Risk Management Articles

"Toxic" Mold Part II: If You Work On Building Construction Projects, This Is Your Problem, And The Stakes Are High. Know The Risks, And Learn How To Avoid Them.
By Michael F. Dehmler

This is the second article in CONSTRUCTOR's three-part series on "toxic" mold. Part I, which appeared last month, examined the question "What is 'toxic' mold?" and discussed the practical steps contractors should take to avoid mold-related problems. This article, Part II, covers the legal and financial risks that "toxic" mold creates. Next month, Part III will discuss the ways contractors can ensure that their insurance adequately covers the risks associated with "toxic" mold.

If you are interested in or concerned about mold, take heart! You have a limitless supply of articles and information about "toxic" mold. Nearly every night, the television news broadcasts stories on "black" or "toxic" mold, about homeowners who lose their homes to mold, and about public schools that close because parents fear for the health of their children. As of August 2001, you could log on to more than 21,000 websites on "toxic" mold, covering everything from "Toxic Mold Survivors"1 to the "Sick Building Syndrome."2 At least one site, "Toxic Mold & Tort News Online," even provides state-by-state information about the lawyers engaged in mold litigation.3


From the media hype, you would think that mold is a plague of biblical proportions that has recently descended upon us. Of course mold is not a new phenomenon. Mold is older than humankind, and our acquaintance with it can be traced at least as far back as the Bible. In fact, in Leviticus, Chapter 15, you'll find what might be the first recorded mold-remediation strategy: "He shall command…that the house be scraped on the inside round about, and the dust of the scraping be scattered without the city into an unclean place: And that other stones be laid in the place of them that were taken away, and the house be plastered with other mortar."

Mold isn't new, and neither is it easily confined. It is in the air we breathe, the food we eat, and all of our homes and workplaces. For this reason, there are many in the scientific community who believe that the hysteria over mold is vastly outpacing the scientific evidence.

Despite the very real debate as to the alleged health risks associated with mold, mold is a real problem for everyone in the construction industry. Whether or not the hysteria is justified, the fear is real, and it has created a multi-billion dollar mold industry. Not surprisingly, personal injury attorneys are at the center of this trend. The construction, insurance, and real estate markets are besieged by mold litigation and the never-ending quest to locate and eradicate mold. Although the true extent of the problem may be hazy, one thing is crystal clear: At this point, the truth doesn't matter. Perception is reality, and the public perception of mold is that it is highly toxic to humans.


The sheer magnitude of the mold-litigation and -remediation industry should be enough to convince everyone in the construction industry that all risk management programs have to take mold into account. Nowadays, any mold problem that develops on a construction project is likely to spawn worker compensation claims, personal injury lawsuits, and demands for immediate and costly remediation efforts. For contractors, these things translate into huge financial losses, project delays, and very bad publicity.

In the vacuum of definitive knowledge about mold, owners often take the "better safe than sorry" approach. That is to say, they reason that if mold has any chance of being as deadly as some believe, then it must be eradicated, regardless of the cost.

If you are still unconvinced that "toxic" mold is a force to be reckoned with, consider the following cases of mold litigation around the country.



In sum, mold has become a serious problem that can destroy a construction company, and it creates very serious and complicated risk-management issues. Contractors need to understand how and why mold grows, and adopt a risk management program that specifically addresses mold avoidance procedures. At minimum, these procedures should include an education program that

Preventing mold growth is the best and most cost-effective way to deal with this problem.


Finally, all contractors should discuss "toxic" mold with their insurance professionals. This discussion should include not only the contractor's insurance needs, but also what, if any, additional insurance requirements should be demanded of subcontractors and suppliers. Insurance is no substitute for mold avoidance, but in some instances, it may limit your financial exposure if mold develops on a project. Stay tuned, as we discuss insurance options in detail next month in "'Toxic' Mold: Part III."

Michael F. Dehmler, associate, Ernstrom & Dreste, practices law in the areas of suretyship, fidelity, contract law, litigation, and other areas surrounding the surety, fidelity, and construction industries. His previous experience includes construction site inspection and project coordination for civil engineering firms.

Mr. Dehmler graduated with honors from the State University of New York, College at Oswego and received his Juris Doctor, with honors, from the State University of New York at Buffalo Law School.

Reprinted from the November 2001 issue of CONSTRUCTOR. In continuous publication since 1919, CONSTRUCTOR is the national magazine of the Associated General Contractors of America (AGC). For more information, visit AGC on the web at


  4. Vol. 8, Mealey's Emerging Toxic Torts, Issue 6, "New York Building Owners Face $8 Billion in Claims for Mold, Fungi Contamination" 6/25/99
  5. Farmers Insurance News Alert,, citing Ballard, et al. v. Fire Insurance Exchange, et al., Index No. 99-05252, Travis County Dist. Ct.
  6. Home Owners for Better Building,, citing Verdict Sheet from Ballard, et al. v. Fire Insurance Exchange, et al., Index No. 99-05252, Travis County Dist. Ct.
  7. Centex-Rooney Construction Company, Inc. v. Martin County, 706 So.2d 20, 24 (4th Dist. 1997).
  8. Centex-Rooney Construction Company, Inc. v. Martin County, 706 So.2d 20 (4th Dist. 1997).

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Contact Michael F. Dehmler
Phone: (716) 473-3100

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