The Infectiousness of Mould: Toxic Mould Claims in Canada?1
There is a surge of mould awareness. Mould in the media and mould litigation skyrocketed in the U.S. after a Texas jury awarded a family over $32 million following determination that their insurer did not fairly handle a water damage claim.2 Almost 300 media articles related to toxic mould litigation were published in the last six months alone. Large mould claims are now commonplace in the U.S. The New York Museum of Contemporary Art settled a class action lawsuit by its employees for $400 million following determination the Stachybotrys caused immune dysfunction.3 Thus far, insurance companies seem to be bearing the brunt of this trend. In Texas, five major insurance carriers have paid more than $1 billion in settlement of mould related claims over the past two years.4 In 2001, 50,000 new insurance claims involving mould were made in Texas alone.5 Inevitably, the cost of this trend is dispersed through increased insurance premiums.
Is the infectiousness of mould a uniquely American phenomenon> Admittedly, there is currently very little Canadian law case dealing with environmental mould in any significant way. However, this is very likely indicative of a slow migration rather than incompatibility with colder climated. Canadians are clearly becoming "mould aware", and for good reason:
Mould damage is often found in conjunction with water damage. The total number of insurance claims for water loss in Canada has climbed over 60% from 1997 to 2001, with a corresponding increase in amounts paid for related property loss. The average increase in amounts paid for related property loss. The average cost per claim has increased from $3,320 in 1997 to $4,079 in 2001.7
A variety of theories have been proffered for the recent increase in "mould awareness", including:
2. What is Toxic Mould?
Moulds are simple, microscopic organisms that feed on organic materials such as wood, paper, carpet, food and insulation materials. They can exist in both indoor and outdoor environments; they are found almost everywhere. Mould require moisture and oxygen to grow. As a result, they are most commonly found in moist environments such as coastal regions.12 However, most mould related litigation involves mould found in indoor environments.
There are approximately 100,000 scientifically identified species of mould.13 Indoor mould can generally be divided into two categories. 1) low to moderate moisture requirement moulds such as Penicillium, Cladosporium and Alternaria; and 2) high moisture requirement moulds such as Stacybotrys, Chaetemiom, Trichoderma and Aspergillus Niger.14 Stachybotrys Aspergillus and Penicillium are most commonly the subject of litigation. Cladosporium is also note-worthy due to its prevalence in indoor environments.15
Despite the large number of mould species, most moulds are not harmful, only about 100 are suspected to cause infection in humans.16 Exposure to mould can have immediate health consequences. These are generally the result of mould by-products which disrupt protein and RNA/DNA synthesis.17 Toxic mould is alleged to cause internal bleeding, caner, respiratory ailments (including severe or fatal lung disease), adverse effects on the central nervous system, immune system suppression, eye and skin irritations, chronic fatigue and adverse effects on both the male and female reproductive systems.18
3. Theories of Liability
The following theories of liability may form the basis for mould related litigation:
4. The Usual Defendants
The following are examples of defendants in mould related litigation:
(a) Product Manufacturers:
Sued for negligence and/or breach of contract for supplying products which either allow moisture to penetrate into a home or building, or prevent it from escaping once there.23
(b) Architects, Engineers, Builders (including contractors and subcontractors):
Sued for breach of contract and/or negligently designing or constructing building which permit moisture penetration or retention and potentiate the development of mould.24
(c) Building Inspectors
Sued for breach of contract and/or negligence for failing to identify mould during property inspection.25
(d) Real Estate Agents
Sued for breach of contract and/or misrepresentation following sale of property with mould contamination.26
(e) Property Managers, Landlords, Owners, Prior Owners:
Sued by tenants or purchasers for negligence in failing to maintain the property or provide a safe living environment27
Sued by employee or insurer (subrogated claim) for negligence for failing to maintain a safe working environment28
First party claim for indemnity for damage to own property,29 claim against insurer for indemnity for third party claims.
