By Alison Rice. Mold hysteria took a hit in December, when a Texas appeals court judge sliced a jury's news-making $32 million award to a homeowner for mold and water damage.

The state's Third District Court of Appeals, saying that there was "no evidence" that the insurance company had acted in bad faith, eliminated the $17 million in punitive damages that had been awarded to homeowner Melinda Ballard in her suit against Fire Insurance Exchange, an affiliate of Los Angeles-based Farmers Insurance Group. The court, which also ordered $8.9 million in attorney's fees to be recalculated, left alone a $4 million award for actual damages, in addition to the $2 million in claims the insurer had already paid.

Ballard plans to appeal the ruling, according to her attorney, William Fred Hagans. "We are disappointed that the appeals court second-guessed the jury," he says.

(For those who've always wondered who built the now-infamous Ballard home in Dripping Springs, Texas, court records offer little satisfaction: Ballard and her family bought the $275,000 house in a 1990 foreclosure sale.)

For Farmers, who paid more than $300 million in mold claims in the first six months of 2002 alone, the award reduction was "clearly a step in the right direction," according to the company, but it's been a challenging year. In September 2002, the insurance company announced it would not renew its Texas homeowner policies, citing excessive claims and unfair state insurance requirements--a decision it later reversed.

As welcome as the award reduction may be to worried builders, they shouldn't let down their guard on construction defect issues. "No one should think the mold crisis is over," says Robert Hartwig, chief economist for the Insurance Information Institute in New York. "This did not change state law. The court simply said the Ballard verdict was too high. I don't think that's enough to dissuade the majority of attorneys who are pressing these cases in Texas and elsewhere."

Big and Bigger

Mold claims cost more than 10 times the average homeowner's insurance claim.

$3,000: Average homeowner insurance claim.

$35,000: Average mold claim.

Source: Robert Hartwig, Insurance Information Institute