Court Awards, Public Concern about Homes Driving Up Liability Fears – By Steve Brown:The Dallas Morning News
ATLANTA – During the last few years, America’s home builders have grappled with rising material costs, labor shortages and a growing burden of government regulations.
But the housing industry’s current foe has been around since the dawn of time: mold.
A series of multi-million-dollar legal awards and exploding consumer concern about mold contamination have caught the residential construction industry’s attention.
“It’s one of the most important issues home builders face,” said Bruce Smith, a California home builder who has spent the last year heading the 200,000-member National Association of Home Builders. “We’ve gone from talking about dirty office buildings to mold in houses.
“It’s an issue that is affecting the housing industry very much,” he said. “The potential costs to builders are huge.”
Home-builder worries about liabilities resulting from mold infestation have reached a crisis level after a series of highly publicized court awards. Homeowners in Texas, California and Florida have won as much as $32.1 million in damages after their homes were invaded by toxic molds.
So far, most of the litigation has been against insurance companies, but builders fear their potential liability.
At the industry’s annual convention this weekend in Atlanta, so many people showed up for a seminar on mold litigation that the crowd overflowed the meeting hall.
“It’s the current media rage and the current legal rage,” Patrick Perrone, an attorney with New Jersey law firm McCarter & English LLP, told the builders. “Lawsuits are being filed from California to Florida, and from Florida all the way up to Maine.
“If you are a builder, you can’t ignore this,” Mr. Perrone said.
In reaction to the flood of moisture-related mold claims, the housing industry is scrambling to change construction techniques, and to improve construction materials and mechanical systems.
But in many cases, the problem can be solved by builders acting quickly at the first sign of a customer complaint about moisture in a new house.
“If you hear about a moisture problem, don’t let it become a mold problem,” Mr. Perrone said. “You have to act quickly. You can go from a $1,000 repair job to a multimillion-dollar jury verdict.”
Paying the Price
Even if builders aren’t sued for mold problems, they are already paying the price. Residential builders say that their liability insurance costs have, in some cases, gone up by 100 percent or more.
“We are a business made up mostly of small businesses, and the rising cost of insurance is very much a problem,” said Mr. Smith.
Tom Kenney with the National Association of Home Builders’ research center, said builders already know that some of their houses have problems with moisture.
“We’ve found that 28 percent of the builders reported that they had mold in at least one house under construction in the past year,” Mr. Kenney said. “Eighteen percent have reported at least one occupied house with a mold problem.”
Most often the growth of mold is caused by easy-to fix problems like a roof or plumbing leak or faulty installation of materials, he said.
There is still a lot of disagreement in the building industry over whether today’s more tightly sealed houses contribute to the growth of mold and other indoor air pollutants.
“On balance, we are not finding that,” Mr. Kenney said. “We cannot tie it to tight houses at this point in time.”
Maybe not, but manufacturers of air handling systems have capitalized on mold concerns with a new generation of heating and air-conditioning systems. Dozens of such products that claim to help control indoor air quality were displayed to builders at the Atlanta show.
Manufacturer Broan-NuTone of Wisconsin was showing off a range of whole-house hepa filtration and fresh-air systems designed to screen mold spores and bring outside air into the house.
Products of Concern
Others firms, such as Michigan-based Evolve Corp., were touting exhaust systems that pull moisture out of bathrooms to prevent buildups in the rest of the house.
Chicago-area builder Scott Sevon is building a whole line of homes he says are certified by the American Lung Association as “health houses.”
“We are learning to be very concerned about the indoor air environment,” he said. “Did you know your dishwasher puts out five pints of moisture into the air every time you run it?
“As a builder, you have to know what you are doing and know what products you are putting in the home,” he said.
David Stumbos, an executive with Dallas-based Centex Corp., knows firsthand about mold damage in houses.
He told builders that he has spent months repairing his family’s Dallas house after a hidden water heater leak pumped thousands of gallons of water into the crawl space under the house.
“We build 22,000 houses a year, and it’s my job to understand this problem,” he said. “What you have to do is find the water that caused the mold and get rid of it.”
And in the case of mold contamination, time is quite literally money, Mr. Stumbos said.
“In my particular case [the damage] was probably in excess of $50,000,” he said. “That’s a lot of money for a broken water pipe.”