Developer Liability
in the Toxic Mold Arena: Recent Trends and Issues
Kerri L. Barsh, Esq.
The toxic mold phenomenon continues, raising new
issues and concerns for a growing range of stakeholders. Chief
among them are developers, building owners, building material
manufacturers, contractors, managing companies, insurers and
homeowners associations.
Litigation Context
To appreciate the context within which developers face increasing
liability for mold-related claims requires an understanding
of mold. Mold is a naturally occurring fungus, found both indoors
and outdoors, with more than 20,000 estimated species, many
of which are harmless.1 Mold needs three things to survive:
warmth, food and moisture. Warmth is readily abundant, especially
in hot and humid climates. There are plenty of food sources
for mold, including building materials such as wood, carpet,
ceiling tiles, drywall, upholstery, wallpaper and sheetrock.
Moisture is similarly available in its liquid and gaseous phases.
Liability Concerns and Responsive Measures
In light of conditions conducive for mold growth in the construction
context, especially in humid climates, developers are increasingly
the subjects of mold-related claims. Common legal theories upon
which plaintiffs are basing their claims against developers/owners/builders
include violation of the duties to disclose and inspect, negligent
maintenance, and defective design, materials and workmanship
in the construction of a building. More recently, plaintiffs
attorneys have expanded the typical theories of relief, asserting
claims for intentional inflection of emotional distress, which,
if successful, would lead to the recovery of punitive damages.
Class-action lawsuits appear to be similarly in vogue, with
a South Florida judge recently granting class certification
in a suit against a multifamily residential developer of national
significance.
In their defense, developers are incorporating various legal
protections such as disclosures and disclaimers into purchase-and-sale
agreements, condominium declarations and leases. These legal
protections acknowledge that mold is a naturally occurring
substance and that there is no method for completely eliminating
mold or mildew. Developers and owners are similarly incorporating
risk-shifting provisions and indemnifications in such agreements
pursuant to which the tenant/condominium owner/homeowner is
responsible for mold-related impacts resulting from tenant negligence,
including failure to maintain his or her residence at the recommended
temperature and relative humidity; failure to report water intrusion
or visible evidence of mold; and failure to take prompt action
to prevent or minimize water leaks or penetrations.
Based on recommendations of their architects, condominium developers
are adding provisions in the condominium bylaws prohibiting
the use of certain building materials such as non-breathable
wall coverings on exterior walls, low-permeance paints and vinyl
wallpaper. Although the legal effectiveness of some of these
measures has yet to be conclusively determined, their use by
owners and developers does not appear to have diminished with
the increasing media attention and public awareness of fungi-related
health concerns.
In addition to legal measures, developers are employing on-site
construction techniques principally designed to prevent water
damage to drywall and other building materials and thereby to
prevent or avoid mold infestation. Such measures consist of
the use of tarps or visqueen to protect these materials from
rain or pooling, documentation of remedial measures taken once
water damage has occurred, and visual inspections for evidence
of mold infestation or post-construction water penetration.
Developers are also taking proactive steps to minimize future
liability by hiring mechanical engineers to evaluate their building
plans specifically for conditions leading to mold infestation.
Recent Legislative Trends and Issues
No federal- or state-established requirements specific to mold
that establish safe exposure levels for the public
have been enacted at this date. In the absence of such regulations,
a few states are starting to come to the aid of developers,
building operators, building managers, mold contractors and
homeowners on the legislative front. In 2001, the state of California
adopted legislation requiring its health department to determine
the feasibility of setting acceptable indoor air exposure limits
for mold as the initial step of a phased and comprehensive approach
to mold concerns. In their 2003 session, Florida legislators
filed three mold-related bills, one of which would have created
a task force to investigate toxic mold and its potential hazards.
The remaining two bills, if adopted, would have established
a regulatory scheme for the licensure or registration of mold-related
contractors doing business in the state. Despite apparent public
support, none of the bills was enacted.
Uncertainty also exists relative to the duty of the building
owner or operator to disclose the existence of the mold. For
example, in certain states, a seller is held to a higher degree
of disclosure in a residential transaction than in a commercial
context; the doctrine of caveat emptor (buyer beware)
typically governs commercial transactions, absent fraud or misrepresentation.
Assuming that a seller/developer is required under common law
to disclose all things material to its residential
buyer/tenant, by which standard does one determine that such
a mold problem is no longer material? If fungal growth is remediated
by a competent expert, must such prior mold growth (and subsequent
remediation) be disclosed? If disclosure is necessary, to whom
does it extend? If the source of mold infestation is a compromised
air conditioning system in a multi-occupant building, does such
disclosure extend to all owners or tenants or simply to the
owner or tenant who complained? Neither case law nor legislation
has satisfactorily addressed these disclosure issues.
In sum, the lack of bright-line regulations governing the presence
of mold within indoor environments, as well as the protracted
and fact-specific nature of mold-related lawsuits, leaves developers
and other affected parties with little guidance on the extent
of their responsibility. Until such regulations are adopted,
developers will rely upon legal and technical protections as
well as the potential for legislative help to minimize their
liability.
Kerri L. Barsh is a shareholder in the environmental
and land use department of the international law firm Greenberg
Traurig.
1-Although scientific research has not been exhaustive or
conclusive, fungi such as stachybotrys, aspergillus, cladosporrin
and penicillium may be potentially harmful to health, especially
when present in large dosages and when susceptible individuals
are exposed.
©2003 France Publications, Inc. Duplication
or reproduction of this article not permitted without authorization
from France Publications, Inc. For information on reprints
of this article contact Barbara
Sherer at (630) 554-6054.
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