?Toxic Mold? Claims in Arkansas Expected to Increase

Tracy Roden of Magnolia became ill sometime after she bought a new mobile home in 1996.

Roden blamed the illness on “toxic mold” that, she said in a lawsuit filed July 1, grew between the walls of the 16-by-80 foot mobile home because the roof wasn’t properly attached. The defendant, Liberty Homes Inc. of Goshen, Ind., has denied Roden’s allegations.

Roden’s case is one of a handful filed in Arkansas involving allegations of toxic mold, but attorneys and insurance executives expect the numbers to skyrocket across the state, as they have in Texas and California.

Meanwhile, the insurance industry is trying to deal with the increasing number of toxic mold claims in Arkansas and nationwide, even though scientific data on the connection between mold and illness is still lacking.

And all the hysteria is good business for at least one Hot Springs company, Atoka Inc., which inspects homes and buildings for mold and other airborne particles.

Joe Henry, vice president of Atoka Inc. of Hot Springs, said about 10 years ago, he only received about one call a month concerning mold. Now he receives four or five calls a day.

“Part of the reason that we’re getting the calls is public awareness,” Henry said. “People have become conscious of mold in their homes … and are beginning to experience more sensitivity than usual to molds.”

The Arkansas Insurance Department is dealing with the mold issue by telling insurance companies to continue to handle

mold claims just as they have in the past, said Lenita Blasingame, deputy commissioner.

If an insurance company paid to clean up a burst pipe and then mold developed as a result, the insurance company has to pick up the tab for removing the mold. But if the mold grew as a result of the homeowner failing to clean up or fix a leaky pipe, “that’s not an insurance claim,” she said.

The homeowner’s policy is not intended to cover testing and removal costs, either.

Some insurance companies have tried to persuade the Insurance Department that it needs to exclude mold coverage for any cause. And the Insurance Services Office, an insurance trade organization, tried to persuade the Insurance Department to cap the mold related damages at $5,000.

“We really don’t feel that it’s fair to the consumer to allow the companies to totally exclude something that happened as a result of a covered cause of loss,” Blasingame said.

The Insurance Department rejected the Insurance Services Office’s request.

Texas Precedent

Many in the insurance industry point to Texas as the source of the mold hysteria.

Texas allows coverage for damages that aren’t sudden or accidental, Blasingame said. So if a water heater leaked for two years because the homeowner never got around to fixing it, the damage caused would be covered under a Texas policy. Almost no other states require that kind of coverage, Blasingame said.

As a result, in Texas, insurers paid out $841 million on mold claims in 2001, a 560 percent increase over the $153 million paid out in 2000, Gordon Stewart, president of the Insurance Information Institute in New York, told the U.S. House Financial Services Committee on July 18.

Stewart testified as part of proposed legislation for the U.S. Toxic Mold Safety and Protection Act, which aims to protect consumers from toxic mold exposure.

The bill would require the presence of mold to be noted when a home or building is sold. The bill also will fund the research of the health effects of mold.

Mold claims in Texas rose 1,306 percent between the first quarter of 2001 and the fourth quarter of 2002, Stewart said. It was also in Texas where a family was awarded $32 million after a jury determined the insurance company mishandled the family’s mold claim.

Shelter Insurance Cos. of Columbia, Mo., said about one or two claims a week are filed as a result of mold, which isn’t a high number in Arkansas, said Joe Mosley, a spokesman for Shelter Insurance.

“Certainly we’re seeing claims that we didn’t use to see with information being disseminated widely,” Mosley said.

Stewart said mold is a major factor in rising homeowners’ insurance premiums, which are expected to climb nearly 10 percent this year.

Traditional homeowners policies now are being called upon to deal with a surge of claims for mold damage and related health problems for which there isn’t any coverage and no premium has been collected, Stewart said.

“The simple presence of mold, like termites and damage from vermin, is considered a home maintenance issue and not covered by insurance,” Stewart said.

