Mold Issues in the Colorado Real Estate Industry

• Publication year: 2007
• Pages: 45

36 Colo.Law. 45 Colorado Lawyer 2007.

2007, January, Pg. 45. Mold Issues in the Colorado Real Estate Industry

The Colorado Lawyer
January 2007
Vol. 36, No. 1 [Page 45]

Articles
Real Estate Law
Mold Issues in the Colorado Real Estate Industry
by Gregory A. Goodman

Real Estate Law articles are sponsored by the CBA Real Estate Law Section.

Article Editor:

Louise Staab, Denver, Holme Roberts & Owen LLP - (303) 861-7000, louise.staab@hro.com

About the Author:

This month's article was written by Gregory A Goodman, an associate with Otten, Johnson, Robinson, Neff + Ragonetti, P.C., where he specializes in commercial leasing and sales transactions, resort development, and mixed-use development - (303) 575-7553, ggoodman@ottenjohnson.com. This article in no way represents the views of Otten, Johnson Robinson, Neff + Ragonetti, P.C., and is written independent of the author's association with the firm.

This article discusses the current state of affairs in mold litigation and its impact on the real estate industry in Colorado, and concludes that in Colorado and across the country, the toxic mold phenomenon already is beginning a general decline.

Several years ago, the rising spate of toxic mold litigation across the country, including property damage and personal injury claims, was widely touted as the "next asbestos," in terms of the volume of lawsuits and the corresponding crippling effect on many businesses in the real estate and insurance industries.(fn1) Although the hotspots for mold claims tend to be states that are both warmer and wetter than Colorado, such as Texas and Florida, scores of Coloradans filed mold-related lawsuits in the late 1990s and early 2000s. The University of Colorado made news in October 2006 when it closed a small building on the Boulder campus because employees were complaining of flu-like symptoms blamed on toxic mold.(fn2) Organizations across the state including the Home Builders Association of Metro Denver, began to seriously address the issue.(fn3)

It now appears, however, that the toxic mold phenomenon has begun to fade as a result of concerted efforts in the medical community (to accurately determine the potential health risks of mold exposure); the real estate development and construction industries (to address the underlying causes of mold proliferation in homes and buildings); and the insurance industry (to exclude mold claims from standard coverage and vigorously contest the flood of lawsuits).(fn4)

This is not to say that builders and developers in Colorado should stop taking design, construction, and legal precautions to protect themselves. However, the uncertainty that has plagued the real estate industry for the past decade regarding the potential ill effects of mold on persons and property, as well as the legal liability builders, developers, architects, and other real estate professionals face, has begun to abate. Toxic mold now appears to be a risk not unlike any other common potential construction or development pitfall, such as radon gas or swelling soils, that can be effectively managed and mitigated.

This article discusses the current state of toxic mold litigation. First, general facts about mold are explored, including the history of toxic mold as a cause of action and medical and scientific evidence relating to mold. Next, potential causes of action relating to toxic mold exposure and growth are discussed. Finally, the article provides recommendations for avoiding liability for mold.

What is Toxic Mold?

Molds are simple microscopic organisms found almost everywhere, indoors and outdoors. Mold generally is not dangerous to humans; most varieties of mold will do nothing more than aggravate hay fever, asthma, or other allergies.(fn5)

Mold requires three elements for growth: warm air, a viable food source, and moisture.(fn6) Warm air is present in most homes and buildings. Any number of organic materials found in homes and buildings, such as cotton, leather, drywall, insulation, synthetic carpets and sidings, and even wood and dirt, provide a viable food source for mold.(fn7) The most critical ingredient, and the ingredient easiest to control, is moisture; it is easier to eliminate moisture than warm air or organic food sources inside buildings and homes.(fn8) Moisture can appear as a result of flooding, a plumbing leak, condensation from air conditioning units, or simply as a result of high humidity combined with building materials that retain moisture.

"Toxic" mold is not a scientific term, but loosely refers to the limited group of molds that may potentially pose human health risks.(fn9) Toxic molds produce mycotoxins, which are fungal metabolites that may aggravate a variety of respiratory problems.(fn10) Any toxic effects stem from exposure to these mycotoxins found on the surface of mold spores, not from mold actually entering the body.(fn11) Toxic mold spores may be found in soils and enter buildings after floods or other sudden water entry, or latch onto building materials coated with dust. Toxic mold can grow on papers, carpet, and any other organic debris in general, and may be present without being seen.(fn12)

Toxic Mold as a Cause of Action

The first appellate court in any jurisdiction to uphold the admission of scientific testimony regarding the health impacts of toxic mold was in Florida in 1997.(fn13) Shortly thereafter, in 2001, a Texas jury awarded a family $33 million after finding that their insurance carrier acted in bad faith in evaluating a slew of mold claims for personal injury and property damage.(fn14) Several other high-profile toxic mold claims, including multimillion dollar lawsuits filed by celebrities such as Ed McMahon and Erin Brockovich, combined with the large jury award in the Texas case, were widely credited as being the impetus for thousands of toxic mold lawsuits in the following several years.(fn15)

Far-reaching federal legislation was proposed in 2002, in the form of the Toxic Mold Safety and Protection Act (Act). In addition to establishing uniform inspection and construction...