$32
million award in toxic-mold suit slashed
Dec. 19, 2002
Associated Press
AUSTIN - In a high-profile case involving
a mold-damaged home, a state appeals court today reduced a jury verdict
against Farmers Insurance Group from $32 million to $4 million plus
interest and attorneys fees.
The Third District Court of Appeals said
a Farmers affiliate violated the state Deceptive Trade Practices Act.
But the court rejected the jury's
findings that Farmers committed fraud and failed to deal fairly with
Melinda Ballard, who had sued over water and mold damage in her 22-room
Southern mansion in Dripping Springs.
The appeals court left intact a $4
million award for actual damages but threw out $17 million for mental
anguish and punitive damages. The court also threw out assorted small fees
and ordered that $8.9 million in attorney's fees be recalculated and
likely reduced.
Ballard's case was probably the most
prominent of many mold claims filed recently against insurers in Texas.
Ballard, dressed in a gas mask and head-to-toe white protective suit, was
pictured on the cover of the New York Times Magazine last year.
The huge jury verdict for Ballard last
year sent shock waves through the homeowners insurance industry, which has
blamed rising claims for mold and water damage as a key reason behind
escalating premiums.
Farmer's saw a measure of redemption in
the appeal court's ruling Thursday.
"We are pleased that the court affirmed
everything that we said all along; that we did not commit fraud or
knowingly act in bad faith," said Michelle Levy, a spokeswoman for Los
Angeles-based Farmers.
Farmers is the state's second-largest
home insurer with about 700,000 Texas customers.
Ballard said she would appeal the reduced
verdict, which could take the case to the Texas Supreme Court.
Thursday's ruling means "an insurance
company can rape and pillage without any form of penalty," said Ballard.
"It's going to be a blood bath. If there are no penalties to punish bad
behavior, what in the hell is going to stop them?"
Ballard and her husband, Ron Allison,
said they had to leave their home in 1999 after toxic black mold made it
uninhabitable.
Their lawsuit against a Farmers
affiliate, Fire Insurance Exchange, went to trial in Travis County. The
couple said the company failed to adequately and swiftly cover repairs for
a water leak, allowing the toxic mold Stachybotrys chartarum to overrun
their home and damage their family's health.
The Alliance of American Insurers, a
Downer's Grove, Ill.-based trade group that counts more than 300
property-insurance companies as members, said Ballard's case and its large
award prompted "mold hysteria" nationwide
"The original inflated award has been the
trigger for a mold hysteria that has swept Texas and the nation," said Joe
Woods, the group's Austin-based assistant vice president for the
Southwest.
Insurance companies had pointed to the
$32 million judgment as a target for trial lawyers to bring even more
lawsuits, prompting more expensive premiums for policy holders.
"Enterprising plaintiffs' attorneys will
discover that mold isn't as golden as they once thought," Woods said.
The consumer group Texas Watch criticized
the ruling, saying it was bad for policyholders.
"Unfortunately this decision sends a
message to insurance companies that says you will not be held responsible
if you delay, deny, hassle and mistreat Texas families or Texas
claimants," said Dan Lambe, the group's executive director.
Ballard, who is also president of a group
called Policyholders of America, which claims more than 400,000 members,
said insurance companies and not claim-filing homeowners were to blame for
rising premiums.
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