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Appeals court knocks down $32 million judgement in toxic mold case
JIM VERTUNO
Associated Press

AUSTIN - In a high-profile case involving a mold-damaged home, a state appeals court on Thursday reduced a jury verdict against Farmers Insurance Group from $32 million to $4 million plus interest and attorneys fees.

The Third District Court of Appeals said a Farmers affiliate violated the state Deceptive Trade Practices Act.

But the court rejected the jury's findings that Farmers committed fraud and failed to deal fairly with Melinda Ballard, who had sued over water and mold damage in her 22-room Southern mansion in Dripping Springs.

The appeals court left intact a $4 million award for actual damages but threw out $17 million for mental anguish and punitive damages. The court also threw out assorted small fees and ordered that $8.9 million in attorney's fees be recalculated and likely reduced.

Ballard's case was probably the most prominent of many mold claims filed recently against insurers in Texas. Ballard, dressed in a gas mask and head-to-toe white protective suit, was pictured on the cover of the New York Times Magazine last year.

The huge jury verdict for Ballard last year sent shock waves through the homeowners insurance industry, which has blamed rising claims for mold and water damage as a key reason behind escalating premiums.

Farmer's saw a measure of redemption in the appeal court's ruling Thursday.

"We are pleased that the court affirmed everything that we said all along; that we did not commit fraud or knowingly act in bad faith," said Michelle Levy, a spokeswoman for Los Angeles-based Farmers.

Farmers is the state's second-largest home insurer with about 700,000 Texas customers.

Ballard said she would appeal the reduced verdict, which could take the case to the Texas Supreme Court.

Thursday's ruling means "an insurance company can rape and pillage without any form of penalty," said Ballard. "It's going to be a blood bath. If there are no penalties to punish bad behavior, what in the hell is going to stop them?"

Ballard and her husband, Ron Allison, said they had to leave their home in 1999 after toxic black mold made it uninhabitable.

Their lawsuit against a Farmers affiliate, Fire Insurance Exchange, went to trial in Travis County. The couple said the company failed to adequately and swiftly cover repairs for a water leak, allowing the toxic mold Stachybotrys chartarum to overrun their home and damage their family's health.

The Alliance of American Insurers, a Downer's Grove, Ill.-based trade group that counts more than 300 property-insurance companies as members, said Ballard's case and its large award prompted "mold hysteria" nationwide

"The original inflated award has been the trigger for a mold hysteria that has swept Texas and the nation," said Joe Woods, the group's Austin-based assistant vice president for the Southwest.

Insurance companies had pointed to the $32 million judgment as a target for trial lawyers to bring even more lawsuits, prompting more expensive premiums for policy holders.

"Enterprising plaintiffs' attorneys will discover that mold isn't as golden as they once thought," Woods said.

The consumer group Texas Watch criticized the ruling, saying it was bad for policyholders.

"Unfortunately this decision sends a message to insurance companies that says you will not be held responsible if you delay, deny, hassle and mistreat Texas families or Texas claimants," said Dan Lambe, the group's executive director.

Ballard, who is also president of a group called Policyholders of America, which claims more than 400,000 members, said insurance companies and not claim-filing homeowners were to blame for rising premiums.

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