Large jury awards, adverse judicial and regulatory decisions and fear of litigation have led to uncertainty about the longstanding coverage exclusion for mold, he said.

“The result is that insurance has become more expensive and more restrictive, with insurers being forced to pull back from markets in many states,” Stewart said.

State Farm Insurance Co. of Bloomington, Ill., announced in June it would no longer issue new homeowners polices in Arkansas and 16 other states.

The company didn’t cite mold specifically as the reason for leaving the market, but it received too many claims ranging from natural disasters to bathtubs overflowing.

Lawsuits on the Rise

Molds thrive in humid environments, especially where standing water exists, such as flat roofs, damp filters and air conditioning systems. Water damage from leaking roofs or pipes typically provides a breeding ground for various fungi.

How quickly mold grows is tied to the temperature, humidity and the nutrient available, such as wood and paper.

“The surge in the frequency and cost of mold claims in Texas cannot be explained by changes in the weather, nor can it be explained by population growth or expansion in the stock of housing,” Stewart said. “What has changed is the legal climate dominated by some who see mold as a huge moneymaker and use mass marketing and media to advertise for clients and class-action participants as well as to instill fear in the public.”

Little Rock attorney David Mitchell, who has done research on mold claims but hasn’t filed any cases, said he thinks more cases involving mold will be filed in Arkansas.

In some cases, finding a negligent party is difficult, though.

In general, if a homeowner allowed water to get in his house and mold grew, “there’s no one you can hold responsible,” he said. “So you may have the damages, but it’s not as a result of anyone else’s negligence.

“So just because you’ve got toxic mold … even if you’ve been injured by toxic mold doesn’t necessarily mean you’ve got the basis for a lawsuit,” Mitchell said.

In Roden’s lawsuit filed in U.S. District Court in El Dorado, Roden said she “developed serious health problems.” The lawsuit didn’t describer her symptoms, but it said she “is certain to incur additional medical (bills) in the future.”

Symptoms and complaints in homes with mold include cold and flu-like symptoms, sore throats, mucous membrane irritation, headaches, diarrhea and fatigue.

But some medical experts question the relationship mold has to illness.

“It is important to remember that in addition to molds, common indoor producers and aggravators of these types of conditions include dust, dust mites and possible cockroach fragments and excreta,” Dr. Howard M. Sandler, president of Sandler Occupational Medicine Associates of Melville, N.Y., told the House Financial Services Committee on July 18.

“To date, no scientific or governmental group has determined the thresholds of exposure above which specific health risks are a concern,” he said.

And the presence of mold growth doesn’t mean that a hazardous airborne exposure has occurred, he said. Thorough testing needs to be done before a diagnosis is rendered, he said.

People exposed to molds may experience a variety of illnesses, said Stephen C. Redd, chief of the Air Pollution and Respiratory Health Branch National Center for Environ-mental Health at the Centers for Disease Control and Prevention.

“Linkages between indoor airborne exposures to molds and other health effects, such as bleeding from the lung or memory loss, have not yet been scientifically substantiated,” he said.

Business Boom

All the talk about mold has improved business for Atoka, which has hired two more employees to keep up with requests for inspections since 2001, when the number of mold calls began rising. Atoka investigates claims of mold for insurance companies and property owners.

In most of the cases Atoka has encountered, the mold is fixable and controllable, said Henry. But he has a few horror stories.

One client bought a 9-year-old, $500,000 home on Lake Hamilton only to learn that it had an “inordinate amount of damp material inside the wall,” Henry said.

An architect said any more weight would cause the house to collapse on its own within two years.

“So the homeowner was left with no choice but to demolish the home to the ground,” Henry said. “It could not be saved, and it was due to moisture and out-of-control humidity problems and subsequent mold growth from that, which rotted the wood.”

The primary cause of mold is moisture and moisture control, he said.

“If moisture some how gets out of hand and is not detected quickly enough, [or] if a new home home is put up with damp building materials, … then all kinds of things can happen,” Henry said.