Stop Restoration From Leading to Mold Problems

August 12, 2004
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Not only can mold put your company on the bench, it could put you in front of one, too.


Q: I am hearing stories of more water-damage restoration contractors being sued for causing or contributing to mold problems in buildings that they have dried. Are there any practical steps I can take to protect my business?

A: There is a lot of anecdotal evidence that water damage restoration firms are being sued more frequently than they have been in the past. Such firms may be at higher risk of lawsuits today for several reasons.

  • Since restoration contractors usually carry general business and pollution-liability insurance, they may be considered to have "deep pockets."
  • Restorers are always under pressure to perform their services in a prompt and cost-effective manner. As a result, pre-existing conditions, hidden mold in adjacent areas, and other problems may not be recognized or addressed properly.
  • In attempting to meet expectations of others with regard to price or time, restorers may not thoroughly dry a structure. This can cause or contribute to mold amplification, which may result in property damage and/or health problems for occupants.

    These risk factors are greatly aggravated when restorers fail to adequately document their activities. Worse, inadequate documentation frequently goes along with a lack of communication with materially interested parties. In turn, inadequate communication often contributes to a lack of trust between restorers and their clients.

    Having said this, there will always be situations where a restorer performs every aspect of his or her service in a competent and professional manner and he or she still gets sued. It's simply a fact of doing business in our litigious world.

    There are a number of strategies that might help companies protect themselves against such lawsuits, some of these are discussed briefly here, in no particular order. They can be divided into two main categories: changing the way your business in general is structured or run, and changing the way you run individual projects.

    Modify How You Run Your Business
    Corporate structure. It seems likely that, for the foreseeable future, those involved with water-damage restoration or mold remediation will continue to be at high risk for being sued. You might wish to consult with an expert as to whether you can make changes in corporate structure to limit your exposure or protect your assets.

    Insurance. Carry appropriate insurance. Engage a reputable insurance broker for assistance, preferably one with extensive experience in the restoration/remediation industry. Exactly what you are protected against by your insurance policy may not be clear to you, so you may need to spend some time researching coverage. Some companies have decided to "go bare" with respect to insurance coverage. Their logic is that if they don't have insurance coverage they won't be sued. We do not recommend this approach. If in doubt about legal implications, consult your lawyer.

    Modify How You Run Projects
    Customer relations. In many cases, customers who sue feel justified in doing so because they believe they were victimized by the company. Careful attention to building up an "emotional bank account" with the customer can provide a helpful cushion when problems inevitably arise.

    Contracts. Many restoration contractors use a "Work Authorization" rather than a full legal contract, at least when doing emergency work. Their theory is that when combining a "Work Authorization" with an "Estimate" forms a "Contract." However, in some states, this form of contract may not be legally enforceable. Every state is different. Don't rely on copies of contracts from other firms to protect you. Seek appropriate legal counsel when deciding to create your own contract documents. Your lawyer can advise you with regard to disclosures, waivers and other contract language.

    Workmanship. You are less likely to be successfully sued if you thoroughly document your compliance with industry standards. For water-damage restoration, use the IICRC S500 Standard and Reference Guide to Professional Water Damage Restoration. Keep in mind that this document was published in 1999 and much has changed in the industry since then. S500 is presently under revision.

    Until the revised edition is released, consult the IICRC S520 Standard and Reference Guide for Professional Mold Remediation for relevant principles, especially those that might be applicable when drying an environment that is or may be contaminated. For instance, according to S520, a restorer must not spread mold or other contaminants when engaged in activities other than mold remediation, such as water-damage restoration. Implementing this principle requires that the restorer use adequate controls, such as negative pressure and containment, to prevent this spread.

    Inspection. The S520 also stresses the importance of performing a thorough inspection in order to make a preliminary determination of "areas of moisture intrusion and potential mold growth." If you are going to prevent the spread of contaminants you must first determine if they exist and where they are located. This inspection must address not only the moisture intrusion problem that led to your being hired, but must also determine whether the building has pre-existing problems aggravated by the covered loss or perhaps even moisture or mold problems completely unrelated to the loss.

    Disclosure. The restorer is ethically obligated to disclose relevant information to materially interested parties. Lawsuits often claim a "failure to disclose" or "failure to warn."

    Documentation. The standards stress the importance of properly documenting the work you do. The S520, in particular, has a very extensive list of the types of documentation that might be appropriate. Among other things, such documentation needs to record the inspection, disclosure and workmanship procedures used and the results obtained. Our company has been involved, as an expert witness, with a number of lawsuits involving restorers. When hired by the defense, our biggest problem is invariably that of incomplete or inadequate documentation of the procedures used on the project. Frequently in court, he who has the most thorough documentation wins.

    If implemented appropriately, the types of strategies described above are not only likely to help you defend yourself if you are sued, they are also likely to act as a "lawsuit repellent." Attorneys are less likely to be interested in pursuing a suit against a defendant who has proof that, under the circumstances, his or her actions were reasonable, prudent and in compliance with published industry standards.

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