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The Fungus Among Us: Mold Litigation and Liability

5.1.2003

Ed McMahon, Erin Brokavich 1, the residents of Brier Creek Country Club 2 in Raleigh, and the students at Topsail High School 3 in Pender County, North Carolina all have one thing in common - they have encountered toxic mold from which litigation arose.

Mold is an ancient problem 4 that has as of late made its way into the courtroom with increasing frequency. It is estimated that about 10,000 mold-related lawsuits were filed nationwide in the last three years. 5 This was likely fueled, at least in part, by reports of the huge jury verdicts in several high-profile mold cases. In June 2001, a Texas jury awarded homeowner Melinda Ballard over $32 million in damages (reduced to $4 million) against her insurer for mishandling mold related claims. 6 In June 1996, a Florida jury awarded Martin County, Florida over $14 million against its construction manager and sureties for the defective construction of the county's courthouse and office building that lead to mold contamination. 7 While significant, these awards did not involve personal injury claims.

While over half of mold litigation involves single-family homes, 8 mold is increasingly being found in multi-family complexes, high-rise buildings, 9 school 10 and office 11 buildings, hotels 12, and other commercial structures. North Carolina has not escaped unscathed. Cases have been filed in North Carolina's superior courts arising from the mold contamination in single-family homes 13, manufactured homes 14, public schools 15, hotels 16, and a number of other structures.

The purpose of this paper is three fold - to report on the current state of mold litigation, what is happening in response, and how such cases can be resolved.

Case Studies

The best place to start when reviewing the current state of mold litigation is the reported case law. The following three cases provide a good overview of the key issues that arise in most toxic mold cases.

Allison v. Fire Insurance Exchange et al., 98 S.W.3d 227 (Tex. App., Dec. 19, 2002) 17

Summary of Facts: Plaintiffs bought a 7,400 square foot home near Austin, Texas for $275,000 and insured it with Fire Insurance Exchange ("FIE"). Within a seven-year period the home experienced numerous plumbing leaks, several of which plaintiff filed as claims with FIE. FIE's investigation included hiring a plumber and civil engineer to evaluate the leak sources and damage. FIE paid plaintiffs approximately $150,000 for several of these claims. Plaintiffs hired an indoor air quality consultant that tested and identified toxic mold in their home. Plaintiffs reported this to FIE and moved her family out of the home. The FIE's consultant estimated it would cost around $382,000 to remediate the home - plaintiffs' consultant estimated it would cost $1,015,500.

Plaintiffs sued FIE for breach of contract, deceptive trade practices, breach of duty of good faith and fair dealing in the claims handling process, and negligence. When mediation failed, FIE invoked the appraisal provision of the plaintiffs' insurance policy requiring that the parties agree to independent appraisers to evaluate the claim for settlement. The appraisal process went on for over 18 months until a $1,287,092.72 award was made to plaintiff. FIE tendered a check in this amount, but plaintiffs deposited it with the court.

Jury's Verdict: After a three-week, the jury awarded plaintiffs $2,547,350 to replace the home, $1,154,175 to remediate the home, $2,000,000 to replace the home's contents, $350,000 for past and future additional living expenses, $176,000 for plaintiff's costs of the appraisal process, $5,000,000 for mental anguish, $12,000,000 in punitive damages, and $8,891,000 in attorney's fees. The trial court rendered a final judgment for $32,118,525.

Texas Court of Appeal's Decision:

Personal Injury Claim: Two doctors, Dr. Wayne Gordon and Dr. Eckardt Johanning, diagnosed the paternal plaintiff with toxic encephalopathy (a type of brain damage) caused by mold exposure, but the trial court excluded this testimony as unreliable. In Texas, as in many states, the proponent of scientific expert testimony must satisfy the test for admissibility formulated by the Supreme Court in Daubert v. Merrill Dow Pharmaceuticals, Inc. 18 Such testimony is admissible where (1) the witness is qualified as an expert and (2) the testimony is relevant and based on a reliable foundation. The trial judge is the "gatekeeper," deciding whether a qualified expert's testimony is relevant and reliable, and determining how the reliability of particular testimony is to be assessed. Daubert enumerates several nonexclusive factors to guide trial courts in assessing liability:

  • the extent to which the theories have been or can be tested;
  • the extent to which the technique relies upon the subjective interpretation of the expert;
  • whether the theory is subjected to peer review and/or republication;
  • the technique's potential rate of error;
  • whether the underlying theory or technique has been generally accepted as valid by the relevant scientific community; and
  • the non-judicial uses which have been made of the theory or technique.

The trial court's focus is on the validity of the principles and methodology underlying the testimony, not the conclusions generated. Reliance on unreliable foundational data renders any opinion drawn from that data unreliable.

For an epidemiological study to be a reliable foundation for expert testimony, it must be unbiased in its design, otherwise properly designed, properly executed and show that exposure to the substance more than doubles the risk of injury. The study must also be capable of repetition with the same results 95% of the time. In this case, the paternal plaintiff's expert witnesses testified that it would be premature to determine whether the epidemiological studies upon which they relied were capable of repetition with the same results 95% of the time. Moreover, these experts testified that a calculation of the risk factors was premature and they could not say that the techniques used were generally accepted. Accordingly, the trial court held that the studies failed the Daubert reliability test and since this was the basis for upon which these experts relied, the trial court excluded the expert's testimony. In the absence of causation testimony, the trial court dismissed the paternal plaintiff's personal injury claim.

Plaintiffs' Other Claims: FIE asserted eleven appeal issues the first of which was that the plaintiffs' evidence was legally and factually insufficient to support the jury's findings that FIE breached its duty of good faith and fair dealing and that this breach caused Ballard's damages. An insurer breaches its duty of good faith and fair dealing by denying or delaying payment of a claim when the insurer's liability becomes reasonably clear. Plaintiffs cited eight acts that it alleged supported the jury's findings including, in pertinent part, that FIE:

  • represented in writing that it undertook a "complete plumbing test" on the home and found no leaks, when in fact the plumbing test did not test all possible leak sources and FIE believed there were leaks present (the "Plumbing Test Representation");
  • requested a 45-day extension to "complete FIE's claim investigation" when in fact FIE had all the information it needed to evaluate the claim and what the FIE claims adjuster really needed was additional time to obtain the requisite authority to pay the claim (the "Time Extension Request");
  • violated the Texas Insurance Code because it had all the information needed to confirm its liability for remediating the home but delayed doing so by conducting an unreasonable investigation, delaying payment of the claim, and tendering insufficient and untimely payments (the "Code Violations");
  • intentionally paid inadequate sums for the plaintiffs' claims based on sham and fraudulent bids received from contractors who subsequently refused to perform the work for the amount of the bids and for receiving bids from contractors with no experience remediating mold (the "Claim Payment Issues"); and
  • invoking the appraisal provision in plaintiffs' insurance contract for the purpose of delay and to gain leverage in negotiations during mediation. FIE also appointed a biased and incompetent appraiser, refused to include all of the pending claims in the appraisal and intentionally withheld estimates and information from its own appraiser (the "Appraisal Issues").

Under these facts, the Texas Court of Appeals held that there was some evidence from which a jury could find that FIE failed to attempt in good faith to effectuate prompt, fair, and equitable settlement of claims after its liability became reasonably clear. Thus, the court upheld the actual damages award in part in an amount of $4,632,000.72.

FIE next argued there was insufficient evidence that it engaged in deceptive trade practices, and unconscionable and fraudulent conduct. The court held that the Plumbing Test Representation was sufficient evidence upon which the jury could have based its decision that FIE engaged in a deceptive trade practice but not unconscionable or fraudulent conduct. FIE's alleged deceptive trade practice was not, however, found to have been a "knowing" violation. Because the jury's punitive damages award was based on knowing conduct, the court reversed the $12,000,000 punitive damages award.

