Life after Ballard: Mold Litigation in the New Millennium

I.

INTRODUCTION

A new toxin is aggressively framing the next wave of tort litigation. It supposedly killed Ed McMahon's sheepdog, Muffin.1 Even Erin Brockovich has sued her contractor with allegations that it took over her new home.2 And a teacher in Piano, Texas, sued her school district because she claimed that it violated her constitutional rights.3 The "it" is toxic mold, and some believe that it represents the next big toxic tort. If mold becomes an unsightly growth on the underside of the legal industry, then perhaps the Bollard lawsuit4 in Texas was the initial spore.

Plaintiff Melinda Ballard, along with her family, had purchased a twenty-two-room mansion in Dripping Springs, Texas (an ironic site for incipient claims of water damage). Soon after moving in, they noticed mold when a hardwood floor buckled due to a water leak. Ballard and her family then began to suffer a variety of ailments. It was not until Ballard discussed her situation with a fellow passenger on an airline light - who happened to be a mold expert - that she became aware that mold might be the culprit behind her family's health problems. The family then hired a mold expert who found that the house was infested with "black mold." As a result, Ballard and her family moved out immediately and sued Farmers Insurance Group to recover for the damage done to their home and their health. The case became known nationwide5 when the jury returned a verdict against Farmers for $32 million.6

The Ballard case has had a profound impact on mold litigation. According to the Texas Department of Insurance, mold complaints proliferated in 2000, shortly after the jury reached its verdict in the Ballard case.7 By the year 2002, the state of Texas hosted approximately seventy-five percent of all mold claims nationwide, though it holds only eight percent of the nation's population.8 As a result of a unique confluence of events-the Ballard case, weather conditions conducive to the growth of mold,9 and a standard homeowners' insurance policy that made it much easier to locate mold damage within the terms of the policy10-Texas has found itself at the forefront of mold litigation.

As the result of cases such as Bollard, mold (viewed earlier as the most ordinary of household nuisances) became a potential cash cow for plaintiffs' lawyers. However, given their position as the primary target of most of the initial lawsuits, insurers moved quickly to ensure that mold did not become the next asbestos. State governments also have become involved in this issue. As a result, the landscape for future mold litigation has changed a great deal since the Bollard case was decided.

II.

BACKGROUND

A. The Basics about "Toxic Mold"

Much has been made of "toxic mold" - a mold that supposedly can sicken and even kill people if it appears in their homes or businesses. However, as the Center for Disease Control and Prevention ("CDC") explains, "[t]he term 'toxic mold' is not accurate."" Although certain molds can produce toxins (such molds are known as toxigenic molds), molds themselves are not toxic.12 Molds are common in buildings and homes and will grow anywhere there is moisture.13 In fact, the CDC believes that there may be as many as 300,000 or more discrete species of mold and fungi.14 The most common indoor molds are CIadosporium, Penicillium, Aspergillus, and Alternaria.14 While the notorious Stachybotrys chartarum (a.k.a. "black mold") is not as common as these molds, it is not rare.16

Although mold growth is common in homes and buildings across the nation, mold litigation has grown more prevalent in Texas in part because of the moisture and warmer weather, which provide ideal conditions for the spread of mold. The question that predominates across Texas and nationwide, however, is what constitutes an acceptable level of mold. Unfortunately, standards for judging what is an acceptable, tolerable, or even normal quantity of mold have not been established at the federal or state levels.

B. The Full Story Behind the Bollard case

While the large jury verdict awarded in the Bollard case received national attention, the actual basis for the award, and its subsequent reduction on appeal, were not widely publicized. In fact, the basis for most of the Bollard award was the finding that the insurance company acted in bad faith.17 More importantly, the appellate court reduced the verdict because it disagreed with many of the jury's findings. While the appellate court held that there was sufficient evidence to support a finding that the insurer had breached its duty of good faith and fair dealing, causing damage to Ballard, it disagreed with the jury's findings of unconscionability, fraud, and "knowing violations" of the duty of good faith on the part of the insurer.18 As a result, the court dismissed the punitive and mental anguish awards,19 and Ballard's $32 million total award was reduced to just over $4 million.20 The decision was appealed to the Texas Supreme Court, but the parties reached a confidential settlement before the court reached a decision.21