(h) Public Entities
Local governments may be defendants as building owners, and with respect to their responsibility to protect the public and to oversee environmental health risks in public buildings.30 Local governments can also be included in third party claims for negligence based on breach of statutory duty e.g. Ontario Technical Standards and Safety Act, 2000, and the Occupiers Liability Act.31
Schools may be at added risk of exposure due to some evidence that children are more susceptible to mould related health problems because their lungs are not fully developed. Building maintenance is also a special challenge for schools due to budgetary constraints.32
(j) Health Care Facilities
Health Care Facilities may be sued for failing to properly maintain mould remediation and ventilation protocols to prevent the development and propagation of mould spores.33 Construction and renovation of health care facilities may also present problems if ventilation systems are not adequately maintained, and if construction within the facilities are not properly contained.34
5. Problems with Mould Litigation - Causation
The biggest obstacle facing claimants in mould cases is causation. Despite vast media reports to the contrary, a direct causal link has yet to be established between toxic mould exposure and serious illness.35 While there is strong evidence to support the relationship between exposure to mould and adverse health effects, more research is needed to establish a causal link between mould and toxicity in humans.36
Clearly, as far as litigants are concerned, the question is to ultimated whether causation can be established on a balance of probabilities. To date, Canadian claimants have bee largely unsuccessful in establishing a causal relationship between the presence of mould and adverse health effects (as opposed to property damage). However, this burden has been met in some U.S. courts.37
6. The U.S. Experience
In 1997, Centex-Rooney Construction Co. v. Martin County became the first major mould case heard by a U.S. appellate court.38 Martin County hired Centex-Rooney to build a courthouse. Martin County was subsequently forced to evacuate the building due to mould contamination. Martin County alleged negligence and breach of contract against Centex-Rooney and others. Martin County was awarded over $14 million at trial. Both the trial and appellate courts accepted expert evidence of a relationship between toxic mould exposure and adverse health effects.
In 2001, The Delaware Supreme Court gave toxic mould litigation another shot in the arm in New Haverford Partnership v. Stroot.39 The Supreme Court upheld a jury award of $815,000 to two tenants who suffered injuries as a result of toxic mould contamination in an apartment complex. The Ballard v. Fire Ins. Exch.40 case caused a sensation when the jury awarded $32 million in compensatory and punitive damages against the defendant insurer. The court found that the insurer acted in an unfair, deceptive and fraudulent manner by refusing to clean up a plumbing leak, which then led to toxic mould contamination. This award is even more remarkable given that the court did not accept expert evidence relating to the health effects of toxic mould. In Maza v. Shurtz,41 a jury awarded $2.7 million to a family for personal injuries caused by exposure to toxic mould.
Litigation in the U.S. has skyrocketed since. By the end of 2001, there were approximately 10,000 toxic mould suits in the U.S. Of these, 5,000 cases involved allegations of bad faith against insurers, 2,000 involved claims against homeowners' associations for improper maintenance, 2,000 involved allegations against builders for construction defects and 1,000 involved claims against vendors of homes or buildings following sale.42 Recently, there have also been a number of very large settlements paid in relation to toxic mould claims.43
7. Toxic Mould Litigation in Canada
The plethora of U.S. litigation is not currently reflected in the Canadian case law. As of the fall of 2003, there were fewer than twenty-five reported cases dealing with mould in any significant way. With few exceptions, these claims involve mould related property damage, not adverse health effects.
Although the first mould related litigation in Canada dates back to 1975,44 the first decision of note occurred twenty years later. El-Merhbi v. Lloyds of London45 was an action brought by a homeowner against its insurer for indemnity for damage to a Persian rug following exposure to water. The court found that the damage was caused by mould growth, not exposure to the water. The court also found that the mould growth was only possible due to the homeowner's delay in discovering the water infiltration. Damage due to mould was not covered by the policy. The action was dismissed.
El-Merhbi was followed a year later by the first "Leaky condo" case, Wright v. Strata Plan.46 This case involved allegations by a former condominium owner against the condominium corporation. The plaintiff alleged that the corporation was negligent in the performance of its obligation to maintain and repair the common property. The plaintiff complained of water damage to her unit due to leaks in the exterior walls, and claimed that she suffered health problems resulting from mould in her unit. Both the trial judge and the Court of Appeal found that the corporation did not breach its duty to repair the common property.
In a 1997 decision, Warren v. Pinecone Investments Inc.,47 a tenant was granted an abatement of rent due to significant moisture problems and extensive mould growth. The court found the landlord liable for failing to keep the premises in a good state of repair.
