Posted by Jack on 3/29/04

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Three Years Later, Industry Puts Toxic Mold into
Perspective
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
place.

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
cases.

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—
lessened.

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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