Moldy House Owner Continuing Allstate Case

By Daniel Hays

NU Online News Service, Sept. 17, 3:50 p.m. EST?An elderly homeowner who won a $500,000 bad faith verdict against Allstate in a case involving mold damage, but lost a multi-million-dollar punitive damage award on appeal, will continue his legal fight, his lawyer said.

A petition will be filed with the 9th U.S. Circuit Court of Appeals, seeking a rehearing in the case of Thomas Anderson v. Allstate Insurance Company, according to the attorney, Stanley R. Parrish, who represents Mr. Anderson.

The homeowner originally won a punitive damage award of $18 million, which was reduced by the trial judge to $2.5 million, and eliminated by a three-judge 9th Circuit panel ruling on Sept. 3.

Mr. Parrish said his interpretation of the court ruling's impact differed from that of a Washington, D.C.-based insurers' litigation group--the Complex Insurance Claims Litigation Association--which described the decision recently as a "rebuke to policyholder advocates attempting to maximize recovery for mold-related claims."

The case originated in January 1997 when a pipe broke in the attic of Mr. Anderson's Placerville, Calif. home. According to the appeals court opinion, a dispute eventually developed over Allstate's contention that the home had been left vacant and unheated, and the company's refusal to approve replacement of sagging, moldy Sheetrock.

In reversing punitive damages the 9th Circuit found that Allstate, by failing to investigate the cause of loss, ignoring additional evidence of loss, and demanding an expensive appraisal, showed that the company acted unreasonably and in bad faith.

But the appeals panel said the company's conduct did not reach the "despicable" level needed to qualify for punitive damages. It noted that "health hazards of mold were less clear at the time of Allstate's actions than they later became."

Mr. Parrish, with the Sacramento, Calif. firm of Shepard & Haven, said his 98-year-old client "has yet to be able to return to his home." Concerning Mr. Anderson's court battle with Allstate, Mr. Parrish said, "He's very determined. Tom wants to keep fighting it."

In Mr. Parrish's view, the appellate court looked at the same facts as the jury and said "?we disagree,' and that goes beyond their powers. The jury decides facts."

He said the decision was unsigned by the panel, and "they specifically made it an unpublished decision so it cannot be used for precedents by anyone. But, having said that, if it is not changed on rehearing, unfortunately, it probably will give insurance companies the feeling they can run rampant without the consequences of being faced with a punitive damage award."

Mr. Parrish disputed the CICLA statement's focus on mold. "This is not a mold claim this is a bad faith claim?," he said. "Mold played only a minor part in the grand scope of what the case was about."

Laura Foggen, an attorney with CICLA, which filed a friend-of-the-court brief in the case, said the decision found "key aspects of law that a finding of bad faith doesn't entitle you to punitive damages." She also found it interesting that "this court recognized that health-hazards recognition is a developing process."

Ms. Foggen said rehearings are "fairly rare" by the circuit court, and called the ruling in the case a middle-of-the-road decision. She acknowledged that because it is not for publication, that "does limit its impact somewhat."

Allstate said it was pleased the court found its conduct was not malicious, "but we are clearly disappointed that the court affirmed the lower court's verdict regarding bad faith." The company said it stands by its California claims practices.

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Moldy House Owner Continuing Allstate Case

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