The Chinese Drywall court ruling and what it means to you: Remediation and Compensation

On April 8th, U.S. District Court Judge Eldon E. Fallon, who presides over all toxic Chinese Drywall cases in federal court, issued an important ruling about the acceptable methods to remediate the damage caused by the defective drywall and the compensation to which affected homeowners may be entitled. See Press Release. While the decision was the result of a hearing involving the homes of seven Virginia families, the judge noted that the overarching issues will impact all homeowners with Chinese drywall cases in federal court.

In this article, we provide an overview of Judge Fallon’s ruling and what it means to homeowners facing Chinese drywall problems. In future articles in this series, we will discuss some of the scientific findings that resulted in the judge’s decision as well as the stories of the seven families whose specific cases were considered.

It is important to note that Judge Fallon’s April 8 decision only addresses some of the issues in the Chinese drywall cases: remediation of affected homes and the standards for determining the compensation owed to affected families. He has not yet ruled on other issues, such as health effects or insurance coverage.

Scope of Remediation

Judge Fallon ruled that a “patchwork” approach to remediation would not be sufficient, and that all drywall, affected household components, and other materials would need to be removed and replaced, including:

  • All drywall in the home (unless the only Chinese drywall used was limited to a part of the house completely separate from the rest of the home);
  • All electrical wiring;
  • Al copper piping;
  • The entire heating, ventilation, and air conditioning (“HVAC”) system, including ductwork;
  • All affected household appliances and electronics;
  • All materials affected by the remediation of the drywall and other systems, such as carpeting, vinyl, and wood floors; possibly tile floors; cabinetry; countertops; bathroom fixtures; and trim work; and
  • All insulation.

Cleaning methods

Once the drywall and other affected materials have been removed, the home must be carefully cleaned, using the following procedures:

  • A HEPA vacuum should be used to remove all dust;
  • Surfaces should be wet-wiped or power-washed after vacuuming to remove any dust particles not removed by the vacuum; and
  • The house will need to air out for 15 - 30 days before the installation of new drywall, wiring, and plumbing.

Inspection and certification by an independent, qualified engineering company

After the “deconstruction” and cleaning phase, an independent, qualified engineering company will need to inspect and certify that the remediation was properly performed and provide a letter or report to the homeowner stating that the home is safe for reoccupation.

Families will need to move out of homes for four to six months

The remediation process will take four to six months to complete, and families must move out of their homes during this time.

Compensation for affected Virginia homeowners and their families

Judge Fallon, applying Virginia law, determined the compensation due to each of the seven Virginia homeowners whose cases were presented during the hearing. He also noted that these families represented a broad cross-section of all families affected by Chinese drywall, and that the general principles used in deciding their compensation would at least partially apply to all affected homeowners.

Removal and repair costs

Homeowners should be compensated for the cost of labor and materials for the remediation of the home. In the case of the seven Virginia families, Judge Fallon concluded that their average cost of remediation and repair was $86 a square foot.

Property devaluation not allowed for time-being

Judge Fallon determined that it was too speculative at this point to determine whether affected homeowners are entitled to compensation for a diminution of property value, at least until the remediation has been properly performed and completed.

Loss of personal property

Homeowners are entitled to the market value and related expenses for the loss of personal property, such as computers and TVs with metal components that were damaged by the toxic drywall.

Alternative living costs

Homeowners will need to move out of their homes for at least 4 to 6 months until remediation is completed, and they are entitled to compensation for alternative housing costs until they are able to again occupy their homes.

Costs associated with bankruptcy, mortgage deferral, foreclosure, inability to refinance, and loss of income

Some homeowners have been forced to file for bankruptcy, and others have had their homes foreclosed because of inability to pay their mortgage while paying rent to live in other housing. Still others have had to turn down job opportunities that required relocation because their homes were not sellable. And lenders have not allowed some homeowners to refinance their mortgages to take advantage of better interest rates because the Chinese drywall made the loans too risky. Judge Fallon ruled the Virginia homeowners were entitled to compensation for such financial losses.

Loss of use and enjoyment of residential property

Judge Fallon found that Virginia law allows for compensation for the loss of the use and enjoyment of residential property, and determined that each of the seven families were entitled to such compensation. The judge awarded $100,000 apiece to six of the seven families whose entire homes were affected by the Chinese drywall and $30,000 to the family with Chinese drywall damage to a portion of their home.