It’s All Chinese To Me – The Recent Drywall Dilemma
There are an estimated 35,000 homes in Florida that were built with Chinese drywall from 2004 to 2008, some 30% of the installations nationally. Contaminants in this drywall react with moisture in the air to produce noxious gases, including sulfur, causing a home to have a strong rotten egg smell. Beyond deleterious effects on physical health, Chinese drywall has been linked to corrosive damage to electronic equipment and appliances. While it is fairly easy to determine if drywall is Chinese in origin, as it will bear a “Made in China” marking, it can be difficult to ascertain the specific manufacturer of the drywall at issue when such a marking is the only identifier contained on a section of drywall.
A consolidated federal class action lawsuit relating to property damages arising from Chinese drywall, which contains cases from several different states, is underway in Louisiana; trials are expected to begin in early 2010. At the same time, there are a number of Chinese drywall related suits that have been filed by and against a variety of entities, including homeowners, homebuilders, installers, manufacturers of the product in China, suppliers and insurance companies. A number of these suits have been made more arduous by the need to translate court documents into Mandarin Chinese. Presently it does not appear that Chinese drywall issues have put any companies out of business, though the financial and emotional strains on affected homeowners have been tremendous.
Exacerbating the problems of affected homeowners, insurance companies have begun to drop coverage or refuse to renew policies held by homeowners with Chinese drywall-tainted residences. Homeowners whose coverages are dropped are then placed at risk of foreclosure because their mortgage companies require the property to be insured. There is presently no law which prevents an insurance company from canceling a policy due to the presence of Chinese drywall.
It is estimated that it costs between $100,000 to $150,000 a house to remove and replace problematic drywall and attached electrical equipment. Removal of the tainted drywall seems to be the only effective remedy to rehabilitate an affected house. Because drywall is installed throughout a house, this removal process is inherently drastic and could well entail stripping a house down to its studs.
Chinese Drywall, & Community Development Block Grants
Florida Senator Bill Nelson has requested that state lawmakers adopt a program similar to one in Louisiana (another state that has been greatly affected by Chinese drywall issues) in which Community Development Block Grants assist homeowners with Chinese drywall concerns. He has also asked the Federal Emergency Management Agency to ascertain if federal disaster monies might by used to help homeowners that have been displaced from their Chinese drywall-containing houses. Louisiana homeowners, however, have not yet seen any such block grant money because the U.S. Department of Housing and Urban Development (which administers these grants) still has to approve the state’s plan. Recently, though, homeowners in Miami-Dade County, Florida were advised that any with defective drywall who have already or will apply for permits to repair their homes will have permit and inspection fees waived.
Additionally, the Consumer Product Safety Commission (CPSC) which began an investigation into Chinese drywall, the largest in its history, has determined that there is a link between the Chinese drywall and the problems with corrosion in homes that have it. While the study found that it is Chinese drywall that emits higher concentrations of strontium and sulfur gases than U.S.-made drywall, it is still investigating whether such emissions are to blame for the myriad health problems being reported by homeowners. The CPSC went on to say that the problem stems more from how the drywall is made than where it comes from. While the Commission has also consulted with Chinese officials on this issue, it has not addressed whether any Chinese entities are willing to pay for damages caused by defective drywall. What it is working on is finding a way to easily identify problem drywall and more importantly, a means to treat affected homes.
While mandatory consumer protection standards for drywall may come to fruition at some future time, for the present we can expect that investigations, recriminations and litigation will continue as homeowners, homebuilders and all the entities in between seek redress for an issue whose resolution is bound to be time-consuming, far-reaching and expensive.
In the nation’s first jury trial involving Chinese drywall, a Miami-Dade County jury awarded $2.4 million in damages to a couple whose $1.6 million house was affected by this product in an action against a drywall supplier. In addition to the costs of renovating the home, the damages award also included compensation for loss of enjoyment of the home and the stigma that may affect its resale value.
One twist in this case was that the supplier had entered into a confidential agreement with the Chinese manufacturer to return drywall the supplier had purchased after discovering that it was defective. This agreement was unsealed at the trial but had never been revealed to purchasers of homes containing the defective drywall. The plaintiff homeowners’ argument that the confidential agreement showed that the supplier knew the drywall was defective seems to have resonated strongly with the jury.
Additionally, two lawsuits relating to Chinese drywall have recently reached settlements. In Florida, a class action suit against a construction company and its affiliate, who used defective drywall in the homes they build, has resulted in a proposed settlement to affected homeowners of just over $6 million. The Plaintiff’s attorney still intends to bring claims against the manufacturer, importer and domestic distributor of the defective drywall on behalf of the 152 families who are eligible to join the class action suit. Meanwhile, in Louisiana, drywall manufacturer Knauf Plasterboard Tianjin settled with two homeowners on the eve of trial. Under the settlement, the manufacturer will hire a contractor to remove the drywall and repair certain areas of the Plaintiffs’ homes. The homeowners will also receive cash payments for relocation expenses.
In light of the thousands of Chinese-drywall related lawsuits which have sprung up around the country, the settlements of these two cases may indicate a trend on the part of drywall-related Defendants to settle these matters prior to the time and expense of trial. As of now, however, it is too early to tell.