Insurers watch mold case

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Insurers watch mold case

$32 million award sends tremor through industry

06/11/2001

By TERRENCE STUTZ / The Dallas Morning News

AROUND CENTRAL TEXAS

DRIPPING SPRINGS, Texas - The ominous sign posted on the front of the

sprawling, 22-room Southern mansion stands in contrast to the peaceful

surroundings of the Texas Hill Country.

" Warning: Do Not Enter - Biohazard "

This is the place Melinda Ballard calls her " toxic Tara, " an oxymoron that

aptly describes her 11,500-square-foot dream home - a duplicate of Scarlett

O'Hara's mansion in Gone With the Wind - and the devastating toxins that

have made it uninhabitable.

Ms. Ballard and her family were forced from their residence in 1999 after it

was overrun by the toxic mold Stachybotrys - also called black mold - which

started from a water leak that soaked the hardwood floors in the home.

The mold was discovered in the home after a series of health problems had

afflicted her family.

She and her husband, Ron , subsequently sued their insurer, Farmers

Insurance Group, in a case watched by insurance companies across the nation.

The lawsuit alleged that Farmers refused to authorize timely repairs to the

home that would have prevented spread of the black mold - a claim denied by

Farmers.

This month, a County jury awarded the family $32 million in damages,

finding against Farmers in a decision that sent shockwaves through the

insurance industry.

" I think it sends a message to the industry that they better start taking

these claims seriously, " Ms. Ballard said last week.

Farmers officials have avoided comment on the case other than to predict

that they will prevail if an appeal is lodged with a higher court. A state

district judge will issue a final judgment June 25.

The case is having repercussions beyond the courtroom, as similar claims are

starting to swamp insurers in Texas and other states.

And this month, Texas Insurance Commissioner Montemayor will hold a

public hearing on the issue that is expected to draw testimony from scores

of homeowners, insurance company representatives and consumer groups.

Farmers recently petitioned the commissioner to let the company remove mold

coverage from all its homeowners policies in Texas. Other companies are

expected to follow suit if the commissioner agrees to the change.

Jerry s, an insurance industry spokesman, said policies in Texas were

never intended to cover the types of claims that arose in Ms. Ballard's

case.

" We are hopeful the commissioner will take some action either to limit

coverage for molds or consider premiums that would cover the

multimillion-dollar losses they could cause, " he said.

He maintained that " a lot of misinformation " had been circulated that has

needlessly scared homeowners. " There are a hundred-thousand types of molds

in existence in this country, and only a few are toxic, " said Mr. s,

president of Southwestern Insurance Information Service.

However, Ms. Ballard said the extent of the problem had been demonstrated by

the fact that Farmers wanted to get rid of mold coverage in its policies.

" I would hate to be the commissioner if he excludes coverage for mold from

homeowner policies in Texas, " she said. Her case would be unaffected because

coverage changes approved by Mr. Montemayor would apply only to future

claims.

" This is a widespread problem, " she said, referring to estimates of nearly

10,000 residences across the country where homeowners have reported a

problem with molds caused by water damage.

She argued that toxic mold would not be an issue " if insurance companies

would properly and promptly handle water damage claims. "

Ms. Ballard acknowledged that she had never heard of toxic mold when she,

her husband and young son Reese began experiencing serious health problems a

few years ago. Those problems occurred after a water leak damaged the

hardwood floors in her home.

" I was on an airplane and a guy sitting next to me saw me coughing up blood.

He asked if I had recently had water damage in my home. I didn't know what

he was talking about, " she said.

It turned out the man was an environmental specialist from Dallas, and he

suggested that the house be examined for mold.

Ms. Ballard and her family quickly moved out of the residence near Dripping

Springs after inspections found that Stachybotrys had spread to walls and

ceilings throughout the house. It was estimated that nearly 10,000 square

feet of surface area contained toxic mold. There is no way to fix the

problem, and Ms. Ballard said the house would be leveled.

She said recent publicity over her case could spare others from similar

troubles.

" We just hope other homeowners won't have to live through the nightmare that

we did, " she said.

Terrence Stutz is based in the Austin Bureau ofThe Dallas Morning News.