Ballard "Toxic Mold" Appeal Allowed (In Part)

On December 19, 2002 the Texas Court of Appeals released its judgment in the now infamous case of Ballard v. Fire Insurance Exchange, one of the first and certainly the most prominent "toxic mold" cases that has spawned thousands of similar claims in the United States.

Beginning in December 1998 the 7,400 square foot house owned by Ballard in Dripping Springs, Texas (perhaps appropriately named) started to encounter plumbing leaks. Ballard started filing claims with her insurance company but it wasn't until she met a so-called "indoor air quality consultant" on a plane flight that she learned of "toxic mold".  Following the IAQ consultant's involvement, the claim started to spiral out of control leading ultimately to a jury verdict on May 31, 2001 against the insurer for the following amounts:

• $2,547,350 to replace the home;
• $1,154,175 to remediate the home;
• $2,000,000 to replace the contents of the home;
• $350,000 for past and future additional living expenses;
• $176,000 for Ballard's costs of the appraisal process invoked by the insurer;
• $5,000,000 for Ballard's mental anguish;
• $12,000,000 in punitive damages; and
• $8,900,000 for attorney's fees

It is apparent that the Texas Court of Appeals didn't think much of the Ballard case.  It commented,

"Were we the trier of fact in this case, we may not have been persuaded that [the insurer breached] its duty of good faith and fair dealing toward Ballard.  That determination, however, is not ours to make.  An appellate court may not substitute its judgment when a jury's finding is grounded in sufficient evidence… Viewing the evidence in the light most favourable to Ballard, we hold there is some evidence to support the jury's finding [of breach of good faith], and we cannot say that it is so weak as to be clearly wrong or  manifestly unjust [to let the judgment on this point stand]".

• the Court of Appeals affirmed the lower court's summary judgment dismissal of the plaintiff's personal injury claims on the grounds that the so-called expert's opinions were scientifically unreliable and therefore inadmissible to prove that the mold in the house had caused the plaintiff's alleged "toxic encephalopathy";
   
• The Court ruled there was no evidence that the insurer had knowingly breached its duty of good faith and hence the award of $17 million for mental anguish and punitive damages was set aside; and
   
• The Court ruled there was insufficient evidence to support the jury's findings that the insurer had failed to appoint a competent and independent appraiser or that there was fraud or mistake in the appraisal decision, hence the $176,000 award for appraisal costs was set aside; 

In the result Ballard came away with an award of approximately $4 million plus interest and a direction that the multi-million dollar award for attorney's fees be sent back to the District Court for appropriate adjustment.

The $4 million award which survived the appeal purportedly 
represented Ballard's "actual damages" i.e. out of pocket losses.

It will be a rare case indeed where a mold claimant's "actual damages" exceed even a fraction of that amount.

The key part of the decision is the setting aside of the punitive damage award for bad faith.  It remains to be seen whether this will help stem the tide of mold litigation against insurers.

The Ballard case is fascinating reading.  The Texas Court of 
Appeals' judgment can be accessed at 
http://www.cwilson.com/insurance/reviews/Ballard.pdf
and Nigel Kent's views on the subject ("Much Ado About Nothing") are available on the Clark Wilson LLP website.