Potential Subrogation Targets for Recovery of Mold-Related Property Damage Losses
January, 2002
The improved property is in place. An insured property loss takes place. Part or all of the property loss includes a claim for mold-related property damage and expenses to repair, replace, and/or remediate. The property carrier pays the claim and receives subrogation rights from the insured. Although there are matters of investigation and scientific expertise somewhat unique to mold-related property damage claims, property carriers responding to mold property damage claims quite simply have the same rights in subrogation—subject to state by state jurisdictional differences—that they have in any other property damage claim. As the following cases illustrate, there are several targets in such a mold-related subrogation action:
• Construction contractors and subcontractors. In Centex-Rooney Construction Company v. Martin County, 706 So.2d 20 (Fla. Ct. App. 4th Dist. 1997), the building owner—the government of Martin County, Florida—was awarded $14 million in a breach of contract action against its construction contractors and subcontractors. Martin County alleged that the courthouse/office building constructed by defendants had defects which caused water leaks and high humidity, resulting in mold growth.
• Product manufacturers and distributors. Products liability claims are also remedies which property insurers must investigate in cases involving mold damage. Assume a property owner replaces a water heater with a defective water heater that leaks, thus leading to mold growth which must be remediated. The owner’s property carrier responds to the owner’s claim. That carrier must investigate and consider claims arising against the manufacturer, any distributor, or any installer of the defective water heater in question. Those claims may allege negligence, gross negligence, breach of contract, strict liability in tort, negligence in the form of failure to warn and, occasionally, ultra-hazardous activities, depending upon the nature of the product and the use of the property involved. See, e.g., DeBarbin v. Rheem Manufacturing Company, No. 2438-34 (Texas District 157th District Harrison County filed December 11, 2000) (First Amended Original Petition).
• Home builders and inspectors. A family buys a mobile home which is defectively designed so that it retains excessive moisture within the exterior walls, leading to toxic mold growth. Claim is made against the homeowner’s carrier. The claim is paid. The property carrier has every reason to subrogate against the mobile home manufacturer and others, such as testing service companies, involved in certifying the home for occupancy. Such a suit can proceed upon theories of negligence in design, strict liability in tort (defective product), breach of warranty of habitability, and other breach of contract theories. See, e.g., Leverence v. USF&G, 432 N.W.2d 218 (Wis. 1990) (homeowners filed suit against testing and inspection company). •
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