Mold: A Growing Liability

Mold: A Growing Liability

Maryann Susavidge

With the public more aware of indoor air quality issues, claims for negligence or bodily injury related to mold growth in schools and businesses are on the increase. Here’s what you need to know.

Schools are places to learn many lessons. One science lesson that many schools didn’t have in their lesson plan for this school year, but nonetheless have had to incorporate: Mold grows in damp conditions. As a result, they also learned that mold can be a big and expensive problem. A very wet summer encouraged mold to grow in many tightly closed schools. When doors began to open for a new school year, the discovery of mold resulted in some delayed openings, alternative classroom arrangements, an outcry from concerned parents, and costly cleanup bills.

The consequences of mold growth are tough lessons that have not only been reserved for school systems. In fact, for any individual, business or public agency that owns or manages a building, preventing the growth of mold has become a top risk management concern, and for good reason. Poor construction practices, airtight buildings and leaking plumbing and roofs, along with seasonal and regional weather conditions, can all contribute to mold growth. As mold grows, so do the accompanying cleanup costs and the potential for third-party claims for negligence or bodily injury.

Mold grows naturally in the environment and comes in a variety of forms. Some types of mold produce toxins that are found indoors in concentrated amounts. One such form is stachybotrys, a greenish-black fungus found worldwide. This mold tends to colonize particularly well in high cellulose building materials such as drywall or gypsum board, fiber board, ceiling tiles, wooden structures, and even books and papers, that are continually moist or water damaged. Stachybotrys has been documented to produce a series of potent toxins that affect the immune system, resulting in adverse effects on the central nervous system, reproductive system, and upper and lower respiratory tract. Stachybotrys can also cause eye and skin irritation and chronic fatigue. Another type, Aspergillus, is a fungus with similar characteristics as stachybotrys and is suspected of having similar effects on human health. Other common molds include Cladosporium and Penicillium, which can grow to levels that can trigger allergic reactions like asthma, coughing, headaches and eye and throat irritations.

The health effects of molds are the center of many debates, many of which are relatively inconclusive. Managing the risks of an individual’s exposure to mold is even more challenging because various molds can affect people differently. Every microbe is an allergen. Some individuals may be affected severely by the presence of a certain type of mold, while another individual may experience absolutely no visible symptoms from mold exposure. Aspergillus, for example, has a fatality rate as high as 75 percent in people with compromised immune systems such as those individuals with AIDS or those having bone marrow transplants or cancer treatments.

Increased Concern

A few years ago, mold contamination claims were rare. With the public more aware of indoor air quality issues, however, claims are on the increase. Microbiological contamination–which includes yeast and bacteria, as well as mold–began its rise to a position of concern for businesses in the early 1990s. Some recent cases have gained significant media attention and, as a result, attorneys and the court system are already starting to see an increase in lawsuits related to third-party injuries from microbiological exposure.

In California, for instance, newspaper employees are suing the landlord of their building for $10 million for failing to make repairs that allowed several types of mold to grow, which they claim, resulted in lung and sinus infections. In New York, 500 plaintiffs are suing the owners and managers of two apartment complexes for mold contamination. Parents are suing an Illinois school district for negligence for not taking care of a mold condition that resulted from a flood.

Managing property damage or third-party claims related to mold could cross several insurance lines. For example, since the buildup of mold typically originates from a water source, cleanup expenses may be covered on a property insurance policy or, if the moisture was the result of a flood, then coverage may be offered by flood insurance.

Third party-claims, however, can be a different situation. In many situations where personal injury is involved, mold may be considered an airborne contaminant. Such claims might be paid by an environmental insurance policy, but would be excluded by the pollution exclusion clause, or perhaps even a specific mold exclusion clause that can be found in general liability policies.

In one recent example, a western university suffered remedial expenses to fix a chronic water problem in a building that housed a research lab. It also was served with a claim from a female researcher who asserted that she developed asthma while working adjacent to the room with the chronic leak and mold growth.

The university’s property insurance carrier paid the claim for remedial expenses. The university has an environmental insurance policy that offers protection against third-party bodily injury related to “sick building syndrome.” The environmental insurance carrier, therefore, paid for expenses related to the health conditions of the researcher exposed to the mold.

Workers’ compensation insurance can also be called into effect where mold may be suspected of causing illness to workers on the job.


In the early 1990s, the Business Council on Indoor Air conducted a study of 695 commercial buildings. The study found that 35 percent of these buildings had mold/mildew and fungal growth. Even with so many of that sampling showing signs of mold, there are currently no industry standards for remediating microbiological contamination, making it a very controversial topic among experts in the field.

