by Dan Friedman

At a time when mold-related litigation is exploding across the country, many contractors are unable to get mold insurance, approximately 200 general contractors, specialty contractors, architects, engineers, attorneys, insurance executives, industrial hygienists and medical doctors were told at a recent meeting titled "Mold: Fact vs. Fiction."

The symposium, co-sponsored by New York Construction News and the law firm of Peckar & Abramson, was held at the McGraw-Hill building at 1221 Avenue of the Americas. It was one of a number meetings and conferences held on the topic in recent years by the construction and real estate industries.

As public perception of mold as a health hazard has grown over the last decade, so have the efforts by the industry to minimize the possibility of its growth during the construction process and to create operating systems that mediate against its development in a building.

John Onnembro, senior vice president and general counsel for AMEC Construction Management Inc., speaking at the "Mold: Fact vs. Fiction" symposium, said: "Some general contractors are not aware of that (the unavailability of insurance). It's become necessary to put in all contracts that the subcontractor must have mold insurance. If no one in that trade can get it, you'll at least know that and take appropriate risk management action."

The issue became immediate at the end of 2002 when To their chagrin, contractors were being presented with new policies that excluded coverage of anything that had to do with mold growth.

Mold had previously been covered in a contractor's commercial general liability policy. However, as the policies are coming due, the insurance companies are phasing the mold coverage out. Some insurers have been willing to provide limited mold coverage as part of a separately purchased pollution policy, but at a high cost and with large deductibles.

Not surprisingly, exterior wall contractors, waterproofing contractors, plumbing contractors and HVAC contractors are, in particular, being iced out of coverage.

The insurance industry's retreat from mold coverage has come in the face of an of steadily increasing amount of mold-related litigation across the country.

Writing in the New York Law Journal in November of last year, James Frankel and Mark Bloom of the New York-based law firm of Buchanan Ingersoll, reported that there were thousands of such cases around the country, including New York.

William Robert, national underwriting director for the construction division of The St. Paul Cos., speaking at the symposium, reported that his firm alone is currently involved in 200 mold-related court cases, which are averaging $124,000 in damage claims.

"The insurance industry doesn't like to insure anything that's a real risk," Onnembro said.

Robert countered: "We are in the business of assuming risk in exchange for a premium. When the possible reaches the probable, assuming the risk ceases to be good business, at this point it is impossible to estimate the cost (resulting from the new wave of mold litigation) so we can't come up with rates."

William Marino, chairman and CEO of the Allied Group of Companies, a major insurance and surety bond agency, who along with Onnembro and Robert participated in the symposium's panel on insurance issues, said the insurance industry's response to mold has been informed by its experience with asbestos.

"With asbestos the insurance companies were caught off guard and it wound up costing them hundreds of billions of dollars," he added.

He said mold is a more complex issue than asbestos. "It's not man-made and that makes it difficult to find fault and to pinpoint cause," Marino said. "What we're really looking at is an uninvited guest who's crashed the party."

The Uninvited Guest
The "uninvited guest" has always been here.

"Mold has been around since long before human beings," Dr. Ronald Gots, CEO of the International Center for Toxicology and Medicine, said while participating in the symposium's "Science of Mold" panel. "Mold hasn't changed. What has changed is that a huge engine of special interests has been built to drive mold as a health issue."

There are thousands and thousands of kinds of mold (or to use its scientific name, fungi), including mushrooms and yeasts. In fact, biologists classify mold as a separate kingdom of life, distinct from both plants and animals.

Molds resemble the animal kingdom in that they cannot produce their own food as plants do. Therefore they must consume organic, carbon-based compounds to survive; that is, they have to eat. However, molds resemble the plant kingdom in that they can't move by themselves. They depend on animals or the forces of nature, such as the wind, to carry them to a food source, or the food to them.

Most molds are harmless to humans. People eat many kinds of mushrooms. Yeast is used in the fermentation of beer and wine and to make breads rise. A fungus called shoyu is used to make soy sauce.

Molds are used to produce a wide range of medicines, including penicillin. In addition, many varieties of mold consume animal waste. Mold is the most important member of nature's recycling system.

Still, some molds cause allergic reactions in some humans. Whether mold can cause more serious and long-lasting diseases such as asthma and neurological impairment remains a matter of controversy.

"Much of the hype is pure nonsense," Gots said. "Yes, mold can be an allergenic, like leaves, grass, dogs and cats. That this has become a major health issue is bizarre."