Third, FIE contended that plaintiffs were bound by the appraisal decision. Under Texas law such decisions are binding and only set aside if made as a result of fraud, accident or mistake. Despite plaintiffs' reliance on the Appraisal Issues, the court held that there was no evidence from which a reasonable jury could infer that the appraisal decision was rendered as a result of fraud. Similarly, even though plaintiffs cite a clerical mistake in the appraisal, the court held that such mistakes do not affect the intention of the appraisers and cannot support a finding of mistake. While the court held the appraisal decision binding, since the jury concluded that FIE breached its duty of good faith and fair dealing, the plaintiffs' damages were not limited to the amount of the appraisal. The court did reverse the jury's award of $176,000 to plaintiffs for the appraisal costs.

FIE next contended that the trial court abused this discretion by excluding evidence of (a) FIE's settlement offers at mediation, (b) the plaintiff's conduct towards FIE adjusters, (c) testimony from FIE's appraiser that plaintiff's lawyers delayed the appraisal process, and (d) by allowing plaintiff's evidence about the possible health effects of mold. The court rejected all four arguments. FIE's mediation offer of $734,000 and plaintiff's demand for $10,000,000 and media rights was inadmissible to show FIE's good faith because of the general rule that settlement discussions are inadmissible. The plaintiff's threats to use her $44,000,000 trust fund to fight FIE and to "snort toxic mold" if necessary to hurt FIE were properly excluded as unfairly prejudicial. Moreover, the jury saw numerous letters from plaintiff to FIE from which they got some flavor for her conduct. The exclusion of FIE's appraiser's testimony was within the trial court's discretion and did not result in an improper judgment. Finally, allowing evidence that some molds are liver carcinogens and that plaintiff's dog had a skin problem caused by mold exposure was relevant to plaintiff's mental anguish claim The trial court acted within its discretion.

Last, FIE challenged the jury's award of $8,900,000 in attorney fees. The court held that while there was sufficient evidence for the jury to award fees, it was necessary to remand this issue to the trial court in light of the court's reduction in damages.

Mondelli v. Kendel Homes Corporation, 631 N.W.2d 846 (Neb., 2001).

Facts: Plaintiffs hired Builder to construct a single-family home. City issued a building permit for the home and after inspecting it determined it conformed with the City's code, which incorporated the Uniform Building Code ("UBC"). After the home experienced significant water intrusion, plaintiffs noticed a foul odor, their daughter began experiencing trouble breathing at night and the maternal plaintiff experienced headaches, nasal congestion, shortness of breath, an annoying cough and chest pressure requiring hospitalization on several occasions. Doctors attributed the maternal plaintiff's condition to mold exposure. Builder discovered water soaked insulation, mud and toadstool covered walls and stud plates in several of the home's walls. Plaintiffs moved out of the house and sued both the Builder and City for personal injuries.

Trial Court's Decision: After a bench trial, the trial court concluded that Builder violated the implied warranty to build the house in a workmanlike manner and in accordance with good usage and accepted practices, was negligent, and strictly liability. The court held that the City was negligent in issuing a building permit and in approving the home after inspection. Since the trial court excluded the plaintiffs' expert testimony that mold caused their personal injuries, the trial court directed a verdict for the defendants.

Nebraska Supreme Court's Decision: Plaintiffs appealed the trial court's exclusion of their causation experts. At the time of trial, four factors governed the admissibility of expert testimony in Nebraska, whether: (1) the witness is qualified as an expert, (2) the testimony is relevant, (3) the testimony will assist the trier of fact, and (4) the probative value of the testimony, even if relevant, is outweighed by the danger of unfair prejudice or other considerations. For scientific evidence, Nebraska courts required that the proponent of evidence to prove general acceptance through scientific publications, judicial decisions, practical applications, or by presenting testimony from scientists as to the attitudes of their fellow scientists.

Plaintiffs first expert was a Ph.D toxicologist that worked for the Nebraska Department of Health and Human Services Regulation and Licensure addressing cases related to toxicology of water, consumer risks and other environmental issues. While admitting there were no State regulations or industry standards in place to determine an acceptable level of mold in an indoor area, she testified in her deposition that the plaintiffs home contained an extremely high level of mold spores, far above those found in clinical studies around the country, including the levels considered hazardous to human health. She further testified that based on her review of scientific literature, molds are a cause of asthma and allergic rhinitis. The second expert was a Ph.D. biologist with ten years experience in air sampling, including the analysis and interpretation of results from air samples. He testified in his deposition that the samples from plaintiffs' home were collected using standard protocol from an industry standard sampler and would have testified at trial that there was a proliferation of mold in the plaintiffs' home greater than that in the outside environment. In this case, the plaintiffs' experts satisfied the relevant tests and should have been allowed to testify.

Finally, Builder alleged that the trial court erred in imposing liability based on a breach of warranty, strict liability, and negligence because Builder followed the defective blueprints and construction design. Specifically, the blueprints and construction design did not call for tarpaper to be installed between the sheathing and brick veneer, weep holes or flashing, and therefore they were not provided. Despite these allegedly faulting plans, the Court dismissed Builder's cross-appeal because Builder was obligated to construct the home in a workmanlike manner using accepted practices in the construction trade in the community at the time the house was built which includes these steps.

New Haverford Partnership v. Stroot, 772 A.2d 792 (Del., 2001).

Facts: Plaintiff Stroot lived in two buildings in the Haverford Place apartments that had mold problems. In the first, mold was present around windows, in the bathroom, on her bedroom ceiling, and around the kitchen sink. Despite efforts to wash it with bleach, the mold returned. There was mold growing around holes that formed in the bathroom ceiling in the second apartment. This ceiling leaked water when the upstairs neighbor showered. Eventually, the ceiling collapsed releasing a strong, nauseating odor and revealing drywall debris and a ceiling covered with black, green, orange and white mold. The morning after the collapse, Stroot had difficulty breathing and was taken to the hospital by ambulance. Despite pre-existing allergies and asthma, during the 21 months Stroot lived at Haverford Place she went to the emergency room seven times for asthma attacks, spent nine days as an inpatient and received intravenous steroids twelve times.

In Plaintiff Watson's apartment, a kitchen sink pipe burst flooding the room, mold was growing behind the tub where the drywall had rotted, behind the toilet, around the sink, and on the ceiling, and the windows were coated with a gummy substance. Despite her attempts to eliminate the mold, it returned. Watson experienced increased fatigue, frequent headaches, sinus problems, chest pains and body aches that did not resolve until 6 months after she moved.

Stroot and Watson sued Haverford Place for negligence and claiming personal injuries. They offered the following expert testimony:

  • Dr. Yang, a mycologist and microbiologist, inspected Haverford Place, took bulk samples and air samples and interviewed residents. He opined there was excessive and atypical mold growth at Haverford Place due to long-term leaks and that widespread mold contamination posed a health risk to tenants.
  • Dr. Johanning, a physician board-certified in environmental and occupational medicine, obtained similar data and took blood samples from the plaintiffs. He opined that the high concentration of toxic mold at Haverford Place significantly and permanently increased the severity of Stroot's asthma and caused her to sustain permanent cognitive deficits and that Watson developed an allergy to one mold strain and permanent upper respiratory problems as a result of her exposure.
  • Dr. Gordon, a neuropsychologist who studies cognitive defects associated with mold exposure, testified that Stroot suffered from significant cognitive impairment in the areas of attention, concentration, memory and executive functions. He opined that her impairments were permanent and proximately caused by mold exposure.
  • Dr. Rose, a physician board-certified in pulmonary, occupational and environmental medicine, opined that Stroot's increased steroid usage while at Haverford Place caused her to develop osteopenia (thinning of the bones) and placed her at greater risk of developing tuberculosis.
  • Mr. Lynn, an architect and partner in a real estate due diligence firm, evaluated Haverford Place and opined that the deferred maintenance on the building was excessive and that the landlord's failure to maintain the building was the proximate cause of the unhealthy and unsanitary conditions he observed - specifically, standing water, roof joists covered with fungus, water damaged moldy drywall, and other evidence of excessive moisture.

