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Property
Management
Limiting liability from mold infestation
by Kristen Bradfield
Horror
stories surrounding the “killer black mold” and “toxic
mold” are as rampant in the industry nowadays as the spores
themselves.
The lack of standard industry regulations surrounding indoor air
quality and mold toxicity is fueling the fire. The recent media
attention surrounding mold-related litigation is testimony to
mold’s prevalence as a problem for the industry. But mold
is not a new problem.
The source of the mold problem isn’t some new, virulent strain
of “killer black mold,” it’s moisture. Mold needs
three elements to survive: an organic nutrient source, like most
building materials; a temperature above 40 degrees; and moist
conditions.
A mold infestation can result from water intrusion, inadequate
drainage and water damage, which may not always be noticeable.
“Water damage can occur from catastrophic and non-catastrophic
occurrences. Catastrophic causes can include water used in fire
suppression, plumbing failure and flooding caused by civil failure,”
said George Fenton, executive vice president of BELFOR/INRECON,
a disaster recovery firm that handles large-scale mold remediations.
“Non-catastrophic water damage [can] occur in covert ways
such as faulty building materials or architectural design, poor
HVAC system installation and inadequate maintenance.”
A water source is a mold source, so detecting and fixing water
leaks and damage are essential steps for apartment owners and
managers who want to stay ahead of the mold hysteria.
However, how tenants react to mold is changing. “Mold is
tricky because it’s an evolving issue,” Fenton said.
“It’s a personal sensitivity issue because problems
arise with people’s reactions to it.”
“The point at which mold contamination becomes a threat to
health is unknown due to the lack of supporting epidemiological
research,” Fenton said, “and this makes it virtually
impossible to nail down a standard guideline.”
With the ever-increasing number of mold-related claims and litigation,
more and more insurance companies are dropping coverage for mold
and mold-related damages.
“A lot of policies now won’t cover mold damage, which
is a recent development. In the last year or so we’ve seen
more policies that excluded mold,” said Patrick Perrone,
partner at McCarter & English. The Newark, N.J.-based law
firm specializes in construction defect, toxic tort and insurance
coverage litigation.
He advises owners to review all policies because interpreting
insurance coverage can be difficult. “They’d be best
off to consult with counsel experienced with insurance coverage,”
Perrone said. “There are both coverage and exclusion sections,
so go through both carefully, not just the coverage sections.”
Insurance policies can exclude mold specifically, or it can be
embedded in different areas of exclusion. For example, “some
insurers will argue that mold is excluded as a pollutant,”
Perrone said. “Counsel can advise you on what coverage they
see and where you might need to be covered.”
It’s important to be up-to-date on the coverage and limitations
of all insurance policies. “Owners need to look at their
policies and see what coverage they have, and that’s not
always easy to read,” said Perrone. “Much of this insurance
company litigation comes from vague or ambiguous [policy] contract
language.”
Being familiar with the coverage and limitations in the policies
can ensure a quick response time in the event of a claim. If claims
are made, it’s crucial to inform the insurance company as
soon as possible to get an agent out to assess the damage. “In
certain circumstances, the insurance carrier can refuse coverage
from late notice, so provide them with immediate notice,”
Perrone said.
Owners should give notice of the claim through a “notice
letter,” which can be written by apartment owners with or
without legal counsel. Expedite the process by explaining what
the
damage is, the claim you believe is covered and refer to the specific
policy number. Request that an insurance company agent come out
and check the damage to preclude any claims of late notice.
It also helps to plan ahead. “Don’t wait for a problem
to occur, get your insurance coverage issues in order now,”
urged Perrone. “Know what policies you have and who carries
them, what’s covered and not covered and who the contact
person is.”
The hysteria has launched a new industry for entrepreneurial “mold
experts” to fix the problems, with a “mold is gold”
attitude. With this scenario, it’s important for apartment
managers to know what they can do to prepare for potential claims
and take precautionary steps to protect apartments from mold infestations.
A proactive approach to protecting a property from a mold infestation
is preventative maintenance, said Perrone. “Failed maintenance
is a big problem with apartment owners who don’t realize
that if they can eliminate moisture they’re not going to
have mold problems.”
“Maintain your property, and have regularly scheduled routine
maintenance checks,” Perrone advised. “Check for window
and roof leaks, look for water stains around the kitchen, in tubs
and sinks. Have regular HVAC maintenance and check for condensation
on the windows. Fix water problems immediately, don’t just
let it go.”
Consider hiring an outside consultant to maintain the HVAC systems
and check for roof leaks, and consult with an expert to assess
large-scale remediations.
While as yet there are no federal standards with respect to cleaning
up mold infestations, guidelines are available on how to remediate
the problem and how to determine whether hiring an outside consultant
is necessary. There are a number of online resources for mold
detection, prevention and abatement techniques.
Tenant education is another way to safeguard against mold claims.
Ensuring that tenants know how to avoid creating an environment
conducive to mold growth in their homes can go a long way toward
reducing your liability if claims are made.
“Put tenants on notice of the potential for mold problems,”
said Perrone. “It’s their responsibility to prevent
excessive moisture in their apartments, and they are responsible
for reporting all leaks so that the landlord can fix them.”
Apartment owners may also want to include such tenant obligations
in the lease to reduce their liability for mold-related claims.
“Incorporate contractual language in the lease agreements
stating that the landlord is not responsible for tenant actions
that led to mold growth,” Perrone said, but consult an attorney
first. “An attorney can do it as a standard provision, and
make it legally binding.”
Another important step to protect yourself from liability against
mold-related claims is to know the limits of the insurance coverage
of the parties involved in the building construction and
maintenance.
“If you have maintenance companies, make sure their insurance
companies cover their services if they fail to do what they were
hired for,” Perrone said. “Get copies of their insurance
policies, make sure they have coverage and check their exclusions.
Make sure you have indemnity agreements with them.”
“Be aware of who the other potentially responsible parties
are if you’re faced with a claim or litigation,” Perrone
advised. “That way if there’s a resolution they can
participate.”
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