Underlying exposures in mold claims: what are the damages? With mold litigation proliferating as the claimed "asbestos" of the new century, it's time to examine the potential damages and their viability.

AuthorBoeck, Tamara L.

MOLD IS NOT a new problem, but it would seem that property owners are suddenly discovering it everywhere, "lurking under sinks, behind wallpaper or under floorboards, and hearing from scientists that it can be a health hazard." (1) And, as the mold grows, so does the litigation. With mold, however, it is not only against insurance companies but also architects, contractors, subcontractors, suppliers, construction managers, property managers and building owners. According to one report, as January 2002, some 10,000 mold lawsuits were in the pipeline. (2)

Plaintiffs in these cases seek damages, both compensatory and punitive, for any number of claimed harms, including property damage, remediation costs, testing costs, loss of use, relocation costs, bodily injury, and medical monitoring costs. Legal theories against property owners and builders may include the traditional construction-related claims--strict liability, breach of contract, breach of the implied warranties of workmanship and habitability, negligence, misrepresentation or fraud, and infliction of emotional distress. A substantial number of plaintiffs allege that construction defects are the initial cause, or a contributing cause, of their mold problems.

The potential theories are currently limited only, it seems, by the plaintiffs' bar's creativity and the courts' willingness, or reluctance, depending on your point of view, to allow cases grounded on these theories to proceed to trial.

What are the various types of damages plaintiffs might seek in "toxic" mold cases arising from alleged construction defects?

COMPENSATORY DAMAGES

Compensatory damages, according to Black's Law Dictionary, are: "An amount awarded to a complainant to compensate for a proven injury or loss; damages that repay actual losses."

  1. Damages for Injury to Property

    1. Construction Defect Damages

      Damages for construction defects are available only where those defects have caused property damage, and may include loss of use as well as the costs of repair. (3) Plaintiffs seeking damages for construction defects typically allege breach of contract, but they also may allege breach of the implied warranties of habitability and reasonable workmanship. (4)

      Damages for repair do not include costs for extensive remodeling. In Temple Beth Sholom and Jewish Center Inc. v. Thyne Construction Corp., the Florida Court of Appeal stated that the proper measure of damages for construction defects is "the cost of correcting the defects, except in certain instances where the corrections involve an unreasonable destruction of the structure and a cost which is grossly disproportionate to the results to be obtained." However, it added, where the owner decides to pursue a more expensive design, recovery may be limited to "what would have been the reasonable cost of repair according to the original design." (5)

      The presence of water, or simply moisture, is a precursor to mold growth. Although not a mold case, Temple Beth Sholom illustrates the kind of damages sought for water damage. Temple Beth Sholom and Jewish Center Inc. contracted with Thyne Construction Corp. to build a sanctuary and social hall. Pursuant to the contract, Tyne entered into separate subcontracts for the construction of a concrete roof deck covered by an asphalt roof membrane. The cost was some $22,000. Within a year after construction, the roof began to leak. Over time, the leaks became so bad that the entire roof had to be replaced. The temple removed the entire membrane and substituted one of a different design, at a cost of $72,000.

      Alleging breach of contract, Temple sued Thyne and its surety for damages arising from the construction of the roof. The trial court entered a final judgment of $10,000 in favor of Temple, and it appealed, attacking the adequacy of the judgment.

      On appeal, Temple's consulting engineer estimated that it would have cost $39,000 to replace the roof according to the original design. Although there was criticism of that estimate, the appellate court opined that "the cost of making reasonable repairs would have far exceeded the judgment." Moreover, the court found that the trial court had not considered the damage to the interior of the building caused by the water leakage.

      The court affirmed the judgment insofar as it held Thyne and its surety liable for the damages arising from the faulty roof construction. However, the court reversed the amount of the award and remanded for a new trial on damages, holding:

      Temple will be entitled to recover what it would have reasonably cost to replace the roof according to the original design, together with any engineering and architectural fees reasonably necessary to accomplish the repair. In addition, Temple will be entitled to recover for the damages to the interior and contents caused by the leaky roof. (6) 2. Defective Components

      Plaintiffs in mold cases may seek recovery from a product manufacturer for losses resulting from defective components of a building. When plaintiffs seek recovery in tort, the economic loss doctrine may preclude their success.

