Breach Contract in Hvac

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					                 Mold and
          Legal/Insurance Issues

Adapted from: Solving Moisture and Mold Problems, by Steve Ferris
  Legal Battles and Mold

• Ballard vs. Farmers Insurance
• Erin Brockovich
• Ed McMahon
• Ritz Carlton condos
       Legal / Insurance Issues

• “Asbestos of the new millennium?”
• “Water damage claims repackaged for
  jury appeal”
      Who’s Getting Sued?

• Insurance companies
• Vendors / manufacturers of
• Contractors and subcontractors
  – Architects, building contractors,
    subcontractors, HVAC designers,
         Who’s Getting Sued?

• Building owners and managers
  – Homeowners associations, previous
    owners, property managers, landlords,
    land developers, real estate
  – Increased focus on
    apartment/multifamily dwellings
• Employers
         Possible Legal Charges

• Breach of contract
  – “airtight” products
  – Meeting certain standards
  – “first-class workmanship”
• Breach of implied warranty of
• Failure to warn
• Failure to disclose
            Possible Legal Charges

•   Tenant claims
•   Constructive eviction
•   Child endangerment – criminal
•   Employee claims
    – Worker’s comp rate increases
    – Have a system for reporting and
    – Show that “we care”
           Recoverable Damages

•   Mold investigations
•   Mold abatement
•   Testing costs
•   Loss of property use
•   Property depreciation
           Recoverable Damages

• Stigma damages
• Emotional distress – must prove
  – Actions were extreme and outrageous
  – Acted intentionally or recklessly
  – Suffered extreme, disabling emotional response
• Pain and suffering
• Medical expenses, including monitoring
• Punitive damages
          Litigation is Murky

• Mixed signals from the courts
• Most state legislatures have yet to take a
  clear stand
• Congress has not yet mandated mold
• No state funding
• No permissible threshold for exposure
           Ways People Reduce Their
              Risk of Litigation
• Proven design
• Materials
• IAQ management policy – mold awareness
  – How building monitored
  – Procedures for reporting/response
• Training of key personnel
• Contractor/subcontractor documentation
          Ways People Reduce Their
             Risk of Litigation

• Tenant accountability – to place an affirmative
  duty on the tenant, new leases should contain the
   – “Mold is a naturally occurring substance that grows in
     areas of excess moisture. Tenants are required to notify
     their landlord promptly if they observe leaks or other
     moisture accumulation.”
• Immediate response
• Communications – reassurance of action being
          Why Insurance Companies
           Don’t Want to Cover
                Mold Claims
• Money
  – 1% = $18 billion
  – Remediation,
    costs >$75 per
    square foot
• Easy target
• No standards
                    Read Policy Carefully

• Mold damage may be specifically
  excluded from coverage, unless it is
  the result of sudden and accidental
  water discharge

“What Every Homeowner Should Needs to Know About Mold”, Vicki Lankarge
Effectively Handling
Water/Mold Claims

               What Every Homeowner Needs to
               Know About Mold

   Texas Department of Insurance
          Texas Dept. of Insurance

• Stop water leak or                         • Make a list of
  flow                                         damaged property
                                                 (videotape or photograph
• Notify insurer                             • Don’t make large
  immediately                                  structural or
• Ask what is                                  permanent repairs
  required of you –                          • Remove standing water
 written notice, protect                       and begin drying area
 property, perform reasonable
 repairs, keep records

     “What Every Homeowner Should Needs to Know About Mold”, Vicki Lankarge
        Texas Dept. of Insurance

• Remove water-soaked                        • Don’t throw away
  materials                                    removed or damaged
• Keep removed                                 materials until
  materials and move to                        inspected by insurance
  dry area                                     agency
• Keep an activity log,                      • Don’t jeopardize your
  including contact with                       safety
  insurance agency                           • Don’t exceed your
                                               personal financial or
                                               physical capabilities

      “What Every Homeowner Should Needs to Know About Mold”, Vicki Lankarge
                 Insurer should:

• Contact you within 1 business day of making claim
  (unless major catastrophe where you live)
• Provide name and contact information of company
• Send representative to your home within 24-72
  hours (unless disaster)
• Determine if claim is covered and give initial
  estimate of damage within 7-14 days of onsite
     “What Every Homeowner Should Needs to Know About Mold”, Vicki Lankarge
           Insurer Expects:

• Information and access to your home
• Allow for a prompt inspection of the
• Cooperation
                 Limits on Claims

• There may be financial limits on
  amount insurer pays for property
  damage and liability claims related to
  fungi, rot or bacterial damage.

    “What Every Homeowner Should Needs to Know About Mold”, Vicki Lankarge

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