The crash of the housing industry is not the only thing spoiling business. Another rotten egg also poses a serious financial threat. Chinese drywall litigation has come to life and is growing quickly. If you think you can avoid the rising storm of Chinese drywall litigation, you may be as naïve as those who thought they could avoid the powerful destruction of the hurricanes. The problems began when homeowners with newly installed Chinese drywall began to discover that their homes smelled like rotten eggs. Besides the smell, homeowners also discovered serious corrosion and failure of mechanical equipment. Some homeowners even experienced headaches, allergic reactions, respiratory ailments, nose bleeds and other adverse health conditions. Testing revealed that Chinese drywall contains volatile sulfur compounds that release toxic gasses which smell similar to rotten eggs. The testing also demonstrated these gasses caused damage to metal. It was no surprise that lawsuits were soon filed. The surprise was that a builder filed first. Lennar Homes sued manufacturers, suppliers, and installers. Lennar also took action to save its reputation by offering to move homeowners out and performing remediation in exchange for homeowners releasing claims against Lennar. Homeowners also filed individual and class actions although no class has been certified yet.
The litigation alleges that Chinese drywall is defective because it contains toxic materials harmful to persons and property. Product defect claims are usually made against everyone in the supply chain including manufacturers, importers, suppliers, and contractors. Product defect claims can result in strict liability for anyone in the supply chain. Claims for negligence, breach of contract, breach of warranty, and deceptive and unfair trade practices are also typically alleged. All of these causes of action involve serious allegations and the potential for large monetary awards for the harm caused to persons and property. Even if a homeowner decides not to sue you, another defendant could bring you into the litigation. There is also the potential for workers to make claims that they were harmed from exposure to Chinese drywall. At this point, you are probably thinking you are glad you have insurance. The insurance industry is likely thinking otherwise. Homeowners filing claims against their own insurer have had their claims denied as not covered. Insurance litigation regarding coverage is likely to be a large aspect of Chinese drywall litigation. Some of the complex insurance issues certain to be litigated involve coverage periods, whether the event is sufficient to trigger coverage, and whether coverage is excluded by standard exclusions such as pollution.
Currently, there are more questions than answers about Chinese drywall. The government continues to investigate and track claims and while the damage caused to property has been established, health concerns are less clear. Protocols for remediation and disposal of Chinese drywall do not exist. Although Congress has proposed legislation to deal with the mess, the timing of this legislation and its ultimate impact is uncertain. Given the amount of Chinese drywall imported to Florida, it seems likely that courts will be sorting out responsibility and awarding damages for quite some time. It is best to determine your exposure, insurance coverage, and legal rights before litigation.
Tags: chinese drywall, construction claims, Construction Law