      In Bay Breeze Condominium Ass'n v. Norco Windows Inc., the Wisconsin Court of Appeals described the economic loss doctrine as a "judicially created doctrine under which a purchaser of a product cannot recover from a manufacturer on a tort theory for damages that are solely economic." (7) Public policy, the court stated, directs that "when commercial parties have allocated their respective risks through contract, the economic loss doctrine instructs that it is more appropriate to enforce that bargain than to allow an `end run' around that bargain through tort law."

      In Bay Breeze, the issue was whether losses from leaking windows in a condominium complex fell within the economic loss doctrine. The windows allowed water to leak into the building's units and into the walls, resulting in peeling paint, rotting, and deterioration of the window frames and casements. The condominium association sued in tort, asserting claims of strict products liability, negligence, and breach of warranty, as well as that the windows were negligently designed and manufactured by Jeld-Wen Inc. The court concluded that the claims were barred by the economic loss doctrine and the terms of the defendant's express warranty.

      The court noted that the so-called other property exception to the economic loss doctrine, which allows recovery in tort where damage occurs to property other than the defective product itself, did not apply in this case, relying on the so-called integrated systems limitation to the exception. The court explained that damage by a "defective component of an integrated system to either the system as a whole or other system components is not damage to `other property'" that would preclude application of the economic loss doctrine.

      In a case of first impression, the court stated:

      Here ... the homeowners purchased a finished product, their condominium units, the quality of which fell below expectations. While the association argued that the defective windows caused damage to the interior and exterior walls and casements, these are but component parts in a finished product. Because of the integral relationship between the windows, the casements and the surrounding walls, the windows are simply part of a single system or structure, having no function apart from the buildings for which they were manufactured.... Although the condominium units may have suffered incidental damage as a result of the failed windows, this does not take a commercial dispute outside the economic loss doctrine. (8) 3. Reasonable Value of Mitigation Efforts

      Plaintiffs in mold cases involving construction defects also may seek recovery for the reasonable value of mitigation efforts. In at least one case, a court agreed that such damages may be recoverable.

      In Adams v. U.S. Homecrafters Inc., (9) Dennis and Rita Adams contracted with Homecrafters to build a house. Before construction was completed, Dennis noticed that the front porch flooded during rains. After construction was completed, the couple moved in, but the water problem continued. They dug trenches around the house, but the water problem remained and eventually caused the front porch railing to rot and fall.

      After getting no response from Homecrafters, the Adamses sued for property damage and emotional distress. A jury found in their favor, awarding $6,731. The Adamses appealed, alleging that the trial court erred in denying an instruction on damages for the reasonable value of Dennis's labor in attempting to mitigate the loss.

      On appeal, the Mississippi Supreme Court held that the trial court should have given the instruction. Under Mississippi law, it stated, a party is entitled to all legitimate expenses incurred in an honest endeavor to reduce damages. Thus, the court continued, a landowner can recover those expenses "reasonable and necessary" to prevent future damages, "so long as those expenses do not exceed the diminution in value the property would suffer if the preventive measures are not undertaken." (10) The court concluded that a "plaintiff who performs mitigating repairs himself should be able to recover damages for the reasonable value of that time and labor just as he would be able to recover the cost of paying someone else to perform the task."

      However, in the case at bar, the court concluded that Adams had not met his burden of establishing the amount of damages with "reasonable certainty."

    2. Stigma Damages

      Stigma damages are awarded for the diminution in value of property because of a negative perception of the property and are in excess of any recovery obtained for physical injury to the property. (11) The issue of stigma damages arises frequently in cases of environmental contamination brought under theories of nuisance and trespass. (12)

      Can plaintiffs asserting breach-of-contract claims for mold contamination resulting from faulty workmanship recover stigma...

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