Mold: Not just a household nuisance anymore

By Yariv Kafri

By now, you've heard: The newest hot-button issue in the world of real estate is something older than mankind itself. Mold.

Formerly considered a mere household nuisance, mold has recently spawned a vast and somewhat chaotic business, effecting the real estate, legal, insurance and construction industries, and fed by conflicting and unclear science, a lack of federal and state guidelines and a veritable firestorm of litigation - already costing insurers billions.

"The new toxic tort 'flavor of the month,' particularly in the real estate business, is mold," said Judy Roth, a partner at Manhattan's Phillips Nizer, LLP. "Mold has been around forever, it's ubiquitous. It's only recently that individuals have been concerned that there may be adverse health effects associated with mold."

A type of fungi, mold may cause extensive property damage, and can also prove injurious to the health of certain individuals. Commonly caused by flooding or standing water resulting from leaking pipes and roofs, mold infestations can occur within 48 hours wherever spores, moisture and "food," such as wood, paper or other porous materials are found - in walls, under floorboards, in dehumidifier and air conditioner drip trays, HVAC systems and elsewhere.

Common molds include aspergillus, penicilium and strachybotrys - a slimy, dark green mold cited in several high-profile insurance cases. Strachybotrys or "black mold" has been blamed for infant deaths and a plethora of health problems in adults that breathe in its spores.

Experts agree that different molds may effect different people in varying ways, potentially triggering a number of health problems, including allergic reactions, dizziness, breathing problems, nausea, asthma attacks, and immune system suppression, among others.

Since the 1990's, a number of high-profile lawsuits have resulted in multi-million dollar judgments.

Over the past year, due in pat to a litigious population and vast real estate market, New York has shot from ninth to fourth in the nation in terms of insurance claims involving mold, following Texas, California, and Florida.

Recently, New York City Housing Court Judge Jean Schneider granted a $30,000 rent abatement to two renters after they were found to have suffered a "constructive eviction" for nearly two years resulting from a toxic mold infestation of their East 57th Street apartment. Although granted an approximate 75% rent abatement, the judge denied the plaintiffs' request for legal fee compensation, approximately $125,000 worth, as neither side was deemed a "prevailing party" in the litigation.

After failing to locate the source of the moisture responsible for the mold, the landlord in question was ordered to perform what is known as a Level IV mold remediation requiring the use of trained personnel utilizing protective gear, air locks and negative air pressurization through the use of a HEPA filtered machine.

According to the tenants' attorney Melissa-Ephron Mandel, Schneider's ruling should serve as yet another wake-up call for property owners. "Landlords will need to be diligent in addressing and promptly dealing with mold conditions in their properties," she said, adding that "there is the potential for liability."

Phillips Nizer litigation partner David Jacoby agreed. "The truly nightmare situations arise when landlords don't take prompt action to deal with mold and moisture problems," he said.

Insurance companies reportedly paid out nearly $2.5 billion dollars last year in mold claims, up from a comparatively miniscule $200 million in 2000, and, according to Roth, the industry is bracing itself for a projected $13 billion dollar loss in upcoming years.

In response, insurers in 38 states have successfully lobbied for absolute mold exclusion in standard policies, and in the remaining 12 insurers are seeking to place caps on mold liability. In New York State, insurers have filled over 100 requests with the State Insurance Superintendent to strike mold coverage from standard policies. So far, those requests have been denied.

Mold conditions can range from small patches to large infestations of entire rooms or even the whole building. Although no federal or state regulations governing mold remediation exist, the New York City Department of Health has published guidelines on Assessment and Remediation of Fungi in Indoor Environments, the current industry standard.

They can be reviewed at: http://www.nyc.gov/html/doh/html/epi/moldrpt1.html.

According to these guidelines, mold infestations of as little as 10 SF in size require remediation workers to use appropriate protective respiratory equipment. Infestations of 30 SF or less require a concerted approach of scientific investigation and intensive remediation, requiring the services of a professionally trained, licensed and experienced remediation contractor.

"Because mold spores can become airborne and contaminate clean areas of the property, it is crucial that the removal and decontamination of moldy materials be performed in a controlled environment, by a certified and insured remediator," said Alon Levin, president of Decon Environmental, a remediation firm based in Florida, with branches in Virginia and New York.

Bob Leighton, of Leighton Associates, Inc., an environmental safety consulting firm, says that in order to effectively combat mold infestation, the source of the moisture must be isolated and corrected before remediation begins.

In order to properly diagnose and remediate a mold problem," said Leighton, "property owners must first identify the source and the type of mold, through visual and scientific tests, and achieve a final clearance by an environmental consultant."

Leighton added that the increase in both analysis and remediation has seen a significant increase within the past two years. "Before, we would do an occasional microbial investigation once a year," he said. "Now, we perform several every day."