New Appeal Underway in $32 Million 'Mold' Case

On Dec. 19, 2002, the Texas Third District Court of Appeals in Austin struck down $17 million in punitive and mental anguish damages awarded to Melinda Ballard of Dripping Springs, Tex., but upheld the jury finding of a bad faith violation of the states Deceptive Trade Practices Act. The company was cleared of fraud.

The suit was filed in 1999 against Fire Insurance Exchange, a member of the Farmers Insurance Group.

Ms. Ballard's complaint centered around water leaks from frozen pipes, which eventually developed toxic stachybotrys mold. The company, she alleged, was unfair, negligent and deceptive in failing to pay the cost of adequate repairs.

According to a complaint filed by Ms. Ballard's husband, Ronald Allison, he suffered toxic encephalopathy brain damage as a result of mold exposure. However the trial ruled out an expert called to testify to the physical injury that mold may cause.

Kirk Hansen, director of claims for the Alliance of American Insurers in Downers Grove, Ill. said that although the case centered around a bad faith allegation, in the public's mind and throughout much of the media reports, "this case was tied to mold" and led to a rash of lawsuits.

The Alliance said the appeals court decision should "help quell the national mold hysteria" and Mr. Hansen said that hopefully "the rush to the courthouse steps has been slowed."

But in Mr. Hagans' view, the cases at issue are primarily centered on bad faith and the Alliance is "being silly."

"The Ballard case didn't cause such cases to be filed and I don't think it will cause cases to drop off," he said.

He said the claim involved had expanded "like a microscopic melanoma" that grows into a fatal cancer because the company "delayed and delayed and never fixed the problem."

Mr. Hagans said he is filing a motion asking the Court of Appeals to rehear its decision. "If they choose not to rehear, we will file with the Texas Supreme Court" for leave to appeal the case, he said.

As he sees it, the key issue is whether the appeals court can apply a more stringent standard for a finding that a company has committed a knowing violation.

Los Angeles-based Farmers, at the time the decision was issued, called it a "step in the right direction" and said it was heartened there was no finding of fraud.