One thing is certain. Mold cleanup is not cheap. In El Paso, Texas, the school district spent $4.2 million to make mold-related renovations to 14 schools.

In Toms River, N.J., the local County Board of Elections office discovered its own mold situation, which resulted in a $56,000 cleanup. Anticipated additional costs would be incurred to fix the structural problems with the building to prevent the problem from occurring again.

In Denton, Texas, stachybotrys mold was found in a firehouse and a county courtroom. The county then spent $80,000 to check all county buildings for mold. Because 40 percent of the firehouse was infested with mold, Denton city officials are currently considering tearing down the existing building and rebuilding it for a cost of $3.5 million.

Remedial techniques vary for different surfaces and structures. They range from scraping, bleaching, painting or all three on immovable woodwork. If the woodwork can be removed, it should be. When metal structures are involved, such as sheet metal ductwork, they can often be brushed clean and chemically disinfected. If it is mold-contaminated lined ductwork, the fiberglass liner may have to be removed and the sheet metal cleaned with a brush and/or a bleach disinfecting solution. Depending on the selected expert, the chosen method will vary.

One thing the industry does agree on, however, is that the problem isn’t a fungal problem at all. The problem is a water problem, and to stop the mold you have to stop the water source. Both fungal and bacterial microbiological contamination usually result from water entering the building envelope or high relative humidity inside the building. Typical examples include leaking exteriors, sewage backups and improperly sized air conditioning units, which do not remove enough humidity from the air during the cooling process.

Taking a Proactive Approach

No enforceable standards have been established by regulatory agencies such as the Occupational Safety and Health Administration (OSHA) or the Environmental Protection Agency (EPA).

Currently, two independent organizations, The American Society of Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) and the Building Officials and Code Administration (BOCA), provide guidance for ventilation in buildings.

Additionally, The American Conference of Governmental Hygienists (ACGIH) has published guidelines evaluating the presence of yeasts and molds.

Even without specific compliance standards or procedures, the need for a proactive approach to managing mold exposures is critical. One strategy currently used by a number of building owners and maintenance personnel is proactive investigation. An informed building owner or maintenance manager can oftentimes address typical indoor air issues, including mold growth, before they become problems by educating themselves and their departments.

At a minimum, the building owner and maintenance staff should review a complete set of architectural drawings to determine the basic operation of the heating, ventilation and air conditioning (HVAC) systems. Outdoor air intake locations should be determined and any problems with their location in relation to potential sources of mold should be reviewed.

A visual inspection of the HVAC systems should be planned to evaluate design specifications in relation to operational and maintenance procedures. One should also establish and adhere to a preventive maintenance schedule.

Industry experts agree that facility owners, contractors, and architectural and engineering firms all must share in the responsibility or liability associated with “wet buildings.” Facility owners assume liability as a result of poor operation and/ or maintenance of the building. Contractors can be subject to liability in a variety of ways, including incorrectly installing the HVAC system.

Another way contractors can be subject to liability is by exposing construction materials to moisture during the construction process and then using those materials only to have fungal growth at a later date. Architectural and engineering firms are not immune either. Liability for an architectural and engineering firm can arise from faulty design of the HVAC system, failure to consider the local climate and its impact on the building envelope, and/or specifying materials that restrict the building’s ability to “breathe,” such as certain types of paint versus vinyl sidings.

The risk control concept is simple, yet the methods may be a little more complicated–keep your facility as dry as possible.

MaryAnn Susavidge is a managing underwriter for ECS Underwriting’s Industrial and Commercial Facilities business unit. Tim Horn is a senior industrial hygienist with ECS Risk Control. Headquartered in Exton, Pa., ECS, an XL Capital company, is an underwriting manager providing integrated environmental risk management solutions worldwide.

Risk Management Tips for Mold Control

* Recognize the fact that fungal growth is an issue and train employees to recognize the signs or identify problem areas.

* Establish a peer review process of the mechanical systems throughout the building and constructibility reviews on the building’s envelope.

* Ensure the building is “dried out” before systems are turned on.

* Consider how systems interact with each other in the building, and the climatological zones in which the building is located, especially when considering placement of vapor retarders and drainage planes.

* Assess window and door seals.

* Store construction materials carefully. Proper storage or timely delivery is a must to prevent water damage or moisture from accumulating on those materials.

* Ensure your company is speaking to industry professionals before you either begin construction or are in the process of remediation.

* Determine how your insurance coverage would offer protection, and under what conditions, for clean up expenses, structural repairs or against third party claims.

COPYRIGHT 2001 Axon Group

COPYRIGHT 2001 Gale Group