Also in 1997, Structures Metropolitane v. Raynault48 involved and action by a landlord for rent withheld to compensate the tenant for the inconvenience of excessive humidity and mould in the basement. The court found that the $90 per month reduction in rent was reasonable.
Frazer v. Knox49 involved an action by the purchaser of a home against the vendor, attorney, agent, real estate company, inspector and inspection company following discovery of water infiltration in the basement and the presence of mould. The plaintiff was successful against the inspector and inspection company for breach of contract and negligent misrepresentation.
There were four individual actions for mould related claims in 2000. In Alie v. Bertrand & Frere Construction Company50 a group of homeowners successfully sued a construction company, manufacturer, supplier and others involved in the construction of defective concrete foundations. Water infiltrated the basements and caused mould formation in the inside walls.
Silaschi and Deutchmann Ltd. v. Pereira51 was an application brought by a landlord against its tenant to recover the cost of repairs to an apartment following the growth of black mould due to excessive moisture. The court found that the mould was not caused by the willful or negligent conduct of the tenant, and concluded that it was ultimately the landlord's obligation to resolve the moisture problem.
In Marvin Investments Ltd. v. Manitoba52 a tenant was granted an abatement of rent to compensate for the value of unusable space due to mould. However, the tenant was not entitled under the lease to compensation for the cost of moving its employees and equipment to another location pending repairs.
Principe v. Group Commerce Cie D'Assurances53 was an action by a building owner against its insurer for indemnity following water infiltration and mould growth. The insurer previously compensated the building owner for the cost of repairs to the building. The court found that it was the owner's own negligence and delay which lead to the additional damage, and the action was dismissed.
Four mould related cases were also reported in 2001. Derosa v. Horning54 was an action by the purchaser of a condominium unit against the vendor, real estate agent, home inspector and strata corporation. The plaintiff allegedly became very ill after moving in as a result of the presence of mould due to a water leak in the basement. The action failed as the plaintiff was not able to establish the presence of mould in the unit at the time of the purchase, or a causal relationship between the defendants' conduct and the plaintiff's medical problems.
Swan River Hospital v. MMP Architects55 was a decision granting leave to a hospital under the Manitoba Limitation Act to bring an action against the architects, contractors and subcontractors involved in the design and construction of a personal care facility following the discovery of mould and water filtration problems. The decision was reversed on appeal.
Alexander v. Zurich56 involved an action by a homeowner against its insurer for indemnity for mould damage allegedly caused by a sewer backup which occurred six years earlier. The homeowner failed to establish that the mould resulted solely from the sewer backup. The court also found that the homeowner failed to follow instructions given by the insurer to prevent the formation of mould.
Davis v. Kelly57 was an action by a purchaser against the vendor of a home following the discovery of extensive water damage and mould under the basement floor. The purchaser failed to establish that the vendor knew of the continued presence of water in the basement or negligently misrepresented the condition of the home. The action was dismissed.
More recently, in Seed v. ING Halifax Insurance58 and insured sought indemnity from its insurer for damages arising out of a flood in her home. The insured alleged that the existence of mould was a result of the insurer;s refusal to pay for the necessary renovations in a timely manner.
In American Risk Management v. "Egale Strength"59 an importer sued the carrier for damage to goods to mould while in transit. The plaintiff failed to establish when the good were actually exposed to water. As a result, the court found that the carrier should be held responsible and the action was dismissed.
Also of note, in Boness v. Bishop60 the plaintiff's expert evidence was that significant defects arose in the construction of the crawl space and basement floor system in a building. The plaintiff alleged that these defects would contribute "negatively to the long term health prospect for the plaintiffs continuing to live in the house due [to] the potential and likely respiration of mould spores originating in the damp crawl space area." The merits of these allegations have yet to be determined.
Finally, the most recent "leaky condo" case, is Strata Plan LMS 1816 v. North Fraser Holdings Ltd.61 Condominium unit owners sued developers, architects, the main contractor and others involved in the design, construction and inspection of the condominiums. The unit owners alleged damages arising from a number of factors including mould contamination.
8. Mould Related Canadian Class Proceedings
As with individual actions, the U.S. experience with mould related cases litigation has yet to migrate north of the border. To date, there have been only two attempts to certify mould related class proceedings in Canada; neither have been successful.