Jury's Verdict: After a 2-week trial, the jury found the landlord negligent and awarded Stroot $1,000,000 for personal injuries and $5,000 for property damage and awarded Watson $40,000 for personal injuries. These verdicts were reduced by 22% to account for the plaintiffs' contributory negligence.

Delaware Supreme Court's Decision: Despite the landlord's claims that the trial court erred in admitting the expert testimony, the Delaware Supreme Court upheld the jury's verdict. The landlord first objected to Mr. Lynn's testimony because he was neither a property manager nor familiar with the standard of care in Delaware. The court disagreed, holding that Lynn was a Delaware licensed architect experienced in working with Delaware building owners and property managers as well as those around the country. The trial court did not abuse its discretion in allowing him to testify as to the unsanitary conditions at Haverford Place.

According to the landlord, Dr. Gordon's testimony was objectionable on the grounds that he failed to eliminate possible causes of Stroot's cognitive deficit other than the excessive mold in her apartments. Instead, he relied on Dr. Johanning's review of her medical records. Since this approach is accepted in the scientific community, the Court held his opinion evidence was properly admitted.

Next, the landlord claimed that testimony from Drs. Yang and Johanning and Mr. Lynn should have been excluded because they never studied the airflow or air pressure in the apartment buildings and without such evidence their opinions were unreliable. The court held that in deciding whether to admit expert testimony, the trial court may consider whether the scientific theory has been tested and subjected to peer review; whether it is governed by standards; and whether it is generally accepted in the relevant scientific community. Since these experts' methodologies were so accepted their opinions were properly allowed.

Finally, the landlord objected to the expert testimony on causation because the experts failed to establish a proper baseline from which to compare the mold levels and failed to eliminate other possible causes of the plaintiffs' medical complaints. The experts did not test the outdoor air to determine the normal mold level and did not consider that, for example, Stroot smoked and had a dog despite being allergic to dogs. The court held that the failure to conduct extensive baseline testing or to eliminate other possible causes of health problems goes to the weight of the experts' opinions, not their admissibility. The Delaware Supreme Court concluded that the foundation for the experts' causation opinions did not need to be established with the precision of a laboratory experiment.

Potential Defendants, Causes of Action & Defenses

Defendants

In mold litigation, the list of potential defendants is long. Real property lawyers will be relieved to know, however, that there were no closing attorneys named as defendants in any of the reported toxic mold cases reviewed for this paper. It will come as no surprise that those most frequently sued in toxic mold cases appear to be developers, builders, contractors, landlords and insurance companies. Other defendants include architects and engineers, the manufacturer of building materials, environmental consultants, mold remediation firms, real estate agents, building inspectors, property managers, and the sellers of mold infested buildings and homes.

Causes of Action 19

Breach of Contract:

Elements:

  • Existence of a valid contract and
  • Breach of the terms of that contract.20

A contract is an agreement between two or more persons based on sufficient consideration to do or refrain from doing a particular act. 21 A breach of contract occurs when a party fails to perform a contractual duty. 22 Under the law of construction contracts, a party is entitled to receive what he contracted for or its equivalent; substantial compliance is not the same as full compliance and a plaintiff may recover damages for substantial compliance. 23

Statute of Limitation: Generally, 3 years from the date that the defendant breaches the contract. 24 If the contract is for the sale of goods, the plaintiff has 4 years from the date that the defendant breaches the contract. 25 If the contract is signed under seal, the plaintiff has 10 years from the date that the defendant breaches the contract. 26

Breach of Express Warranties:

Elements:

  • The existence of an express warranty made by the defendant to the plaintiff;
  • The defendant breached the express warranty; and
  • The plaintiff was damaged as a result of the defendant's breach.27

An express warranty is a promise made by a seller to a buyer that relates to the title, condition or quality of the goods being sold. 28 North Carolina statutes provide the following examples of express warranties:

  • Any affirmation of fact or promise made by the seller to the buyer that relates to goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
  • Any description of the goods that is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
  • Any sample or model that is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.29

A plaintiff may bring a claim for a breach of express warranty claims if a defendant uses defective goods to satisfy his duties under a construction contract. 30

Statute of Limitation: 4 years from the date that the defendant breaches the express warranty in the contract. 31

Breach of Implied Warranties:

General UCC Implied Warranty

Elements:

  • The defendant sold goods;
  • The goods were not merchantable at the time of sale;
  • The plaintiff or his property was injured by such goods;
  • The defect proximately caused the injury; and
  • The injured plaintiff gave timely notice of the defect to the seller.32

A retailer and manufacturer may be sellers for purposes of this claim. 33 In order to be merchantable, the goods must:

  • Pass without objection in the defendant's trade;
  • In the case of fungible goods, be of fair average quality;
  • Be fit for the ordinary purposes for which such goods are used;
  • Be of even kind, quality and quantity within each unit and among all units involved;
  • Be adequately contained, packaged, and labeled as the agreement may require; and
  • Conform to the promises or affirmations of fact made on the container or label, if any.34

The plaintiff must show that the goods failed to satisfy one of these conditions at the time of sale in order to succeed on this claim. 35 A defendant may disclaim the implied warranty of merchantability under certain circumstances. 36

Implied Warranty of Fitness for a Particular Purpose

Elements:

  • The defendant sold goods;
  • At the time of sale, the defendant knew that the plaintiff would use the goods for a particular purpose;
  • At the time of sale, the defendant knew that the plaintiff was relying on the defendant's skill or judgment to select or furnish suitable goods.37

A defendant may disclaim the implied warranty of fitness for a particular purpose under certain circumstances. 38
Elements of Implied Warranty of Habitability

Elements:

  • The plaintiff enters a construction contract with the defendant;
  • The defendant fails to construct the building in a workmanlike manner or does not possess the skills necessary to perform the work; and
  • The defendant's failure causes damage to the plaintiff.39

A plaintiff may bring a claim for the breach of the implied warranty of habitability if a defendant defectively constructs a building or uses defective goods in constructing a building. 40 A defendant fails to construct the building in a workmanlike manner if he does not complete his construction in an ordinary skillful manner, in accordance with the customs of the construction industry. 41 The implied warranty of habitability does not apply to commercial buildings. 42

Statute of Limitation: Generally, 3 years from the date that the defendant breaches the implied warranty in the contract. 43 If the breached warranty is in a contract for the sale of goods, the plaintiff has 4 years from the date that the defendant breaches the warranty. 44 If the breached warranty is in a contract that is signed under seal, the plaintiff has 10 years from the date that the defendant breaches the warranty. 45

Negligence & Negligence Per Se

Elements:

  • A defendant owes a legal duty to a plaintiff to use reasonable care;
  • The defendant breaches that duty; and
  • The plaintiff suffers injury proximately caused by the breach.46

A duty to use reasonable care may arise from statute, contract or surrounding circumstances. 47 If a duty exists, the defendant breaches his duty to the plaintiff if he fails to exercise the degree of care that a reasonable and prudent person would exercise to the plaintiff under similar conditions. 48 The defendant's failure to use reasonable care is the proximate cause of the plaintiff's injury if there is a natural and continuous sequence between the defendant's act and the plaintiff's injury, unbroken by any new and independent cause to the plaintiff's injury, and without which the plaintiff's injuries would not have occurred. 49

A negligence per se claim is a negligence claims in which the defendant's standard of care is defined by statute. In construction cases, a violation of the standards imposed by the North Carolina Building Code constitutes negligence per se. 50

