Knauf Plasterboard Tianjin Co., one of the companies tangled in
litigation over defective Chinese-made drywall, said it has reached
a settlement with builder Beazer Homes USA Inc., an indication that
Knauf is moving quickly to settle claims before lawsuits go to court.
Atlanta-based Beazer didn't respond to request for comment. But Kerry
Miller, a partner at New Orleans law firm Frilot LLC, which represents
Knauf, confirmed that a settlement had been reached. Mr. Miller said
Knauf, known as KPT, is in talks with between six and 10 other builders
that had used its Chinese-made wallboard, ranging from big players
to mom-and-pops, and settlements are expected within weeks.
Builders have been hit by a rash of lawsuits from homeowners, who
complain that defective drywall, also known as gypsum board, imported
from China during the housing boom is generating sulfurous odors,
corrodes metal and, in some case, causes health problems. The home
builders, under pressure to fix affected homes, are suing the manufacturers
and other parties to cover their costs.
Builders will have to document that their problem drywall did indeed
come from KPT and show reasonable repair costs.
"We have a lot of people calling us up and saying we have drywall
that says 'Made in China' on it and they assume that it's ours,"
Mr. Miller said. "But it's not necessarily ours."
Beazer, in its most recent quarterly report, said it has identified about 50 homes in Southwest Florida where subcontractors installed defective product in fiscal 2006 and 2007. It has warranty reserves of nearly $27 million, a figure that could grow should additional cases be confirmed.
Another homebuilder, Lennar Corp., meanwhile, has set aside nearly
$81 million to repair about 750 homes in Florida. In addition to rampant
construction during the housing bubble, the state used imported drywall
as it rebuilt from hurricanes in 2004 and 2005.
The problematic product also wasn't limited to the Sunshine State:
The U.S. Consumer Product Safety Commission has received nearly 3,300
reports from 37 states and other areas.
Experts estimate it costs about $100,000 to pull out bad drywall
and replace corroded electrical wiring and appliances in an average-sized
home. Consulting firm Towers Watson has estimated U.S. drywall damages
of $15 billion to $25 billion.
KPT is facing nearly 200 federal lawsuits, mostly from homeowners,
over the defective drywall. Mr. Miller, the manufacturer's lawyer,
said that three builders have sued the company.
Two of them are independent companies based in Florida—Heritage
Homes of Northwest Florida and Mitchell Co. Beazer made claims against
KPT but never formally filed suit.
KPT has been working to settle with builders ahead of potentially expensive court decisions.
As part of a suit against different drywall manufacturer, Taishan
Gypsum Co., a court awarded $2.6 million in April to seven Virginia
families. That averages more than $371,000 per homeowner.
Also, last month, a federal court in New Orleans awarded $164,000
to a Louisiana homeowner who claimed faulty KPT drywall had been installed
in the family's house.
In that decision, the court relied on information provided by Beazer,
which developed a remediation protocol based on fulfilling the warranty
agreement in the "most practical and cost-effective way possible."
Beazer's process replaces everything from cabinetry to affected plumbing
components.
Beazer was one of the first builders to step up and fully remediate
troubled homes, said Chris Seeger, a partner with Seeger Weiss LLP,
a firm representing families suing KPT.
"There's really no defense in this drywall," he said. "The
product is defective."
Repairing the homes might address the distinctive "rotten egg"
odor, but the possible health effects, which remain under investigation,
weren't addressed at either trial.
That's one reason why John C. "Chuck" Fowke, president of the Florida Home Builders Association, questioned whether settlements that provide homeowners money for remediation work go far enough.
Do I Have A Chinese Drywall Case?
Reports are indicating Chinese drywall emits a sulfur compound that
corrodes wiring, air conditioning coils and other metals and may cause
health problems from chronic exposure. Chinese Drywall News
online Resources
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