About four years ago, a key appellate court decision in Manhattan known as the “Fraser decision” (Fraser vs. 301-52 Townhouse Corp.) blocked millions of dollars in legal claims for damages related to the health effects of mold in buildings. The decision essentially stated that there was no scientific consensus that air-borne mold spores caused illnesses. However, in March of this year, the same appellate court overturned a lower court ruling allowing a toxic mold lawsuit to go forward, finding that scientific literature was now “indicative of a causal relationship” (Cornell v. 360 W. 51st St. Realty, LLC).
This new ruling has set precedent and confirmed that the scientific studies are sufficient for the courts to show a health link based upon exposure to mold. This decision could influence other courts as well and should, therefore, be of particular concern to landlords, co-ops and condo boards not just in New York but across the country, as this new ruling potentially opens the door for thousands of similar lawsuits.
Insurance Reaction to Mold Decision
From an insurance perspective, this coverage is still widely available via the environmental insurance markets, and they have not yet shown signs of changing their underwritten appetite for mold-related risk. But the carriers are closely monitoring this new development for any claim trending that may take shape in the future, and we anticipate closer underwriting scrutiny on an insured’s “Mold/Water Control & Response Plan.”
(Perhaps now is a good time for our clients to consider purchasing long-term, multi-year policies.)
Our environmental practice is actively advising our clients about this subject, but I can also answer your questions in the comments section below.