Protecting What's Right

At a hearing earlier this week, U.S. District Judge Eldon Fallon said that a program to fix up to 300 homes in Alabama, Louisiana, Florida and Mississippi with tainted Chinese drywall manufactured by Knauf Plasterboard appears to be on the right track. If successful, the program may be extended to other plaintiffs with the defective drywall.

The pilot remediation program was announced in October, when the Plaintiffs’ Steering Committee (PSC) and Knauf announced that they had struck a deal to fix infected homes. The homes, once completed, will be inspected by environmental engineers who will certify compliance with rigorous environmental standards.

Baron & Budd shareholder Bruce Steckler is a member of the PSC in the Chinese Drywall litigation.

The Internal Revenue Service said that it would permit taxpayers with defective drywall in their homes to deduct the repair and replacement of damaged appliances. This tax break is the first significant response from the federal government to provide financial help to the thousands of homeowners nationwide struggling with the defective drywall.

While this ruling is good news, it is not a panacea –this tax break will only help homeowners capable of affording the costly drywall repairs, most likely a small percentage of those affected.

Taxpayers can only deduct the casualty losses, including the cost of repairs from an unexpected event, in the year in which the loss occurs – as long as insurance or other parties do not compensate the losses. Taxpayers must also itemize their federal returns to claim the deduction.

Lowe’s Home Centers, Inc., has entered into a tentative settlement in a class action suit filed in Georgia state court that has attorneys representing individual claimants in defective Chinese drywall cases up in arms.

Under the terms of the settlement, any homeowner who bought tainted drywall from Lowe’s would receive a gift card valued up to $2,000, and for higher damages, an additional cash payment of as much as $2,500.  But attorneys representing plaintiffs in a consolidated federal court action are crying foul.  They have asked the New Orleans judge presiding over the federal cases to prevent the Georgia settlement from applying to their clients’ claims because remediation costs of defective drywall are likely run vastly higher than the settlement proffered by Lowe’s.

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Homeowners with tainted Chinese drywall have yet another concern to contend with: purported drywall remediators who are not licensed contractors and, in some cases, have criminal records for consumer fraud.

A recent report by the Palm Beach Post found that, of 47 Florida drywall remediation and inspection companies it identified, 26 were created since January 2009—around the time that problems with the contaminated drywall were becoming widely known.  Only 18 were being operated by licensed contractors, and some were run by known felons with a history of consumer fraud convictions.

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Plaintiffs’ lawyers representing homeowners affected by toxic Chinese drywall have asked the federal court judge presiding over the cases in New Orleans to establish rules governing settlements between the manufacturers of the drywall and homebuilders.  They have voiced concern that such deals could put homeowners at risk by getting them to unwittingly waive their legal rights or accept inadequate remediation for affected homes.  The lawyers are also asking for more disclosure of the settlement terms entered into between the product manufacturers and homebuilders.

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The federal judge overseeing Chinese drywall cases said this week that his court has thus far resolved just 10 of what could be 40,000 claims for damage caused by the toxic product.  U.S. District Judge Eldon Fallon also stated during a court conference in New Orleans that his court is using a variety of methods to determine the “whole census” of potential claimants.  Judge Fallon presides over a coordinated docket of Chinese drywall cases pending in federal courts across the country.

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A Miami-area couple has won a case against Banner Supply, a distributor of contaminated Chinese drywall.  The verdict of $2.47 million was awarded on Friday after two days of jury deliberations.

The jury found that Banner was negligent in selling a defective product and violated Florida’s Deceptive and Unfair Trade Practices Act.   The monetary award includes costs for gutting and fixing the couple’s home, diminished home value, loss of enjoyment of the property, and other damages.

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James City County, Virginia, home to a number of houses built with tainted Chinese drywall, has lowered the property values of such homes to $100, plus the value of the land.  The county’s actions will provide tax relief for homeowners burdened with the contaminated properties.  Chinese drywall can emit noxious fumes that corrode electronic components and metals in the home, as well as cause health complaints in residents.

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A federal court judge in Virginia has ruled that a Virginia homeowner’s insurance policy did not cover damages caused by Chinese drywall.  Judge Robert G. Doumar of the U.S. District Court in Norfolk found that the policy excluded damages caused by latent defects, faulty materials, corrosion and pollution.

This is the first decision in many cases involving insurance companies that have refused to cover damage caused by toxic Chinese drywall.  Thousands of homeowners across the U.S. have incurred damage to their homes caused by the defective drywall, including corrosion of wiring and other household components and appliances as well as health complaints.

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