Statute of Limitation & Statute of Repose: The statute of limitations is generally 3 years after the date that the injury caused by the negligent act becomes or ought to have become apparent to the plaintiff. 51 The statute of repose for:

Professional Malpractice

Elements:

  • A defendant owes a legal duty to a plaintiff to conform to a certain standard of conduct;
  • The defendant breached that duty by failing to conform; and
  • The plaintiff suffers injury proximately caused by the breach.52

Professional malpractice claims are essentially negligence claims in which the defendant must meet a heightened standard of care. Malpractice is defined as any professional misconduct, unreasonable lack of skill or fidelity in professional or fiduciary duties. 53 The defendant owes a duty to exercise that degree of skill, care, and diligence exercised by members of the same profession. 54

Statute of Limitation: Generally 3 years from the date of the malpractice that causes injury to the plaintiff. 55 The plaintiff may have up to 4 years if the defendant's malpractice results in an injury that is not discoverable at the time the action occurs. 56
Negligent Misrepresentation

Elements:

  • A defendant who, during the course of a business, profession or employment, or in any other transaction in which the defendant has a pecuniary interest;
  • Supplies false information for the guidance of others in their business transaction;
  • Is subject to liability for pecuniary loss caused to them;
  • By their justifiable reliance upon the information;
  • If the defendant fails to exercise reasonable care or competence in obtaining or communicating the information. 57

    Whether a defendant fails to exercise reasonable care or competence in obtaining or communicating the information depends on the facts and circumstances. A defendant's duty to use reasonable care or competence in obtaining or communicating the information may arise from a statute, contract or the surrounding circumstances. 58

    Statute of Limitation: 3 years from the date that the plaintiff knew or should have known of the facts constituting the defendant's negligent misrepresentation. 59

    Fraud

    Elements:

    • False representation or concealment of a material fact;
    • Reasonably calculated to deceive;
    • Made with intent to deceive;
    • Which does in fact deceive;
    • Resulting in damage to the injured party.60


    The false representation or concealment must relate to facts of which the defendant had actual knowledge. 61 A plaintiff may use surrounding circumstances to prove that the defendant had actual knowledge. A plaintiff may prove that the defendant intended to deceive him if the defendant induced the plaintiff to act or refrain from acting in reliance upon the representation or concealment. 62 In addition, a court will presume that the defendant intended to deceive a plaintiff when the defendant takes advantage of a confidential or fiduciary relationship that exists between the plaintiff and defendant. 63

    Statute of Limitation:
    3 years from the date that the plaintiff knew or should have known of the facts constituting the defendant's fraud.64

    Violation of the NC Unfair and Deceptive Trade Practices Act, Chapter 75

    Elements:
    • The defendant committed an unfair or deceptive act or practice;
    • The act or practice was in or affecting commerce; and
    • The act proximately caused injury to the plaintiff.65

    The defendant's activity must be accompanied by egregious or aggravating circumstances before a plaintiff may pursue a claim for unfair and deceptive trade practices. 66 Commerce includes the business of developing, buying, selling, and leasing residential or commercial property. 67 Commerce does not include the sale of residential property between private parties. 68
    Statute of Limitation: 4 years from the date of the defendant's act. 69
    Constructive Eviction

    Elements:

    • An act of a landlord;
    • That deprives the tenant;
    • Of the tenant's beneficial enjoyment of the premises;
    • To which the tenant is entitled under the lease;
    • Causing the tenant to abandon the premises.70

    A landlord must breach a duty under the lease, such as the implied covenant of quiet enjoyment, and the tenant must abandon the premises within a reasonable period of time after the breach before a party may successfully pursue a claim for constructive eviction. 71

    Statute of Limitation: 3 years from the date of the defendant's breach. 72

    Declaratory Judgment

    Elements:

    • The party bringing the action must be:
    • (i) an interested person under a deed, will or contract or
    • (ii) a person whose rights, status or other legal relations are affected by a statute, municipal ordinance, contract or franchise;
    • An actual controversy exists between the parties in the lawsuit; and
    • The declaration will make certain that which is uncertain and secure that which is insecure.73

    Parties to whom a declaratory judgment is available include parties to a contract, direct beneficiaries of a contract, and those who benefit from a contract based on the intent of the contracting parties. 74 An actual controversy exists when litigation between the two parties appears unavoidable. 75 A party may pursue a declaratory judgment to determine the liability of an insurance company and the extent of coverage under an insurance policy. 76

    Statute of Limitation: It depends on the instrument upon which the plaintiff sues. For instance, an action seeking a declaration relating to a zoning ordinance has a different statute of limitations than a declaratory action relating to a contract. 77 Courts have held that a plaintiff can be barred from suing for a declaratory judgment if he lacked the diligence in pursuing a lawsuit that may be expected of a reasonable and prudent man, thus prejudicing the defendant. 78

    Potential Defenses

    Just as there are numerous causes of action, there is a multitude of available defenses, the applicability of which are dependent upon the facts involved. Certainly the starting point in defending any lawsuit is to confirm whether the plaintiff filed suit within the applicable statute of limitations and statute of repose. When considering such periods, special attention should be paid to when they accrue. Consideration should also be given to the equitable doctrine of laches.

    In defending negligence claims, the most obvious defense is that of contributory negligence - particularly since it is a bar to any recovery .79 As previously described, the jury in the New Haverford Partnership case concluded that both plaintiffs were contributorily negligent in attempting to clean the mold themselves. Had that case been tried in North Carolina, the plaintiff's contributory negligence would have barred their recovery.

    Another notable negligence defense is the "economic loss rule," which provides that purely economic losses are recoverable under a breach of contract theory, not under tort law. 80 Economic losses are damages that are purely pecuniary losses without the addition of personal injury or physical damage to other property. In essence this rule prevents parties in construction litigation from recovering purely economic losses (i.e., contract damages) from parties with whom they have no privity. 81

    Finally, the United States Supreme Court recently provided some protection against excessive punitive damages awards. In State Farm v. Campbell 82 the Court struck down a $145 million punitive damages award as excessive and in violation of the Due Process Clause of the 14th Amendment of the Constitution. In Campbell, the Supreme Court looked to three criteria when evaluating the punitive damages award: (1) the of reprehensibility of the defendant's conduct, (2) the disparity between the actual or potential harm suffered by the plaintiff in the punitive damages award, and (3) the difference between the punitive damages awarded and the civil penalties authorized or imposed in comparable cases. While not providing a bright-line ratio, the Court did state that few awards exceeding a single-digit ratio between punitive and compensatory damages would satisfy due process.

    Causation & Expert Witnesses

    According to the American Academy of Allergy, Asthma and Immunology, 12 percent of the Nation's population, approximately 35 million Americans, suffers from reactions to mold. 83 Such reactions typically involve allergic responses including hay fever-type symptoms such as sneezing, runny nose, red eyes, and skin rashes. 84 Molds can also cause asthma attacks in people with asthma or who are allergic to mold. 85 Some molds can cause infectious respiratory disease (e.g. aspergillosis), whole others generate toxins that may case other illnesses. 86 According to the EPA, "symptoms other than allergic and irritant types are not commonly reported as a result of inhaling mold." 87 Whether mold causes a severe adverse health effect beyond these is hotly disputed. 88 As such, the best defense against personal injury claims arising in the toxic mold context is the absence of causation. As is evident in the three case studies, courts across the country are struggling with the expert testimony required to substantiate the causal link between toxic mold exposure and personal injuries.

