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Construction Defect Litigation Changes Hurricane
Protection Industry
On the surface installing hurricane protection has no relationship
to sick building syndrome, but a series of new court cases have widened
the definition of a construction defect so that if you or your employee
allow moisture to intrude inside a structure, then the toxic mold
problem facing the air conditioning industry will become as controversial
within the hurricane protection industry.
Don Leggett, president, Advanced Risk Management, Inc., notes that
a flood of current court cases has changed the outlook for any contractor
who pierces the envelope of a building. “If water gains access
to one of your projects, you can reasonably expect a lawyer or lawyers
will be entering your life shortly thereafter claiming that your negligent
act promoted the growth of mold, mildew, fungus, spores and other
toxins that caused a continuing health risk and adversely affected
the value of the home or building.”
In determining the effectiveness of their coverage from toxic building
syndrome, business owners need to answer two questions: First, are
your limits of coverage adequate; and second, are you covered?
Most construction defects will not be discovered for several years,
the limits that you select today will be the limits paid out in the
future. Are your limits sufficient or will you be paying the remaining
portion of a judgment from your company’s checkbook?
The second and most important question (Are you covered?) can be answered
only by a close examination of your policy. There are two major issues
with regard to applicability of the pollution exclusion to a mold
claim. One is whether mold constitutes a “pollutant” as
defined by an Insurance Service Office exclusion. The other significant
issue is whether the manner in which the exposure to the mold spores
causing the alleged injury constitutes a discharge, dispersal, release
or escape under the exclusion.
One of the earliest cases addressing these issues is Leverence vs.
USF&G, 462 NW2d 218 (Wis App 1990). In that case, occupants of
homes built by the insured contractor filed suit alleging that their
homes retained excessive moisture within their exterior walls, promoting
the growth of mold, mildew, fungus, spores and other toxins that caused
a continuing health risk and adversely affected the value of their
homes. They alleged the defective design of the walls and roofs and
inappropriately selected building materials resulted in the excessive
moisture, and sought recovery for both bodily injury and property
damage.
During the decade that followed there were many cases that tried to
establish what is covered under the general liability policy and what
is excluded, but the most important case for the hurricane protection
industry is Centex-Rooney Construction Co., Inc. vs. Martin County,
FL, 706 S2d 20 (Fla App 1998).
In this case, the county sued its construction manager for dampness
that promoted mold growth and excessive humidity throughout a courthouse.
The source of the water infiltration, among other things, was the
exterior insulation finish system (EIFS). The court affirmed a $14
million verdict against the construction manager. The damages were
awarded for the costs of repairing the courthouse to prevent future
water infiltration. Insurance issues were not the subjects of the
lawsuit.
These types of cases allege that the source of the moisture giving
rise to the mold problem include faulty HVAC and mechanical systems,
leaking windows, curtain walls, EFIS and any other defects that result
in wet and damp building materials which, in turn, serve as a breeding
ground for mold, mildew and other organisms. The water damage to the
building itself constitutes the potentially covered property damage
forming the basis of the CGL insurance claim.
The conclusion of this case appears to be that the water damage would
be covered, but any liability incurred from health conditions caused
as a result of the mold would not be covered. But in a Texas court
case the health consequences caused by an allergic reaction to the
mold was held by a jury to be covered. Clearly, the court system has
not seen the last of these types of lawsuits and the some insurance
companies have developed a new strategy to reduce their exposure to
construction defects and toxic mold syndrome. They are excluding both
using very specific endorsements that clearly state that mold in any
form is not covered.
In the final analysis, Leggett concludes that, “as the insurance
industry has begun to attach exclusions for mold, construction defects
and work performed by other parties, every contractor should review
their renewal policies carefully to see if the mold or any other exclusion
has been added. Go over your policy with an insurance professional
who understands your industry and decide which exclusions can be covered
under another policy (yes, you can purchase a policy to cover mold),
what the correct limits of liability of insurance should be carried,
what installation and training procedures should be established to
reduce the risk and, finally, evaluate what jobs might not be worth
the aggravation and litigation further down the road.”
IHPA IN ACTION
Here is a summary of where and how the IHPA is working for the hurricane
protection industry and its members:
• Florida—Monitoring state legislature and the Florida building
commission. Working with the state Fire Marshal’s office to identify
the correct levels of fire protection on protected enclosures. Working
with the insurance industry to clarify the roll of window film in
the hurricane protection industry. Working with building officials
to standardize the application of building codes. Creating an educational
program for hurricane protection installers.
• Louisiana—Attending National Hurricane Conference to widen
the visibility of the hurricane protection industry.
• New York—Building officials joining the IHPA to increase
knowledge of the hurricane protection industry.
• North Carolina—Testifying before the building commission
on the availability of affordable hurricane protection.
• South Carolina—Testifying before the building commission
and lobbying the state legislature on the advantages of hurricane
protection.
• Texas—Clarifying the roll of designing to internal pressure
in protecting persons and property from hurricane force winds.
• Mexico—Submitting information on the availability of hurricane
protection for high-rise construction. |
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