Court Reverses Mold Award
The Baltimore Sun, January 12, 2003

By Anne Lauren Henslee
Special to the Sun

Insurer ruled not liable for punitive damages 

But firm mishandled Texas claim 

Impact unclear in Md., where exclusion is sought 

A possible shift in the mold-litigation movement emerged last month when the Texas Court of Appeals partially reversed a multimillion-dollar verdict for members of a family who said their insurance company’s failure to act on a claim led to complete mold infestation of their 22-room estate. 

In Maryland, where the General Assembly began its 2003 legislative session last week, the timing of the Texas decision could prove an asset to the hundreds of insurers who have been lobbying the state’s insurance administration for an exclusion of mold coverage. 

With the proposed exclusion, insurance companies would be allowed to deny coverage for all mold-related claims, regardless of whether damage resulted from covered water of fire loss. If insurance companies succeed in excluding coverage, then responsibility for paying for and defending claims of mold damage would fall to the homeowners. 

In the Texas case, Melinda Ballard and her husband, Ronald Allison, claimed that Fire Insurance Exchanged, a member of Farmers Insurance Group, acted in bad faith in its handling of a toxic-mold claim that resulted from a plumbing problem in their home in Dripping Springs. 

The jury found in their favor, awarding $32 million. 

But on Dec. 19, a three-judge panels of the 3rd Court of Appeals cut the figure to $4 million plus interest and lawyers fees, which will be determined. It reversed the $17 million in punitive damages, including $5 million for mental anguish. 

The jury had awarded the family $6.2 million in actual damages, $12 million in punitive damages, $5 million for mental anguish and $8.9 million for lawyers fees. 

In reducing the jury’s award, the appeals court found sufficient evidence that the insurance carrier mishandled the claim. 

The appellate court also affirmed the lower court’s exclusion of medical mold experts and dismissed the plaintiff’s personal-injury claims. 

Insurance representatives said they view the court’s dismissal of those issues as a step in the right direction for their industry.

Insurance companies have seen mold-related claims from homeowners increasing during the past two years as well-publicized cases in Florida, Wisconsin and Delaware have raised health and housing concerns. 

Kimbery Bray, a Maryland lawyer for the State Farm Insurance, said she believes that the decision shows the court’s insight into some far-reaching claims associated with mold damage. 

Local impact unclear 

Bray is unsure how great an impact it might have locally. 

“Texas is Texas, and Maryland is Maryland,” she said. “Now they are starting to get things in order, but we know that Texas got in a lot of trouble because they delayed in acting.” 

Bray hopes that Maryland will decide soon.

“We just hope we can get an exclusion and provide buybacks for people who choose that coverage,” she said. 

Maryland, she pointed out, is one of about 15 states nationwide that has not adopted a mold-exclusion or similar coverage provision. 

A spokesman for the Maryland Insurance Administration said the agency will decide by the end of next month whether to allow Maryland insurers to exclude mold coverage. 

Associate Commissioner Robert Becker, who is presiding over the matter, had no comment on the Texas Court of Appeals ruling in the Ballard case or its possible implications. 

The Maryland Insurance Administration received more than 220 form filings from 147 licensed property and casualty insurers looking to exclude or limit coverage for damages arising out of mold or related exposures. 

On Nov. 7, the administration held an informational hearing to consider the issue further. 

The agency previously has disapproved personal-line filings for mold exclusions from policy claims, nothing inadequate statistical justification or other pertinent data to support those filings. 

In Texas, mold exclusions now are permitted, but insurers are required to offer buyback policies that for an extra fee include coverage of mold and mold-related damage. 

'Mold machine'

Another concern, Bray said, relates to what she calls the “mold machine,” or “the genre of services and players that come out to supposedly service these mold claims and drive up the premiums for every homeowner in Maryland.” 

“If the ‘mold machine’ no longer has a forum in Texas, where will they go?” the lawyer said. “I say they’re going to go to states where the regulatory and legislative environment has not yet acted on the mold issue.” 

Steve VanGrack, chairman of the Maryland Real Estate Commission, acknowledged that, despite the recent twist in the Ballard case, the mold issue is far from over. 

The reversal represents one case out of many, VanGrack said. 

“It doesn’t destroy in any way the concern that people have over mold in their homes,” he said. “It is a growing issue that will continue to take time in the courts, in the legislatures and among the regulatory bodies. The [decision] doesn’t change that at all. 

“It still is too important an issue to drop by the wayside. The issue’s not going away.”

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