October 31, 2002
Mold Rush Days

A home is a man's castle, and every castle needs a moat to dissuade attackers. In this day and age, instead of a moat the homeowner needs knowledge of current events, a good insurance company, and common sense to fend off the hoards of lawyers and unscrupulous contractors who have encircled American communities. For years, lawyers and contractors have been utilizing scare tactics to swindle millions of dollars from homeowners and insurance companies.

The use of junk science to cheat homeowners and insurance companies started with the asbestos scare of the 1960's. Even today American cities are filled with needlessly abandoned buildings because of lawyers, unscrupulous contractors, and knee-jerk government reaction causing the evacuation of formerly valuable assets. When the lawyers, contractors and politicians milked the asbestos issue for all it was worth, they turned to the myth of radon gas, then radon gas turned into toxic poisoning, then electromagnetic waves (they're coming back again), and now mold.

But all is not lost. Scientists and medical experts, who may finally be getting the attention they deserve, are alerting the public that most mold, including allergenic mold, is not nearly as dangerous or pervasive as "mold remediation experts" claim.

Gailen Marshall, director of the Division of Allergy and Clinical Immunology at the University of Texas Medical School in Houston, said, "Mold is everywhere. For most people, mold is a mostly ignored part of their lives. For some with mold allergies, the smell can cause nasal allergy or even asthma symptoms. Yet what is increasingly clear is that their mold-related illness has nothing to do with toxic substances produced by molds."

Airborne mold spores, much like pollen, dust or animal dander, trigger allergic reactions. But mold toxins, however potentially harmful, never get into the body in high enough levels to cause harm. These mycotoxins, secreted by a dozen or so mold species, are known to be deadly to animals that ingest them in large amounts (typically while feeding on stored hay or grain).

The Centers for Disease Control and Prevention (CDC) and the Environmental Protection Agency (EPA) report that very few cases of toxic mold inside homes have been shown to cause serious human health problems, and they usually involve someone who ate very old food laced with toxic mold.

A September 17, 2002 Washington Post news story on mold reported, "Although rampant mold growth in these cases may have caused illnesses, scientists have been unable to show a clear link between some of the more frightening reported symptoms, such as memory loss and internal bleeding, and breathing in mold toxins. Three recent reviews of the medical literature found no support for the claim that toxic mold levels in the home or office can lead to chronic or life-threatening health problems. These independently funded reviews were conducted largely to educate health care professionals and industrial hygienists about mold exposure. A fourth study is now underway by the Institute of Medicine for the CDC."

The article did note, "Mold is by no means always benign. The most recent of the completed reviews, conducted in part by Norman King, an epidemiologist for a Montreal regional public health board, found a strong association between mold and respiratory problems, such as exacerbation of asthma. Scientists cannot rule out the possibility that mold levels cause more serious problems, King said, but no link has yet been demonstrated."

Coreen Robbins, an industrial hygienist with Global Tox Inc., a firm based in Redmond, Wash., says, "Toxins from mold-such as those from an infamous black mold called Stachybotrys, which is often cited in lawsuits as causing grave harm to human health-are not readily airborne, and are therefore not likely to be breathed in. Even if the toxins piggyback on spores, it's nearly impossible for them to enter the human body in large enough quantity to cause illness."

Robbins said that Stachybotrys often grows below floors and behind walls, and we are unlikely to breathe in its toxins because they cling to mold and dust particles. The mere presence of toxic mold, according to Robbins, is no indication that the air contains mycotoxins.

"This is a fairly complex topic, so it is ripe for a bit of bamboozlry," Robbins said. Cottage industries have sprung up overnight to test for and clean up toxic mold. She said newly minted "mold consultants" are participating in what "is like a huge hoax." While common sense tells us we should clean up moldy stuff indoors, Robbins said, removing floorboards, walls and ducts upon detection of a few Stachybotrys spores is often unnecessary.

Even if indoor mold in rare cases is harmful, there is the specter of an epidemic of fraud in mold claims. Jerry Johns, president of the Austin-based Southwestern Insurance Information Service, which represents the majority of the state's property-casualty insurers, stated, "Mold remediation fraud is rapidly becoming a nationwide problem."

For example, a Houston federal grand jury earlier this year indicted a local area contractor-Johnny Duane Staples, of Baytown, Texas-as heading a group involving his relatives and associates who perpetrated mold remediation scams that cost insurers over $7 million dollars as a result of 54 false claims.

The indictment states that the group would generally buy a two-story home in a residential neighborhood that they would briefly occupy. On weekends, they would remove most of the good furnishings and replace them with cheaper items. The windows would be covered with sheets and the house would be left to soak for eight-to-10 days, and then a damage report would be made.

The indictment charges that Mr. Staples and his group, acting as contractor remediators, would then generate false invoices to be given to insurers, and pay other persons to generate fake documents that went to insurers. Their activities led to charges of conspiracy, mail fraud and money laundering.

Insurers named as victims included Allstate, Farmers Group, Farmers Mutual Protective Association, General Star Indemnity Company, Heartland Insurance Group, Scottsdale, State Farm, Texas Farm Bureau, Mt. Vernon, Republic, Heartland Lloyds, Horace Mann, Kemper, and Prudential Property and Casualty.

The Houston case is currently set for trial, but has been delayed to allow plea negotiations.

Johns commented, "In addition to getting paid for the replacement of furniture and appliances, these scammers collected for living expenses, and insurers were charged two or three times what people were actually paying." He added, "With a house worth $100,000, an insurer could end up paying two or three times the cost of a home."
The mold con artists left dozens of homes in a soggy, mold-covered condition after the plotters cracked water pipes and turned on garden hoses to create damage claims. In many mold fraud cases, doors and windows of homes were sealed up to create a warm environment that cooks up mold.

Johns notes that insurance company investigators often find remediators who offer to check homes for mold sometimes intentionally exacerbate existing mold conditions after persuading residents to leave, or plant mold where it never existed. Remediators have their own testers who inspect the work, and frequently the finding is, "Oops, still got mold-have to go to work again."
Price-gouging contractors will charge insurers five times the norm for building materials, and hundreds of dollars for protective bio-hazard "moon suits" made of paper.

Johns says mold remediation fraud frequently involves repairs that are not made at all, or for which inflated rates are listed. Johns said examples of such scams involve charging for water extraction units that either are not used or employed for much less time than is charged for.

The growth in mold cases is being fueled by billboards popping up across the state, which urge homeowners to bring claims.
The problem of lawsuit abuse makes the fraud even more costly. According to Johns, adjusters fearing multi-million dollar lawsuits do everything possible, including settling questionable mold claims, to avoid litigation and the attendant risk of a huge jury verdict.

Earlier this year, Texas Insurance Commissioner Jose Montemayor started an investigation into mold fraud, but discussion of the problem has remained largely absent from the political debate. Moreover, it is Farmers and other insurers that appear to be the first targets of state legal action. Fraudulent mold claim remediators should be prosecuted under existing laws that address fraud and the Texas Deceptive Trade Practices Act.

It is time for Texas politicians in both parties to break the mold and utilize existing laws, rather than government rate controls, as the solution for a problem that involves junk science, lawsuit abuse, greed, and fraud. If policy is dictated by political demagoguery instead of sound science, economics, and common sense, Texas' insurance industry, a pillar of our economy, will become the proverbial baby thrown out with the bathwater.


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