Once upon a time, developers put up buildings, landlords leased out space, and nobody feared the big bad “L” word: litigation.

Then, decades ago, things began to change. First, the accident-prone began suing property owners when they slipped and fell. Next, their lawyers started branching out, attacking not only the property owner, but also the landlord, developer, construction firm and anyone else who ever had anything to do with the site of the accident.

In the 1990s, a real cash cow appeared for those interested in suing anyone connected with real estate. Sick building syndrome (SBS) has continued to be a boondoggle for landlords, constructions firms and others battling to determine whether reported cases are real or imagined, and who should pay for those that are legitimate.

Most recently, SBS lawsuits and expensive indoor environmental cleanups have touched off a rash of litigation between property owners and their insurance companies. This has left the courts to decide who should pay, with insurance companies arguing they are not liable. So when an SBS outbreak results in high costs for a property owner, who should pay? To answer that question, let’s first look at a quick SBS primer.

What is SBS anyway? According to the Environmental Protection Agency, SBS “describes situations in which building occupants experience acute health and comfort effects that appear to be linked to time spent in a building, but no specific illness or cause can be identified.”

The syndrome can be caused by a wide range of factors, from building design and maintenance to air circulation and hypochondria. That’s right. SBS often is in the minds of groupthink-seized employees. In fact, in 1992 more than 40 EPA employees claimed the agency’s headquarters building was making them sick. The government promptly shut the building down and began testing. But no SBS factors were ever found, meaning it was literally a figment of employees’ imaginations.

But according to a 1996 study by Cornell University, at least one in every five occupants working in one of every 35 buildings had experienced symptoms of SBS. And according to the EPA, indoor pollution can actually exceed the level of outdoor air pollution by staggering multiples of two to 100.

As for the real cases of SBS, look no further than the energy crisis of the 1970s to understand why SBS exists. At the time, fears about continual energy shortages prompted architects to design energy-efficient buildings. Meaning air-tight buildings. This led to recirculated, stagnant indoor air, creating a plethora of indoor illnesses.

Plus, a growing list of commonly used products now has been put on the SBS hit list. This includes air fresheners, gas stoves, new carpeting, hobby supplies, paint, pets, dry cleaning, chemicals and garage car exhaust. These substances now are considered contributors to declining indoor air quality, putting them – and homebuilders – at risk of SBS litigation as well.

But back to the effects of SBS on commercial property owners. Once SBS is detected, a wide array of expenses can be incurred. These include everything from consultant fees, personal injury claims, new roofing, windows, doors and HVAC systems.

When facing these potentially financially devastating bills, most property owners turn to their insurance companies. But insurance firms have been attempting to turn claimants away by relying on something called the “absolute polluter’s exclusion.”

The insurance industry started placing this exclusion in its policies about two decades ago. These clauses were meant to limit liability from damages resulting environmental pollution – the outdoor kind.

Faced with large claims from indoor pollution, the industry is understandably attempting to avoid paying out. But they are not winning their cases. For the most part, courts are siding with builders, property owners and others trying to stick their insurers with the bill.

Several cases are currently in the system, however, that may change this trend. In the meantime, insurance companies will continue to bear the burden of SBS remediation and litigation.

For more articles by Lesley Hensell, please press here.

Published: February 9, 2001

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Lesley Hensell covers commercial real estate and financial issues for Realty Times. Based outside of Dallas, Lesley works with high-tech and real estate clients as an independent marketing and public relations consultant. She also writes for several publications, including the Dallas Morning News. E-mail Lesley at: lhensell@earthlink.net