I've Been Sued . . . Now What? An Attorney's Advice on Preparing for Mold Litigation

You're a builder who has been sued for mold related damage and possible personal injury. Did you see it coming? Was it a complete surprise? It shouldn't be. Under no circumstances should you be surprised to be hit with a lawsuit alleging mold damages. If you are, something is wrong. Either you have not been attentive to problems or you have homeowners that have not properly informed you of the problem. In some states, such as Florida, the law now requires a notice of 120 days before a homeowner can sue for construction defects that lead to a mold claim.

Before you Reach "The Last Resort"

Certainly, the filing of a lawsuit should be the last resort in a mold dispute. There should have been reasonable efforts made to resolve the problems so that litigation would not be necessary. What did you do to minimize the chance of a lawsuit? Did you promptly respond to the homeowners' concerns? Did you take any steps to identify the cause of the mold or attempt to remediate the mold? Responsiveness is a key issue for homeowners, particularly of recently built homes, and failure to timely respond to homeowners' concerns can lead to a lawsuit. Do you have a mold protocol to call upon in such a circumstance? If you do not, put one together promptly. The protocol should include the steps to be taken if a mold problem arises and identify a "team" to handle the problem. The team should include a reputable environmental consultant who is experienced in indoor air quality or water intrusion investigations and a mold remediation company who is certified by either the American Indoor Air Quality Council (AIAQ), the Institute of Inspection, Cleaning and Restoration Certification (HCRRC), or the Indoor Air Quality Association, Inc. (IAQA).

Having an established protocol is helpful in litigation. It shows that you're prepared and conscientious.

Documentation is the Key to Preparation

Perhaps the most important aspect of preparing for and successfully defending a lawsuit is to make sure that the problems and attempted solutions are well documented. This should start with the first contact by a customer service representative documenting the time, date and nature of the problem. Photographs are very important and should be dated. The documentation should include any comments made by the homeowner as to any alleged personal injuries and any observations made by your staff. Memos to the file are good if they are kept factual, contemporaneous, and do not contain editorial comments which can be used to try and show some bias by the employee or the builder. Employees should be instructed to assume that their notes and comments will be made public. In that way, their comments will be kept factual and specific.

Also, any physical evidence that was gathered and removed from the home such as wood, insulation or portions of the HVAC system should be saved in a sanitary environment. Keep in mind that it is not unusual for a case to take four to five years to go to trial and attempting to piece together what happened without contemporaneous notes or documentation is very difficult. Also, it is a good business practice to keep complete notes and information for each of your homeowners.

After the Lawsuit is Filed

The first thing to determine once a lawsuit is filed is whether you have insurance coverage and whether the claims made by the homeowner are a covered event. Reading and understanding the insurance policy is not easy and contacting your attorney for a coverage opinion may be necessary.

Clearly, it is critical to retain competent counsel who is experienced in dealing with mold issues and construction defects. To make the attorney's job easier and less expensive for you, a file should be put together which includes all relevant documents concerning the homeowner such as the purchase and sale contract, any warranties, customer service documents, notes or memos concerning the mold problem and a list of employees who have interacted with the homeowner on behalf of the company.

The next step should be to determine who the relevant witnesses are and what expert witnesses may be necessary. Depending on the area of the country in which you live retaining the best experts early can be important. By the way, lawsuits are one reason why you try to maintain good relationships with former employees. It is very common, due to the length of time it may take a case to be tried, that employees who have worked on a homeowner's mold problem may no longer be with the company. It may be appropriate to have employees who are no longer with the company sign an affidavit so that there is no confusion as to what the employee's recollection is and so that the affidavit can be referred to before deposition or trial.

Inspection of the home is important. There may be strategic reasons why your attorney may want to wait to have an inspection, but generally it is better to have it sooner rather than later, and make sure your expert or consultant attends. Pictures and/or videotapes should be made at the time of the inspection. If you wait too long for an inspection, the homeowner may remediate the problem, make repairs, and therefore, change the condition of the home.

It is important to determine whether personal injuries are being claimed by the homeowner. If medical issues arise, records from the relevant doctors or hospitals should be obtained. It is important to know what steps the homeowner has taken to protect his own health. Obtaining a medical history of the homeowner is important if there is a claim of any personal injury since allergies and sinus conditions are the primary known side effects of exposure to certain kinds of molds.

Also, does the homeowner have insurance which may cover the damage and did he make a claim? You need to see the policy to know whether the insurance company has subrogation rights against you if it settles with the homeowner.

It is important to review any contracts with the homeowner to determine your contractual and warranty obligations, as well as to see if there is an attorney fee provision. Many contracts have attorney fee provisions which allow the prevailing party to collect fees. In order to properly analyze a builder's risk and exposure, attorney's fees should be considered. In many states, such as Florida, attorney fee provisions are, as a matter of law, interpreted to be reciprocal even if the language appears to be one sided.

An Ounce of Prevention

As with most things in life, preparation is the key to successfully defending a lawsuit. You cannot control whether you get sued, but you do control the documentation and preparation. Too often builders are not prepared for the inevitable. If you are involved in any facet of the building industry and have not been a party in a lawsuit, it is simply a matter of time. As the saying goes, an ounce of prevention is better than a pound of cure.

Alvin D. Lodish is a partner in the Litigation Department of the Miami law firm of Bilzin Sumberg Baena Price & Axelrod LLP. He is currently handling numerous mold-related cases throughout the State of Florida. He can be reached at alodish@bilzin.com.

Originally published in the Jan-March 2005 issue of Mold & Moisture Managament Magazine. (c) 2004. All rights reserved. Reprinted with permission.

For a pdf of the Mold & Moisture Management article, please click here