Mold: The Hidden Menace

It is virtually impossible to read a magazine or newspaper these days and not come across some article dealing with the dangers of toxic mold. Whether you believe mold is an environmental hazard or you believe that all the mold news is nothing more than a bunch of media-driven hype, the reality is that mold is a subject that no real estate appraiser can ignore.

You may have read or heard about the Texas lawsuit where a jury awarded $32.1 million in damages to a family whose 22 room mansion was contaminated with mold. The jury gave the homeowner $6.2 million to decontaminate, demolish and rebuild the home, $12 million in punitive damages, $5 million in mental anguish, and $8.9 million in attorneys fees. It is therefore not surprising that some sources estimate there are now between 50,000 and 60,000 active mold cases in Texas, and an estimated 2,000 plaintiffs in mold related lawsuits in California.

Many attorneys proclaim themselves to be toxic mold specialists and one lawyer recently expressed the opinion that mold litigation will make the asbestos problem seem like a small issue.

What is mold and how does it form?

All molds are fungi, but not all fungi are molds. Do you remember seeing black or green stuff on areas of buildings where dampness or water intrusion has occurred? Mold forms when moisture is combined with poor ventilation; it also needs an organic food source to grow. The "food" is easily found in drywall, carpet and wood based products and the mold destroys the material it feeds on. As it reproduces, mold spores spew out into the air, landing anywhere and everywhere, ready to start another cycle. The three toxic molds that are the topic of discussion everywhere are stachybotrys, penicillium and aspergillus.

How does mold contamination occur and how can it be fixed?

Humans may be exposed to mold through skin contact, inhalation and ingestion. Experts have linked mold exposure to anything from sinus infections to brain damage and cancer.

How best to remove the offensive mold is the subject of much debate. Remediation "specialists" could charge tens of thousand of dollars to remove pervasive mold from a home. Sometimes the recommendation is to demolish the property because the mold condition is too extensive to correct. There are others who say that most mold problems can be resolved by scrubbing the affected area with a solution of one cup of bleach mixed into one gallon of water.

Why is the appraiser sued?

We have seen several claims against appraisers involving mold. In each situation, the claimant alleged the appraiser was negligent for failing to discover and/or disclose a condition in the property (such as leaky roof, plumbing problem or inadequate drainage) that caused the mold to develop, months or years after the appraisal was performed. These claims are most likely covered under an errors and omissions policy.

How can the appraiser be best prepared to defend a mold claim?

If you see something that looks like mold or a condition that may cause mold to grow, it must be reported. We recommend all appraisers to take a photo of the mold to show the extent of the condition at the date of inspection. Just as you tackled the lead paint, radon, and asbestos issues, so must you now address mold in your appraisal reports.

What if the appraiser does see mold but doesn`t see what kind of problem might be causing it to grow, or what if the appraiser sees mold but has no idea if it is the kind you can clean up with some bleach or the toxic kind? It is recommended that the appraiser consider adding additional language under a "Scope of Work" section in the addendum to the appraisal report to define and clarify the scope of the appraisal inspection and the limits of the appraiser`s expertise. Some language to consider may include:

"the appraiser is not qualified to determine the cause of the mold, the type of mold or whether the mold might pose any risk to the property or its inhabitants. Additional inspection by a qualified professional is recommended."

What about the mold that may be growing behind walls or under the floors and is not visible? Some language to consider here may include:

"the appraiser is not a home or environmental inspector. The appraiser provides an opinion of value. The appraisal does not guarantee that the property is free of defects or environmental problems. The appraiser performs an inspection of visible and accessible areas only. Mold may be present in areas the appraiser cannot see. A professional home inspection or environmental inspection is recommended."

Some claims seek a variety of other damages, such as the cost of remediation, diminution of value to the home and the costs of medical expenses, and these claims may not be covered under errors and omissions insurance. Homeowner`s insurance policies cover only sudden and accidental water discharges and exclude mold, however mold claims may be covered in connection with another covered loss as a part of the cleanup.

There is a lot that remains unknown about mold and there are a lot of differing opinions. Following these suggestions may not prevent you from being sued but it should provide a prompt and effective defense. As with all "hot" topics that affect the appraiser, it is crucial that you keep up to date by reading the articles in your local newspapers, by attending pertinent seminars and keeping in touch with your real estate and appraisal associations. For more information about mold in general, go to the Environmental Protection Agency web site (www.epa.gov).

Copyright 2002. LIA Administrators and Insurance Services. All rights reserved.