The Austin, Texas-based 3rd Circuit Court of Appeals has thrown out the punitive and mental anguish elements of the $32 million award, originally made in May 2001 to Melinda Ballard against Farmers Insurance Group. The court reduced the award to approximately $4 million in compensatory damages. In lieu of that reduction, the appeals court also ordered the lower court to reconsider and recalculate the nearly $9 million in attorneys' fees that were originally awarded. The appeals court upheld Ballard's claim of bad-faith dealing and said Farmers had violated the state's deceptive trade practices law. However, it found that Farmers had not acted knowingly or fraudulently.
"While the Ballard case is more about bad faith than mold, the original inflated award has been the trigger for the mold hysteria that has swept Texas and the nation," said Joe Woods, assistant vice president of the Alliance's Southwest Region based in Austin. "The appellate court's ruling injects a note of reality into the debate over mold-related claims."
The Alliance press release also said that "the ruling could bring some sanity to the feeding frenzy among plaintiff attorneys, many of who have founded entire practices on mold-related claims."
"With the elimination of the punitive and mental anguish damages, enterprising plaintiffs attorneys will discover that mold isn't as golden as they once thought," added Kirk Hansen, Alliance director of claims. "Attorneys looking to cash in on mold might have second thoughts."
According to Texas Insurance Department data, during 2000 and the first half of 2001 water loss claims increased six-fold and the cost of the average mold claim was $18,000, nearly five times the cost of an average homeowner's claim and almost six times the cost of an average non-mold-related water damage claim. Texas now has the highest premiums for homeowners insurance in the nation.