The pace of Chinese drywall litigation is increasing, with several new class action cases filed in the last few months alleging classes of homeowners from Florida, Louisiana and nationally, who were affected by allegedly toxic components in certain drywall manufactured in China and used during post-Katrina reconstruction and the housing boom.
The China-based drywall manufacturing entities are alleged to have known of the problems with the drywall and the suits also name various U.S. distributors and construction companies who installed it in U.S. homes. There has been no definitive regulatory response yet, though various federal entities, including the EPA, are addressing the issue.
The suits allege that particular substances in the drywall emit volatile organic compounds that corrode HVAC coils, refrigeration units, plumbing, electrical, and other metal and chrome fixtures, and produce a noxious “rotten egg”-like smell. The suits also raise allegations of personal injury, ranging from cough, nausea, shortness of breath, fatigue, headaches, and dizziness to miscarriage and reproductive health issues.
The suits are now pending in federal court (at least one of which was removed to federal court pursuant to the CAFA), and were recently consolidated under the multidistrict litigation rules and will be managed in the Eastern District of Louisiana. The suits allege various theories of negligence, breach of implied warranty, state unfair trade practices laws, and strict liability.
Given its scope and quickening pace – the judge presiding over the multi-district litigation has indicated that a number of test cases will be expedited to trial by the end of the year – the litigation will likely have a substantial impact on P&C carriers, raising coverage and defense issues pertaining to first party property and third party liability coverages, excess and reinsurance. Jorden Burt will continue to monitor developments.