Mold Hurts Pocketbooks, if Not Health

Protecting buildings against mold continues to be a major focus for engineers, but protecting oneself against mold-related lawsuits may prove the greater concern.

With approximately 10,000 mold-related cases pending in the United States, intrusive building mold has certainly grabbed headlines.

The majority of these cases getting such media attention are in Florida, Texas and California. Many stem from mold problems in single-family homes, prompting several insurance carriers to make mold coverage more difficult to obtain—or in some cases, dropping it completely.

According to Kate Enos, manager of the Premier Program for Victor O. Schinnerer—underwriter to commercial insurer CNA—many smaller commercial insurance carriers have in fact added expressly stated mold exclusions in their general liability policies. Furthermore, she says many insurers are not allowing mold coverage as a buy-back exclusion, meaning the customer cannot pay extra to add mold coverage to an existing policy.

CNA, itself, has drafted a mold-exclusion provision, but has yet to add it to its policies. Enos says the exclusion will only be implemented if the insurer sees an increase in mold claims. Additionally, the exclusion only refers to bodily injury, which is where most mold claims originate.

"We're not concerned about the actual design professional's defects," she says. "We're concerned about third-party bodily injury with respiratory issues that escalates to multi-million dollar damages."

But, Susan Hickman, a partner with Hinshaw & Culbertson, a Chicago-based law firm that has been involved in a number of mold and sick-building syndrome cases, warns that engineers should be concerned about design problems if they are named in litigation.

Courts, she explains, have historically determined that water intrusion is the foundation for most mold propagation, so they often look in that direction for a guilty party. Therefore, she says the best defense is doing one's homework. "You need to figure out what's causing the water intrusion because anyone responsible in whole or in part could potentially be a defendant," she explains.

While fault may lie elsewhere, M/E/P design engineers are easily targeted. For example, two frequent prosecution strategies involve going after engineers for improper sizing of HVAC equipment in relation to the space and the use of the space, or for improperly acting to establish proper maintenance and operation guidelines.

Here's where proactive investigation by the M/E/P firm comes into play, says Hickman. "If I represent the engineer and it's pretty clear that the HVAC system isn't the problem, then it's much easier to make the case that the engineer isn't at fault," she explains.

To get there, Hickman stresses diligence in relation to contractor and subcontractor documentation. For example, if a contractor puts pressure on an engineer to cut costs that might lead to mold propagation, the engineer should explain the risks, and then document the issue if they are coerced into any situation they feel might cause a potential mold intrusion.

As far as troubles in obtaining mold insurance, Hickman suggests firms should assemble IAQ management plans that demonstrate to the insurer how a firm is taking steps to avoid mold. At the least, she says, it will yield a better premium rate.

Enos concurs, saying a lot of this is common sense. And for the most part, she also feels the whole mold issue is being over-hyped. "Right now, we consider it a non-story," says Enos.

She points to the position of the Centers for Disease Control and Prevention (CDC) in Atlanta, which hasn't articulated any type of medical evidence suggesting a correlation between mold and all of these bodily injury claims.

In fact, Enos says the insurer is currently involved in only one such case, in California, at the present time.

That being said, Enos does say the insurance industry will continue to keep a close watch on mold in 2003, and will include monthly reviews of mold-related issues.