    Mold cases by their very nature are expert intensive and often require a number of experts ranging from mycologists, microbiologists, industrial hygienists, neuropsychologists, immunologists, toxicologists, and occupational and environmental medical doctors. 89 In North Carolina, the admissibility of testimony from such experts is controlled by the North Carolina Rules of Evidence Rule 702. 90 An expert witness is one that "by knowledge, skill, experience, training, or education" can opine when "scientific, technical or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue." 91 Thus, the test of admissibility under Rule 702 is whether the expert is "helpful to the trier of fact." It is within the exclusive province of the trial judge to determine whether a witness qualifies as an expert. This, the North Carolina Supreme Court holds, "requires a preliminary assessment of whether the reasoning or methodology underlying the testimony is sufficiently valid and whether that reasoning or methodology can be properly applied to the facts in issue." 92 The indices of expert witness testimony reliability include:

    1. the expert's use of established techniques,
    2. the expert's professional background in the field,
    3. the use of visual aids for the jury so the jury is not asked to sacrifice its independence by accepting the scientific hypothesis on faith, and
    4. independent research conducted by the expert.93

    Once a trial court determines that the method of proof is sufficiently reliable as an area for expert testimony, the trial court then looks to whether the witness is qualified as an expert. Notably, it is not necessary that an expert be experienced with the identical subject matter at issue or be a specialist, licensed, or even engaged in a specific profession. 94 It is enough that the expert witness, because of her/his expertise, is in a better position to have an opinion on the subject than is the trier of fact. Moreover, the trial judge is afforded wide latitude of discretion when making a determination about the admissibility of expert testimony.

    Since there are no reported toxic mold cases in North Carolina, the courts have not considered whether to accept the alleged link between mold exposure and personal injuries. Undoubtedly, such decisions will be made on a case-by-case basis and depend heavily on the cases specific facts.

    Insurance Issues

    Insurance providers have also felt the brunt of mold contamination, remediation and litigation. In 2000, insurers paid approximately $200 million toward mold claims. 95 That number shot to $1 billion in 2001 and a staggering $2.5 billion in 2002. 96 According to the Insurance Information Institute, the average residential mold claims costs about $35,000 and can easily exceed $100,000. 97 Such numbers suggest that the cost of a mold inspection, which ranges from $300 to $1,200 depending on the size of the building, would be money well spent. 98 Mold claims have cost insurers so much that they have successfully lobbied 35 states to allow them to exclude coverage for loss caused by mold. 99

    While the facts of each case will vary, one common theme is that insurers look to exclude coverage whenever possible. In the first party insurance context (e.g. homeowner's policy), the policies typically cover the structure when there is a direct physical loss. This coverage is followed by a laundry list of exclusions, which are increasingly including mold, wet or dry rot, fungi, and bacteria. In May 2002, the North Carolina Department of Insurance ("DOI") approved changes to the coverage and exclusion sections of standard homeowner's policy. The DOI now allows those insurers providing homeowners insurance in North Carolina to include that their policies exclude losses that result from or consist of wet rot, dry rot, bacterium, or a fungus, including but not limited to mildew and mold. Insurers do provide coverage up to $5,000 for such losses if they are the result of covered perils. An example of how insurers apply this change is attached as Exhibit A. 100

    While some jurisdictions permit coverage under such provisions, others allow insurers to avoid coverage even for ensuing losses. In Cooper v. American Family Mutual Insurance Company, 101 the United States District Court for the District of Arizona considered whether mold remediation was covered as a "resulting loss" by a homeowner's insurance policy. Following a plumbing leak that damaged drywall and flooring, the insurer paid for repairs to the drywall and flooring, but denied coverage for damage caused by mold. The policy covered "risks of accidental physical loss ... unless the loss is excluded in [the] policy." It excluded losses caused by "smog, rust, corrosion, frost, condensation, mold, wet or dry rot...." The "resulting loss" provision, however, provided that it would cover losses caused by these factors if they were a resulting loss to property covered by the policy. The insured argued that since the water damage was a covered loss, the mold caused by the introduction of water is covered as a resulting loss.

    The district court rejected the insured's argument on the grounds that Arizona had yet to adopt the "efficient proximate cause" rule. That rule provides that coverage exists when the insured can identify an insured peril as the proximate cause of the loss even if subsequent or concurrent events are specifically excluded from coverage. Thus, the insured had no coverage even though water intrusion may have contributed to the loss. 102 This case stands in contrast to Home Insurance Co. v. McClain, 103 where the Texas Court of Appeals held that mold damage was covered as an ensuing loss from water damage.

    Third party insurance policies, such as commercial general liability ("CGL") policies, provide insurance for the purchaser against liability that may incur to others. In general, such policies cover all damages arising out of bodily injury or property damage for which the insured is liable. CGL policies typically contain pollution exclusion clauses that, for example, exclude:

    ... property damage arising out of the actual, alleged, or threatened discharge, disbursal, release or escape of pollutants ... at or from premises you own ... or ... at or from any site or location on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations: ... if the pollutants are brought on or to the site or location in connection with such operations.... 104

    The policy then defines "pollutants" to mean "any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and wastes." 105 Obviously, whether such a pollution exclusions covers mold will depend upon whether the court concludes that mold is a "pollutant" that was discharged, disbursed, released or escaped. While no case law was found addressing the first issue, two cases address the second one.

    In Lexington Insurance Company v. Unity/Waterford-Fair Oaks, Ltd., 106 the United States District Court for the Northern District of Texas considered whether coverage for mold damage to an apartment complex was excluded by a pollution exclusion endorsement. The insured argued that the mold that caused the damage was already present and thrived because of moisture. Thus, the mold that caused the loss was not released, discharged, or disbursed, and did not escape within the meaning of the policy language. Following testimony about the spread of mold spores in the air, the court held that the mold that caused the damage at issue was disbursed within the covered properties and that the damage caused thereby falls within the scope of the Pollution Exclusion in the relevant policy.

    This decision stands in stark contrast to the decision reached by the Wisconsin Court of Appeals in Leverance v. USF&G. 107 In that case, the court held that the relevant pollution exclusion clause did not apply because the mold resulted from moisture trapped within the building's walls. Thus, the mold formed over time and was not "released."

    Mold Legislation

    On March 13, 2003, Representative John Conyers (D-MI) introduced the "United States Toxic Mold Safety & Protection Act of 2003", H.R. 1268, in the 108th United States Congress. 108 A copy of this legislation is attached as Exhibit B. This bill would require certain federal agencies to, among other things, establish minimum permissible exposure limits, national standards for mold inspections, standards for the certification of mold professionals and for the design, installation and maintenance of air ventilation and/or air conditioning systems to prevent mold growth. It would also require the disclosure of mold hazards in housing offered for sale or lease, require development of a new model building code and make a mold inspection a requirement for federal mortgage financing. The house referred H.R. 1268 to a number of committees where it is being considered.

    At least 11 states are also taking action. Arizona, California, Illinois, Indiana, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, Texas, and Washington state have all introduced legislation that propose creating various task forces to study the health effects of mold and to propose acceptable minimum exposure limits. 109 Despite having experienced numerous instances of flooding in the last several years, the North Carolina General Assembly is not considering any such legislation.

    A South Carolina law that recently took effect is a step in the right direction. On January 1, 2003, home sellers in South Carolina must complete a 24-question disclosure form before selling residential real estate. While similar to North Carolina's residential property disclosure form, South Carolina's disclosure form specifically asks about the presence of mold. 110 A copy of South Carolina's disclosure form is attached as Exhibit C. North Carolina's disclosure form is attached as Exhibit D.

    Mediation of Mold Contamination Cases

    When I signed up for mediation training in 1994, it was for the purpose of understanding what mediators were trying to do to my client and me during the settlement conference. At that time, many lawyers viewed mediation as obtaining "free discovery" from the other side without any realistic expectation that the matter would settle. However, since North Carolina's Mediated Settlement Conference pilot program began in early 1992, the perception of mediation by attorneys has drastically changed. Clients now view mediation as an opportunity to avoid costs, risks, and time. Lawyers now enter mediation with a greater expectation of settlement. Recently a new type of case has appeared on the scene involving property damage and personal injury. Cases involving mold contamination of buildings present some unique issues and problems to resolve prior to and during the mediation. From the viewpoint of a mediator of such disputes, I have been asked to give you some comments, which may help you in the mediation of mold contamination cases.