The first Canadian attempt at mould related class litigation was Taub v. Manufacturers Life Insurance.62 Taub was brought on behalf of the tenants of an apartment building following the discovery of mould (stacybotrys atra). The only evidence before the court was the affidavit of the representative plaintiff. There was no evidence that anyone else in the proposed class had found mould, or that there was any complaint of harm or damage as a result of mould:
Despite very low evidentiary burden on the plaintiff at the certification stage, the court concluded that there was simply no evidence to justify certification.
MacDonald v. Dufferin-Peel Catholic District School Board64 is the only other reported attempt to certify a mould related class proceeding in Canada. MacDonald was brought on behalf of all students assigned to a portable, port-a-pak or relocatable classroom module ("RCM") at Peel District Catholic School Board since 1995. The plaintiffs alleged that the portables, port-a-paks and RCMs were contaminated with mould that made students ill.
Unlike Taub, the court found that the plaintiffs met the very low evidentiary hurdle to support their contention that amplified mould could cause illness. The court was also satisfied that there were a number of common issues capable of determination on behalf of the class. These included whether the portable classrooms were contaminated, the level of contamination, the type of mould and whether the defendant was liable for the contamination. However, the court concluded that a class proceeding was not the preferable procedure due to the number of individual issues:
Despite this lack of certification success, it should not be concluded that mould related litigation can not or should not be conducted on a class basis in Canada. The lack of success in Taub and MacDonald likely has more to do with case selection and tactics, than an inherent inconsistency between mould claims and class proceedings. Given the utter lack of evidence available during the certification motion in Taub, it may well have failed as an individual action. The decision to attempt to certify the entire school board in MacDonald may simply have been too ambitious.
Some of the individual factors alluded to in MacDonald such as the prior health and risk factors of class members will likely exist in any mould related litigation. However these factors are equally relevant to litigation involving contaminated water and tainted blood. As an environmental and potentially air-borne pollutant, mould is capable of causing mass harm. As noted by Sharpe J in Taub, "most class proceedings arise from situations where the fact of widespread harm or complaint is inherent in the claim itself."66 Ostensibly, plaintiffs may assert that mould related class litigation is based upon allegations of "systemic" negligence - "actions (or omissions) whose reasonability can be determined without reference to the circumstances of any individual class member.67 Pleaded as such, plaintiffs may assert that issues of duty of care and breach are common to the class and "necessary to the resolution of each class members claim."68
It is also noteworthy that mould litigation is expert driven. Expert evidence may be relevant from any number of sources including microbiologists, environmental engineers, chemists, mould experts, architects, engineers, construction experts, air quality specialists, ventilation experts, industrial hygienists, medical experts. As a result, mould litigation can be very costly. Class proceedings may provide the added benefit of "distributing fixed litigation costs amongst a large number of class members [thereby improving] access to justice by making economical the prosecution of claims that any one class member would find too costly to prosecute on his or her own."69
On the other hand, there has been judicial notice in Canada of the difficulty of using class proceeding when a mass tort is involved. In Pearson v. Inco Ltd.70, Nordheimer J. seemed to empathize with the skepticism of some U.S. courts "over the usefulness of class actions in so-called mass tort cases and, in particular, claims for injuries resulting from toxic exposure".71
It is likely that the first successful Canadian class litigation will derive from something asking to "sick-building syndrome" or "building related illness". "Sick-building syndrome" is a term used to describe situations in which building occupants experience acute health and comfort problems that appear to be linked to time spent in the building, because all other probable cause have been ruled out.72 "Building related illness" refers to clinically diagnosed disease(s) in building occupants that result from exposure to indoor air pollutants.73
Despite the apparent 'epidemic' of toxic mould litigation in the U.S. and a growing Canadian preoccupation with mould, mould litigation in Canada is still relatively uncommon. Thus far, the majority of claims involve property damaged as a result of mould, rather than personal injury dur to exposure to toxic mould. The trend however, is certainly growing "mould awareness". Plaintiff's counsel are increasingly aware of mould related damages issues, and the scientific community continues to study the impact of mould on human health. Whether the number of mould related claims will continue to grow will likely and ultimately depend upon whether the scientific link between mould and adverse health effects is strengthened.
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