This makes liability harder to establish.