    One of the threshold issues will be your selection of a mediator. Recently, I solicited comments from other lawyers in our firm as to a slate of mediators, which I was considering for use in a construction defect case. None of the mediators escaped unscathed. Some of the comments I received were as follows:

    • Didn't push for a settlement;
    • Pushed too hard for settlement;
    • Lack of knowledge of the subject matter;
    • Too passive;
    • Too aggressive.
    • Declared impasse too easily.

    One can see from those comments, it is difficult to obtain a consensus on a mediator or how the mediation process should be conducted. However, I offer my views for your consideration.

    What kind of mediator do you need? I classify mediators into three (3) types: a carrier pigeon, a facilitator, and a basher. I believe that a mediator, on occasion, may have to be all three types. There are occasions when the mediator should only carry information back and forth between the parties. Other times, the mediator should explore the weaknesses and risks of each party's position and offer alternative methods of resolving the dispute. Finally, sometimes, although infrequently, the mediator should point out to the reluctant party, the unreasonableness of their position.

    If choosing a mediator for a mold case, it is helpful to select one who has knowledge of how mold contamination occurs, types of mold and the potential injury to persons and property. You would also prefer to have a mediator who has had trial experience and can evaluate how a jury may view the facts as well as the amount of the potential damage award. In a mold case, there may be many legal theories of liability, including negligence, nuisance, breach of contract, constructive eviction, breach of implied warranty of habitability, unfair and deceptive trade practices and fraud. Therefore, it may be helpful to select a mediator who has knowledge of the various elements of the legal theories. Lastly, it is also helpful for the mediator to have some technical expertise in the types of mold, and the remediation of mold contamination in buildings.

    Once involved in the mediation of mold contamination case, attorneys should recognize that there are certain issues, which are peculiar to mold cases. First, as addressed in section II, there may be numerous parties. Generally, this type of case will have a larger property damage claim due to the clean up cost and procedures. Often there will be personally injury and respiratory ailments claims associated with mold contamination of buildings. At the present time, some states require that peer reviewed medical treatises must support the medical evidence of personal injury. Another potential impediment to settlement in mold contamination cases involving numerous parties is that each party has its own idea of the percentage of settlement that each should pay. As a result, it may be desirable to request that the amount each defendant contributes to settlement be kept confidential from all other defendants in order to facilitate a settlement.

    The most common mistakes made by some lawyers representing clients in during a mold mediation are as follows:

    • Failure To Prepare the Client for the Mediation. The client needs to understand the process, the role of the mediator and factors that will be involved in deciding whether to settle or continue to litigate a case.
    • Failure to Consider When to Mediate (Early or Late). Depending upon the case, it may be beneficial to your client to mediate the matter early if the facts are fairly well known and there are a few or limited outcomes. However, if further investigation or discovery is needed to resolve the matter, a later mediation date may be preferable.
    • Failure to Communicate Willingness and Ability to Try the Case. Unless you have in the past indicated a willingness and ability to try a case in arbitration or litigation, one may not be able to get the best settlement for your client during mediation. In an appropriate case it may be necessary to try a mold case to a jury verdict. Otherwise, offers of settlement may be made which do not reflect the cost of trial and risk of an adverse verdict.
    • Avoid Antagonistic Opening Statements. Although a lawyer should be firm in stating his clients position on the law and the facts, he or she should neither deal in personalities nor belittle the other side's version of the facts or their claims. In order to reach a settlement, it is not necessary for any of the parties to agree as to the facts and the law of the case.
    • Failure to Bring Knowledgeable Persons to the Mediation. Many times a person with knowledge of the facts is needed to overcome the "facts" obtained second-hand or from "wishful thinking", but not brought to the mediation. In the absence of a knowledgeable party, it is difficult for a party to evaluate its risks and settlement value of the case.
    • Failure to Allow Sufficient Time to Mediate. Often lawyers and their clients expect the matter to either be resolved or not resolved within a couple of hours. Although as a mediator, I am not opposed to expediting matters, my experience has shown that it takes time for the mediation process to work. It is necessary for each party to "vent" and explore various alternatives and engage in "give and take negotiation" before either party believes that the other has made its last offer to settle.
    • Disclosure of "Bottom Line" to Mediator. Often clients or attorneys disclose their "bottom line" number to the mediator and hope that he or she will be able to negotiate a settlement above or below that amount. As a mediator, I prefer not to have such information primarily because once a line is drawn in the sand, and even though a different number is justified, a participant may refuse to do so because it becomes a personal matter.
    • Failure to Evaluate the Case. Many attorneys and clients fail to evaluate the tangible costs (immediate dollars), the intangible costs (relationship cost) and transaction cost (the cost of litigating presently or in the future).
    • "Sweating the Small Stuff" and "Rather be Right than President" positions. Even though it may economically make sense to settle a case, often parties "dig in their heels" over inconsequential items or want to prove that they are correct on a factual or legal issue. Attorneys and clients should understand that in order to settle a matter, it is not necessary to agree upon the facts or the law, but the focus should be on how a judge or jury will view the law and the facts in dispute.
    • Avoid the "Last Nickel Syndrome. After a long and difficult negotiation one party makes its "final" offer that is acceptable to the other party, but the other party often believes there is at least another "nickel" that he can obtain in settlement. As a result, a counteroffer is made, the receiving party withdraws its offer, and the mediator must declare an impasse. Attorneys and their clients should resist seeking to obtain a small amount of money or payment of the settlement monies "tomorrow" at the end of a negotiation, otherwise a settlement may be lost.

    The above items are some that you may wish to consider for your client in the mediation of a mold contamination case. Although mold contamination has been a part of construction lawsuits for many years, it has only recently become the main focus of property and personal injury claims. As a result, there are sharp disagreements as to the ability of mold to cause personal injury and there is presently a lack of generally accepted standards on which to base the scope of cleanup. Such uncertainties make mold contamination cases ripe for settlement during mediation.

