Defective Chinese Drywall Problems (11/09)

Builders and environmental consultants began investigating Chinese drywall after reports that the potentially toxic drywall caused unpleasant (rotten egg) odors. A class action lawsuit by homeowners affected with Chinese drywall is scheduled to be heard in September 2010 and is being called the largest construction defect case in U.S. History.

• 23 states had reported 681 cases of health problems and/or metal corrosion associated with Chinese drywall. (July 30, 2009 per Florida Department of Health and US Consumer Product Safety Commission

• Those states hardest hit are Florida, Louisiana, Alabama, Georgia and Virginia, but complaints from Arizona and California are also increasing.
  
  Consumers in 24 states have filed a total of 1,174 Chinese drywall complaints with the Consumer Products Safety Commission (CPSC). A CPSC spokesman said the agency has identified a "handful" of Chinese drywall makers that supplied the suspect drywall, although the agency hasn't publicly named them. The agency's investigators visited gypsum mines and drywall facilities in China in August.

• Drywall plasterboard manufactured in China was first introduced to the United States in 2000 or early 2001 with spike increase 2004 and 2006.  It is estimated at least 550 million pounds of Chinese drywall has been imported.  Major ports of entry include Miami and Port Everglades, FL, Long Beach and Oakland, CA, Seattle and Tacoma, WA, and Vancouver, British Columbia.

The Chinese drywall, also known as gypsum or wallboard, is under investigation for emitting sulfide fumes suspected of causing the homeowner complaints. Chinese drywall was manufactured with a fly ash which is the residue generated from the combustion of coal. The fly ash, when exposed to heat and humidity, emits a noxious gas containing sulfur. Sulfur compounds accelerate corrosion.

Lawsuits allege fumes from the defective Chinese drywall have resulted in corrosion damages to all metal parts of the house including electrical systems, copper piping, HVAC and other metal fixtures. Non metal parts of the house have been damaged by foul smelling and noxious sulfur dioxide fumes. Homeowner complaints include respiratory problems, bloody noses and recurrent headaches.

Lawsuits

Lennar Corp. v. Knauf Plasterboard Tanjin Co., et al.,:  This was the first Chinese drywall lawsuit filed.  It was filed in the U.S. District Court for the Middle District of Florida filed on January 30, 2009 against the  manufacturer Knauf Plasterboard Tianjin, the German parent company, The Knauf Group, Banner Supply, a Florida supplier and a China based exporter Rothchilt International Ltd., and Lennar the builder.  The suit claimed defendants made deficient and defective gypsum drywall, failed to establish quality control for detecting defects and failed to warn their customers that the drywall was defective. 

Harrell v. South Kendall Construction Corp.:  This is a class action law suit filed in state court in Miami-Dade County, FL. 

Reisz, et al., v. Knauf Plasterboard Tianjin Col, et al.: Class action filed in U.S. District Court for the Southern District of Florida

Vickers, et al., v. Knauf Gips KG et al:  Class action filed in U.S. District Court for the Southern District of Florida

Swidler et al. v. Georgia-Pacific, et al: The plaintiffs claim that  Georgia-Pacific manufacturer's American-made drywall using synthetic drywall similar to that found in Chinese drywall. 

Litigation is occurring between homebuilders and manufacturers and distributors.  It is expected that litigation between homeowners and their insurance companies will occur as well.  Owners and property managers of commercial residential properties are putting insurance carriers on notice with claim reports like this:

As of September 28, 2006 the residents occupying unit 3123 noticed an unusual smell during their move-in. The resident then notified the office that their silverware had become very tarnished a few months after moving in. Also, the resident said that they had smelled a metallic acid smell in the apartment and the wife was feeling ill.

As of 2007, the resident made a work order request due to their air conditioning cooling improperly. During inspection of the a/c unit, it was noted that there was a leak detected in the a/c coil causing the freon to escape the system. This was highly unusual that a new unit less than a year old would show this defect. Thinking it was a manufactures defect the coil was replaced with a new one. After this repair the a/c unit did not show anymore signs of trouble during the rest of 2007 and the whole of 2008. 

 As of the beginning of 2009, the resident requested service for his water heater. He stated that it was not heating up the water properly. This unit was only two and a half years old and we determined that the thermostats and elements would need to be replaced. During the repair we noticed that the thermostats were corroded and falling apart and the heating elements were corroded inside and out. This was very strange for them to look like this for such a new water heater.

 As of July of 2009, the resident called in a work request that his a/c was not cooling sufficiently. During the maintenance repair of the a/c unit a leak was detected in the coil that was replaced in 2007. Upon a visual inspection of the coil, we noticed that the copper tubing on the coil was showing major signs of corrosion and deterioration. The coil was replaced but we suspected that there was something seriously wrong in this unit.

 As of September 29, 2009 the residents moved out of the unit. We took this opportunity to do a full visual inspection of the apartment. We noticed that the copper wiring in all of the light fixtures were showing the same signs of black corrosion that was spotted on the a/c coil tubing and water heater thermostats/elements. We then went online to do a search on copper turning black and what could cause it. We then got a result that it could be Chinese Drywall. So we then proceeded to cut a hole in a wall that was replaced during renovation, and saw in big print CHINA on the back of the section of drywall.

According to the National Underwriterbased on Publicly available information and experience in estimating past construction-related torts, we estimate total economic losses could fall in the $15 billion to $25 billion range-numbers that rival some hurricanes but fall short of the price tag for asbestos. As for legal fees, we know from other construction defect experience that can be substantial, representing on average 40-to-50% of the total claim costs.

Civil judgments in U.S. courts are not enforced in China, and suing through international court is expensive and time-consuming.

House and Senate Democrats are currently investigating whether Chinese drywall problems will qualify homeowners for special tax deductions under casualty loss tax code laws, and some senators are calling for a Chinese drywall recall.