During the massive reconstruction efforts in the aftermath of the hurricanes that struck the Southeast and Gulf Coast regions of the United States in 2004 and 2005, a shortage of American-made drywall caused contractors and distributors to look to foreign suppliers. From 2006 to the present, at least 550 million pounds of Chinese-made drywall were imported into the United States. The imported drywall may have been used in as many as 100,000 homes nationwide. While the largest concentrations of imported drywall can be found in Florida and other Southeastern states, it is believed that the imported drywall has made its way into Minnesota.
Homeowners are now alleging that the Chinese-made drywall is defective. Over the last several months, more than 100 lawsuits have been filed in state and federal courts around the United States relating to the drywall. In addition, since December 2008, the U.S. Consumer Product Safety Commission has received 365 complaints from residents in 18 states. It is claimed that abnormally high levels of sulfur and other organic compounds in the drywall cause it to emit gases when exposed to heat and humidity. These gases allegedly cause respiratory and other health problems in humans and corrode air-conditioner coils, appliances, electrical systems and other metal components in homes.
While the claims are currently focused in the Southeast, claims have also been made in other regions of the United States. It is believed that the problems associated with the drywall may take longer to develop in areas with cooler, drier climates. If you believe you may have exposure to claims relating to defective Chinese-made drywall, as a contractor or supplier, consider the following:
- Be aware that documents generated in connection with an investigation that you conduct on your own may at some point be discoverable in a lawsuit. Be thoughtful about your internal and external communications on these issues and the fact that a letter or e-mail you send today might at some point be a plaintiff’s Exhibit A to the jury.
- Consider identifying the subcontractors and/or suppliers that may be responsible for installing and/or supplying the allegedly defective drywall. Review the contract documents relating to these subcontractors/suppliers and evaluate your ability to pursue these parties and/or the drywall manufacturers in the event of a claim.
- If you learn that defective drywall was installed, consider your obligations to notify the owner and mitigate damages. If the health effects from prolonged exposure to defective drywall are serious and you decide to say nothing, there may be serious legal consequences. Also, if you receive notice of a claim, but decide to do nothing, the property damage may get progressively worse. An insurer may not cover costs associated with damages you could have prevented.
- Consider reviewing your insurance policies to determine available coverage and any potential obstacles to obtaining coverage. If you learn that you may have potential exposure for defective drywall claims, consider whether you have an obligation to put your insurers on notice. Some insurance policies require notice of claims and potential claims.