A report that came out last year by the American College of Occupational and Environmental Medicine concluded that, "Despite a voluminous literature on the subject, the causal association (between mold and symptoms in humans) remains weak and unproven."

Whatever the actual medical risk posed by some species of mold, the perception of mold as a health hazard has grown dramatically in recent years. As a result, in addition to litigation, there is now the probability of legislation.

While only California has passed a mold-related law so far, nine other states, including New York and New Jersey, now have such legislation pending. On the federal level, the "United States Toxic Mold Safety and Protection Act" has been introduced to the House of Representatives. If passed, it would codify standards pertaining to the prevention, detection and remediation of mold in residential and commercial buildings.

"Rules and guidelines are meant to calm public fears," Dr. Hugh Granger, the laboratory director of HP Environmental Inc. told the symposium. "The irony is that the more guidelines, standards and laws you put in place, the more fear you generate."

Dealing with the Fear
Mold has become a construction and real estate issue because some common building materials-including wood, the paper that clads drywall, OSB board and acoustic tiles-contain organic matter, food for mold. When this organic material is combined with water, mold finds a feeding ground.

Thus the two major ways of preventing mold in buildings are: 1) development and use of building materials that mold can't eat and 2) prevention of too much water accumulation in the building and its materials.

Building product manufacturers are working hard to develop mold-resistant materials. James Murphy, national product manager for Georgia Pacific, made a presentation to the symposium about his firm's glass-mat gypsum panels, which contain, he claimed, "few organics" and therefore have "superior mold resistance compared to conventional gypsum board products."

Fiberlock Technologies Inc., at the Buildings-N.Y. conference held in June, unveiled a clear antimold sealant. It contains an Environmental Protection Agency-registered fungicide that prevents mold from growing and seals out moisture.

"After you kill the mold, there are still a ton of fragments and mold spores on the surface," said Cole Stanton, Fiberlock's director of sales. "While they might not grow again, they are still allergenic. Coating locks the fragments and spores to the surface so they can't become airborne."

Brian Feury, senior staff environmental scientist for Langan Engineering and Environmental Services Inc., advised contractors at the symposium to periodically inspect construction materials as they are brought onsite to make sure that the moisture content is at the level agreed to with the supplier.

Mold-resistant building products remain new and not yet widely used. And they cannot completely eliminate the risk even if widely accepted. Wood and drywall are not likely to go away any time soon.

Not surprisingly then, the industry has focused primarily on the control of moisture.

"We can't control mold; it's everywhere.," Edward McNeill, vice president of construction operations for Turner Construction Co., said at the symposium. "What we can control is water."

Christopher D'Andrea, an industrial hygienist with the environmental and occupational epidemiology unit of the New York City Department of Health, added, "If you keep dry, there will be no mold."

Others at the symposium argued that it was not so simple.

"Don't have a knee-jerk reaction," John Hennessy III, chairman and CEO of Syska Hennessy Group, warned the audience. "If you eliminate all moisture, people get sinus infections and you create static electricity and the computers go out. The whole challenge is, you want moisture where you want it, not where you don't."

Martin Wizorek, an industrial hygienist with Dewberry's division of environmental consulting, said a common problem was inadequate drainage of condensing water from the cooling tubes of air-conditioning systems.

He told of one apartment complex he was sent to inspect in Las Vegas. "Las Vegas is obviously a pretty dry place," he said. "But this building had closed mechanical rooms which developed clogged drip pans (in the air-conditioning system). It became like a forest of mold."

The Blame Game
Carl Galioto, a partner with Skidmore Owings & Merrill LLP, urged architects and engineers at the symposium to "make sure general contractors and construction mangers prepare mold mitigation programs."

Onnembro, in turn, urged general contractors, to "oblige subcontractors to remove and repair anything that can cause mold."

McNeill said it had become imperative for contractors to aggressively seek out possible problems and, when found, to thoroughly document the remediation.

Steve Charney, a partner with Peckar & Abramson, who co-hosted the symposium with Heather Hatfield, publisher of New York Construction News, said that when it came to mold, "It's become a blame game."

To get past that, Charney said that the industry must develop protocols so that it would be clear to everyone involved who was responsible for what in terms of mold prevention and remediation.

Hennessy took a philosophical stance. "What building designers and engineers do is face challenges and threats - wind, gravity, electricity," he said. "Mold is simply another challenge and threat that building systems have to deal with - and that's just what we're doing."