    --------------------------------------------------------------------------------

    1 Witkin, James B., There's a fungus among us: Mold attacks real estate, Wash. Bus. J. (June 14, 2002). [return]
    2 Nilsen, Kim, Mold taking its Toll, Triangle Bus. J. (Jan. 17, 2003). [return]
    3Jones, Sherry, Parents take legal action; Topsail High Mold, Wilmington Star (Nov. 15, 2002). [return]
    4See Leviticus 14:34-46. [return]
    5 Hevesi, Dennis, The Turmoil Over Mold in Buildings, New York Times, March 23, 2003, � 11, Col. 2, at 1. [return]
    6Allison v. Fire Ins. Exch. et al., 98 S.W.3d 227 (Tex. App. 2002). [return]
    7Centex-Rooney Construction Co., Inc. v. Martin County, 706 So. 2d 20 (Fla. App. 1997). [return]
    8Krizan, William; William Angelo and Janice Tuchman, Mold Lawsuits Have Industry Feeling Vulnerable as Larger Projects Are Eyed, Engineering News Record, Vol. 250, No. 12, at 24 (March 31, 2003) (hereinafter "Engineering News"). [return]
    9Condominium owners living at 515 Park Avenue in New York City recently filed lawsuits in New York State court alleging water damage and mold contamination. As a result of numerous water leaks, the 39 unit 43-story high-rise where condos were selling for $3,000/square foot, developed a significant mold problem. One plaintiff alleges that his 3-year-old daughter developed a severe, disabling respiratory illness, among others, and that his wife developed a severe allergic reaction to toxic mold. They are demanding $2 billion in compensatory and punitive damages and recision of the sale contract. See Hevesi, supra. [return]
    10 See Foster v. Denten Indep. Sch. Dist.et al., 73 S.W. 3d 454 (Tex. App. 2002) (contaminated school); Greene v. Plano I.S.D. et al., 227 F.Supp. 2d 615 (E.D.Tex. 2002) (same). [return]
    11 See Minner et al. v. American Mortgage & Guaranty Co., 791 A.2d 826 (Del. Super. Ct. 2000) (contaminated office building). [return]
    12 Hilton Hotels Corp.'s Kalia Tower in Hawaii, a $95 million, 25-story hotel with 453 guestrooms, opened in May 2001 and shut its doors in June 2002 due to mold contamination. Hilton expects the mold remediation to cost approximately $35 million. Engineering News, at 24. [return]
    13Sommer v. USAA Casualty Ins. Co., Guilford County Superior Court. [return]
    14Dobson v. Redman Homes, Inc., New Hanover County Superior Court, 02-CVS-4699. [return]
    15 See Frizzell v. HBS Contractors, Inc. et al., Robeson County Superior Court, 01-CVS-3859; Spearman v. Pender County Board of Education, Pender County Superior Court, 02-CVS-1029. [return]
    16 See RCDI v. Ricky Ridge Hosp. Corp., Buncombe County Superior Court, 98-CVS-1072. [return]
    17 T his is the much-ballyhooed "Melinda Ballard" decision that aired on CBS's "48 Hours" in July 2002. See [http://www.cbsnews.com/stories/2001/09/05/48hours/ main309720.shtml] (visited April 4, 2003). [return]
    18 509 U.S. 579, 125 L. Ed. 2d 469, 113 S. Ct. 2786 (1993). North Carolina also follows Daubert. See section II, C, 4 "Causation & Expert Witnesses," supra. [return]
    19 Scott P. Dill of Poyner & Spruill LLP assisted with the drafting of this portion of the manuscript. [return]
    20 Lake Mary Ltd. P'ship v. Johnston, 145 N.C. App. 525, 536, 551 S.E.2d 546, __ (2001). [return]
    21 McCraw v. Llewellyn, 256 N.C. 213, 216, 123 S.E.2d 575, __ (1962). [return]
    22 Salvaggio v. New Breed Transfer Corp., 150 N.C. App. 688, 692, 564 S.E.2d 641, __ (2002). [return]
    23 Waynick Constr., Inc. v. York, 70 N.C. App. 287, 290, 319 S.E.2d 304, __ (1984). [return]
    24 N.C. Gen. Stat. � 1-52(1). [return]
    25 N.C. Gen. Stat. � 25-2-725(1). [return]
    26 N.C. Gen. Stat. � 1-47(2). [return]
    27 Bryant v. Adams, 116 N.C. App. 448, 467, 448 S.E.2d 832, 842 (1994); 67A Am Jur 2d SALES � 705. [return]
    28 Everts v. Parkinson, 147 N.C. App. 315, 331, 555 S.E.2d 667, __ (2001). [return]
    29 N.C. Gen. Stat. � 25-2-313. [return]
    30 Allen v. Roberts Constr. Co., 138 N.C. App. 557, 571, 532 S.E.2d 534, __ (2001); Russell v. Baity, 95 N.C. App. 422, 425-26, 382 S.E.2d 217, __ (1989). [return]
    31 N.C. Gen. Stat. � 25-2-725(1). [return]
    32 N.C. Gen. Stat. � 25-2-314; Reid v. Eckerds Drugs, Inc., 40 N.C. App. 476, 480, 253 S.E.2d 344, __ (1979). [return]
    33 Gillispie v. Thomasville Coca-Cola Bottling Co., 17 N.C. App. 545, 549, 195 S.E.2d 45, __ (1973). [return]
    34 N.C. Gen. Stat. � 25-2-314. [return]
    35 Morrison v. Sears, Roebuck & Co., 80 N.C. App. 224, 228, 341 S.E.2d 40, __ (1986). [return]
    36 N.C. Gen. Stat. � 25-2-316. [return]
    37 N.C. Gen. Stat. � 25-2-315. [return]
    38 N.C. Gen. Stat. � 25-2-316. [return]
    39 Cantrell v. Woodhill Enter., Inc., 273 N.C. 490, 497, 160 S.E.2d 476, __ (1968). [return]
    40 Langley v. Helms, 12 N.C. App. 620, 625, 184 S.E.2d 393, __ (1971). [return]
    41 Moss v. Best Knitting Mills, 190 N.C. 644, 648, 130 S.E. 635, __ (1925). [return]
    42 Dawson Indus., Inc. v. Godley Constr. Co., 29 N.C. App. 270, 276, 224 S.E.2d 226, __ (1976). [return]
    43 N.C. Gen. Stat. � 1-52(1). [return]
    44 N.C. Gen. Stat. � 25-2-725(1). [return]
    45 N.C. Gen. Stat. � 1-47(2). [return]
    46 Tise v. Yates Constr. Co., 345 N.C. 456, 460, 480 S.E.2d 677, __ (1997). [return]
    47 Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52, 58, 554 S.E.2d 840, __ (2001). [return]
    48 Martishius v. Carolco Studios, Inc., 355 N.C. 465, 473, 562 S.E.2d 887, __ (2002). [return]
    49 Smith v. Winn-Dixie Charlotte, Inc., 142 N.C. App. 255, 263, 542 S.E.2d 288, __ (2001). [return]
    50 N.C. Gen. Stat. � 143-138(b); Lassiter v. Cecil, 145 N.C. App. 679, 684, 551 S.E.2d 220, __ (2001). [return]
    51 N.C. Gen. Stat. � 1-52(16); Stamey v. Rutherfordton Elec. Membership Corp., 249 N.C. 90, 93, 105 S.E.2d 282, __ (1958). [return]
    52 Reich v. Price, 110 N.C. App. 255, 258, 429 S.E.2d 372, __ (1993). [return]
    53 Watts v. Cumberland County Hosp. Sys., 75 N.C. App. 1, 10, 330 S.E.2d 242, __ (1985). [return]
    54 Reich v. Price, 110 N.C. App. 255, 258, 429 S.E.2d 372 (1993); Restatement (Second) of Torts � 299A (1965). [return]
    55 N.C. Gen. Stat. � 1-52(16). [return]
    56 N.C. Gen. Stat. � 1-15(c). [return]
    57 Raritan River Steel Co. v. Cherry, Bekaert & Holland, 322 N.C. 200, 214, 367 S.E.2d 609, __ (1988). [return]
    58 Oberlin Capital, L.P. v. Slavin, 147 N.C. App. 52, 58, 554 S.E.2d 840, __ (2001). [return]
    59 N.C. Gen. Stat. � 1-52(9) (2003); Jefferson-Pilot Life Ins. Co. v. Spencer, 336 N.C. 49, 56, 442 S.E.2d 316, __ (1994). [return]
    60 Becker v. Graber Builders, Inc., 149 N.C. App. 787, 793, 561 S.E.2d 905, __ (2002). [return]
