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The court, the Third District
Court of Appeals, said a Farmers affiliate violated the state's Deceptive
Trade Practices Act, but it rejected the jury's findings that Farmers
committed fraud and did not deal fairly with the homeowner, Melinda Ballard,
who had sued over water and mold damage in her 22-room house in Dripping
Springs, a suburb west of Austin. The appeals court left intact a
$4 million award for actual damages but threw out $17 million for mental
anguish and punitive damages. It also threw out assorted small fees and
ordered that $8.9 million in lawyers' fees be recalculated and probably
reduced. Ms. Ballard's case is probably
the most prominent of many mold claims filed recently against insurers in
Texas. The huge jury verdict for her last year sent shock waves through the
homeowners insurance industry, which has cited rising claims for mold and
water damage as a main reason for escalating premiums. Farmers, which is based in Los Angeles, said it saw a measure of redemption in today's ruling. "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," Michelle Levy, a spokeswoman for the insurer, said. Farmers is the second-largest
home insurer in Texas, with about 700,000 customers here. Ms. Ballard said she would appeal the reduced verdict, which could take the case to the Texas Supreme Court. The appeals court ruling means "an insurance company can rape and pillage without any form of penalty," Ms. Ballard said. "It's going to be a blood bath." "If there are no penalties to
punish bad behavior," she said, what "is going to stop them?" Ms. 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 here in Travis County. The
couple said the company did not to cover repairs for a water leak adequately
and swiftly, thereby allowing the toxic mold Stachybotrys chartarum to
overrun their home and damage their family's health. The Alliance of American Insurers, a trade group based in Illinois that counts more than 300 property-insurance companies as members, said Ms. Ballard's case and its large award prompted "mold hysteria" nationwide. 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 policyholders. As a result of today's ruling,
"enterprising plaintiffs' attorneys will discover that mold isn't as golden
as they once thought," Joe Woods, the alliance's vice president for the
Southwest, 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 executive director of Texas Watch.
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