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    Post: Three Years Later, Industry Puts Toxic Mold into Perspective

    Posted by Jack on 3/29/04

    Three Years Later, Industry Puts Toxic Mold into
    February 9, 2004

    Whatever became of mold? Only three years ago, newspaper
    headlines, fueled by overzealous trial attorneys and
    misguided scientific information, trumpeted mold as "the
    next asbestos."

    Since then, however, mold has reverted back to what it has
    been for centuries: a naturally occurring organism, easily
    prevented and eradicated in most cases, posing little or
    no threat to healthy people. That such a simple organism
    could lead to such a complex issue is a testament of what
    hype, hysteria and junk science can do.

    What kept mold from becoming "the next asbestos?" In
    retrospect, insurers' aggressive public policy response to
    the brewing crisis—combined with a dose of common sense
    from the medical community and state regulators—helped
    restrict what could have been a runaway problem.

    Prior to 2001, insurers viewed mold as primarily a
    maintenance issue. They traditionally excluded it on
    property forms, providing coverage only for mold that was
    part of an otherwise covered claim. Covering mold in its
    own right would make insurance prohibitively expensive for
    policyholders. It was less expensive for property owners
    to budget for the proper maintenance that would keep
    buildings dry and prevent mold from growing in the first

    In recent years, mold began showing up as an alleged
    health concern within liability claims stemming from water
    damage. Plaintiff attorneys found some traction in
    courtrooms where they could introduce spurious information
    as if it was fact. This gave the pioneers of the mold
    economy—including plaintiff attorneys, mold "remediators"
    and professional expert medical witnesses—useful
    experience they could apply when opportunity was thrust
    upon them.

    This finally happened in 2001, when a $32 million judgment
    in a Texas claim handling case that included mold, made
    the topic a national issue. The dollar amount got a lot of
    attention, especially from plaintiff attorneys and
    businesses that make their living from insurance claim
    dollars. Ironically, this mega-judgment came in what was
    actually a homeowners policy claims handling case where
    mold was present—an important distinction in light of what
    happened next.

    As fate would have it, a tropical storm hit Texas just
    days after the big judgment, giving creative opportunists
    the perfect opportunity to foment hysteria over what they
    were now calling "toxic" mold. The news media, always
    searching for colorful visuals, seized upon the rare worst-
    case scenarios provided by these opportunists to transform
    a ubiquitous, naturally occurring organism into a major
    health threat.

    Spurred by the media and the trial lawyers, and assisted
    by the Internet, an entire mold industry burst into being.
    Plaintiff attorney firms created "mold information" Web
    sites. Self-styled mold remediation "experts" advertised
    on the Internet and linked with the attorney sites. Both
    groups descended on the area of Texas where the tropical
    storm struck. The situation became so bad that the Texas
    insurance commissioner asked the attorney general to
    investigate claim fraud in the area.

    The insurance industry faced a decision: allow mold to
    become like silicone breast implants, where true science
    arrived too late to save a number of companies from
    bankruptcy through litigation; or help mold become another
    radon, where science overcame hysteria in time to
    eliminate the fear and the threat. While the hypesters
    predicted that mold would turn into another asbestos,
    insurers went to work gathering facts and educating
    regulators, legislators and the public.

    Aside from one discredited study that the Centers for
    Disease Control (CDC) retracted shortly after its 1994
    publication, scientific studies consistently reinforced
    the fact that beyond acting as an allergen or irritant,
    mold did not cause problems in normally healthy people.
    Official publications from such creditable sources as the
    Environmental Protection Agency (EPA), the Occupational
    Safety and Health Agency (OSHA), the Center for Disease
    Control, the Texas Medical Association and the Texas
    Health Department showed again and again that mold was
    just mold. It was not a monster that threatened man's
    existence, but a necessary part of the ecosystem whose
    purpose was to break down dead organic materials. Most
    importantly, it was easily prevented and handled in most

    The insurance industry helped disseminate this
    information, which helped defuse the "toxic" mold hype.
    Gradually the media feeding frenzy began to die down and
    the number of "toxic" mold headlines—and court cases—

    However, politics would not be as simple to handle.
    California, always one of the most environmentally
    conscious states in the country, passed a law in 2001
    instructing health officials to develop exposure standards
    for mold. This law was written in such a way that the
    pulmonary-compromised individuals covered by the law would
    require a zero tolerance standard for mold. In essence,
    the state passed a law requiring eradication of a living
    organism that exists everywhere.

    Citing budget shortfalls, the California Health Department
    has yet to begin the study, which would be redundant in
    light of the scientific literature published in the last
    three years.

    Eventually, however, some common sense returned to the
    public policy process. The growing body of scientific
    evidence presented by insurers and others convinced policy
    makers in other states that the California example did not
    make sense. Other states concentrated on gaining
    scientific knowledge without predetermining the outcome,
    disclosure requirements in real estate transactions and
    regulating mold assessors and remediators.

    Using factual statistics from the early mold claim
    experience in Texas, insurers helped most state insurance
    regulators see the need to allow reasonable limitations on
    mold following a covered loss. Claim data showed that mold
    alone would add 40 percent to homeowners insurance rates
    if insurers covered mold claims arising from a covered
    loss at the full value of the policy. Regulators realized
    when something became as predictable as mold, homeowners
    and commercial property owners would not be able to afford
    the coverage. While market-based solutions would have been
    the best approach to take, politics often resulted in
    regulators requiring some minimum level of coverage. Yet,
    insurers found room to develop competitive options and
    allow consumers to decide which options they preferred. At
    the same time, they made it harder for the profiteers to
    feed at the insurance trough.

    State legislators and regulators also worked to rein in
    the profiteers. Again, Texas took the lead, successfully
    prosecuting several "remediators" for insurance fraud in
    the aftermath of the 2001 tropical storm. The Texas
    legislature enacted licensing, training and professional
    requirements for mold contractors. Other states continue
    to consider such requirements to protect consumers.

    Mold profiteers also are running into better-educated
    consumers. Respected governmental agencies such as EPA,
    OSHA, the Texas Department of Health and the Texas Office
    of Attorney General have published common-sense guides for
    preventing the water damage that is always the root cause
    of mold growth. These publications stress the importance
    of quickly dealing with water problems to prevent mold
    growth, handling mold before it becomes a major problem,
    and choosing qualified professionals to clean up the rare
    cases that are too big for property owners to handle.

    Finally, mold profiteers are running into better-trained
    insurance professionals who know what tools are required
    to handle each unique mold situation. Claim adjusters know
    which mold contractors are professional and when to use
    them. Insurance claim professionals work to minimize
    disruption for their insureds and keep costs down.

    The insurance industry's proactive stance on mold helped
    prevent it from becoming "the next asbestos" that
    opportunists hoped for. For homeowners insurers, mold is
    headed toward becoming a controllable exposure. For
    insurance consumers, mold is an exposure they can cover
    for an appropriate price, depending on which insurance
    products they choose to buy.

    However, mold is still attractive as an income source,
    especially in the commercial liability arena, where it
    continues to play a significant part in class action
    litigation against building owners and builders.

    Moving forward, insurers must continue to use the tried
    and true methods of public policy advocates—gather all the
    facts, build strong coalitions of organizations and
    individuals that may be damaged by these unfounded claims,
    and speak with one clear and unambiguous voice to
    legislators, regulators, the news media and consumers.

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