    61 Allen v. Roberts Constr. Co., 138 N.C. App. 557, 568, 532 S.E.2d 534, __ (2000). [return]
    62 Atkinson v. Charlotte Builders, Inc., 232 N.C. 67, 68, 59 S.E.2d 1, __ (1950). [return]
    63 Lowry v. Lowry, 99 N.C. App. 246, 254, 393 S.E.2d 141, __ (1990). [return]
    64 N.C. Gen. Stat. � 1-52(9) (2003). [return]
    65 South Atl. Ltd. P'ship of Tennessee, L.P. v. Riese, 284 F.3d 518, 535, 2002 U.S. App. LEXIS 4747 (4th Cir. 2002). [return]
    66 Dalton v. Camp, 353 N.C. 647, 548 S.E.2d 704, 711 (N.C. 2001). [return]
    67 Rucker v. Huffman, 99 N.C. App. 137, 141, 392 S.E.2d 419, __ (1990); Adams v. Moore, 96 N.C. App. 359, 361, 385 S.E.2d 799, __ (1989); Wilder v. Hodges, 80 N.C. App. 333, 334, 342 S.E.2d 57, __ (1986). [return]
    68 Rucker, 99 N.C. App. at 141, 392 S.E.2d at __ (1990). [return]
    69 N.C. Gen. Stat. � 75-16.2 (2003). [return]
    70 K&S Enter. v. Kennedy Office Supply Co., 135 N.C. App. 260, 267, 520 S.E.2d 122, __ (1999). [return]
    71 K&S Enter., 135 N.C. App. at 267, 520 S.E.2d at __(1999); McNamara v. Wilmington Mall Realty Corp., 120 N.C. App. 400, 405, 466 S.E.2d 324, __ (1996); Marina Food Assoc. Inc.. v. Marina Rest. Inc., 100 N.C. App. 82, 92, 394 S.E.2d 824, 830 (1990). [return]
    72 N.C. Gen. Stat. � 1-52(1) (2003). [return]
    73 N.C. Gen. Stat. � 1-254; Pilot Title Ins. Co. v. Northwestern Bank, 11 N.C. App. 444, 449, 181 S.E.2d 799, __ (1971). [return]
    74 Whittaker v. Furniture Factory Outlet Shops and Auto-Owners Ins. Co., 145 N.C. App. 169, 173, 550 S.E.2d 822, __ (2001). [return]
    75 Gaston Bd of Realtors v. Harrison, 311 N.C. 230, 234, 316 S.E.2d 59, __ (1984). [return]
    76 Ramsey v. Interstate Insurors, Inc., 89 N.C. App. 98, 101, 365 S.E.2d 172, __ (1988); Bellefonte Underwriters Ins. Co. v. Alfa Aviation, Inc., 61 N.C. App. 544, 547, 300 S.E.2d 877, __ (1983). [return]
    77 Baucom's Nursery Co. v. Mecklenburg County, 89 N.C. App. 542, 559-60, 366 S.E.2d 558, __ (1988) (applying N.C. Gen. Stat. � 1-54.1 to declaratory action); Hamlet HMA, Inc. v. Richmond County, 138 N.C. App. 415, 423, 531 S.E.2d 494, __ (2000) (applying N.C. Gen. Stat. � 1-53(1) to declaratory action). [return]
    78 Taylor v. Raleigh, 22 N.C. App. 259, 261, 206 S.E.2d 401, __ (1974); Knotville Volunteer Fire Dept., Inc. v. Wilkes County, 85 N.C. App. 598, 601, 355 S.E.2d 139, __ (1987) (applying doctrine of laches). [return]
    79 Sawyer v. Food Lion, Inc., 144 N.C. App. 398; 549 S.E.2d 867 (2001). [return]
    80 Chicopee, Inc. v. Sims Metal Works, Inc., 98 N.C. App. 423, 391 S.E.2d 211, __ (1990). [return]
    81 North Carolina State Ports Auth. v. Roofing Co., 294 NC 73, 240 S.E.2d 345, __ (1978). [return]
    82 123 S. Ct. 1513; 2003 U.S. LEXIS 2713; 71 U.S.L.W. 4282 (April 7, 2003). [return]
    83 Hevisi, supra. [return]
    84 U.S. Environmental Protection Agency, Office of Air and Radiation, A Brief Guide to Mold, Moisture and Your Home, available at [http://www.epa.gov/iaq.com] (hereinafter "EPA's Guide to Mold"). [return]
    85 Id. [return]
    86 North Carolina Department of Health and Human Services, Guidelines for Re-Occupancy of Flooded Buildings, available at [http://www.dhhs.state.nc.us/docs/ hurricaneoccupant.htm]. [return]
    87 EPA's Guide to Mold, supra. [return]
    88 Id. See also, Mycotoxicosis: Little evidence of serious illness due to Stachybotrys chartarum, Immunotherapy Weekly, March 19, 2003 (researchers did not find well-substantiated supportive evidence of serious illness due to Stachybotrys exposure in the contemporary environment). [return]
    89 Blundell, David F., Proliferation of Mold and Toxic Mold Litigation: What is Safe Exposure to Airborne Fungi Spores Indoors?, 8 Envtl. Law. 389, 396 (Feb. 2002). [return]
    90 N.C. Gen. Stat. 8C-1, Rule 702. [return]
    91 Id. [return]
    92 State v. Goode, 341 N.C. 513, 527, 461 S.E.2d 631, 639 (1995) (citing Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993)). [return]
    93 State v. Pennington, 327 N.C. 89, 393 S.E.2d 847 (1990). [return]
    94 State v. Goode, 341 N.C. at ___, 461 S.E.2d at ___. [return]
    95 Calbreath, Dean, The New Asbestos; Increasingly Expensive Mold Infestation Claims Are Reeking Havoc With Homeowners And Insurance Companies, The San Diego Union-Tribune at H-1 (Feb. 16, 2003). [return]
    96 Id.; Krizan, William, William Angelo, Janice Tuchman, Mold Lawsuits Have Industry Feeling Vulnerable As Larger Projects Are Eyed, Engineering News Record, Vol. 250, No. 12, at 24 (March 31, 2003). [return]
    97 Thomas, Corwin A., Mold Is A Growing Problem; Common Fungus That Can Be Toxic Proves Costly For Property Insurers, Plain Dealer at C1 (Feb. 13, 2003). [return]
    98 Asbestos of the Millenium, Central Penn Business Journal, Vol. 19, No. 14, at 27 (March 28, 2003). [return]
    99 Calbreath, supra. [return]
    100 The insurance company issuing this notice calls it "additional coverage," implicitly suggesting that the homeowner's policy did not cover such losses before this change. [return]
    101 184 F. Supp. 2d 960 (D. Ariz., 2002). [return]
    102 In Cooper, the insured relied on the "efficient proximate cause" rule that coverage exists when the insured can identify an insured peril as a proximate cause of the loss even if subsequent or concurrent events are specifically excluded from coverage. The district court held that since Arizona had not adopted this rule, insurer in that state were permitted to limit their liability with current causation lead-in clause similar to that found in the relevant policy. [return]
    103 Home Ins. Co. v. McClain, 2000 Tex. App. LEXIS 969 (Feb. 10, 2000) [return]
    104 W. Am. Ins. Co. v. Tufco Flooring E., Inc., 104 NC App. 312, 409 S.E.2d 692 (1991). [return]
    105 104 N.C. App. at 315-16, 409 S.E.2d at 694. [return]
    106 2002 US Dist. LEXIS 3594 (March 5, 2002). [return]
    107 462 N.W.2d 218 (Wis. App. 1990). [return]
    108 Representative Conyers introduced an identical bill in June 2002, H.R. 5040. That bill never made it out of the four House committees to which it was sent. [return]
    109 Goldberg, Diane E. Toxic Mold Sparks New Legislation, Environmental Components and Litigation, Vol. 18, No. 9, at 1, (Feb. 2003). Barista, Dave, Mold Related Lawsuits and Escalating Insurance Premiums are Threatening the Pocketbooks of America's Building Teams, but the Good Fight Goes On, Building Design & Construction, at 44 (Jan. 1, 2003). [return]
    110 Vogel, Heather Selling Home? Grab-a-form; 24 Questions Designed to Keep a Owner Honest When Property is for Sale New State-Wide Disclosure Law, Charlotte Observer, Jan. 10, 2003, at 1. [return]

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