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.

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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Florida homeowners affected by toxic Chinese drywall will get some financial relief through a bill signed into law this week.  Under House Bill 965, properties with defective drywall will be eligible for an adjustment to the assessed value of the property.  The new law will apply to assessment rolls from 2010 until July 1, 2017, unless reviewed and reenacted by the Florida Legislature.

For the full story, go to South Florida Business Journal.

The U.S. Consumer Product Safety Commission (CPSC) has published a list of drywall brands emitting the highest levels of sulfuric gases.  The greatest emissions were found in drywall manufactured by Knauf Plasterboard in 2005 and Taian Taishan Plasterboard in 2006.

Hydrogen sulfide from Chinese drywall has been linked to corrosion of household appliances and metals.  The CPSC has received approximately 3,300 complaints from U.S. homeowners, and it is estimated that thousands more are affected by the defective drywall.

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A class action lawsuit involving damages from toxic Chinese drywall is set to go to trial the first week of June in Miami, Florida.  But first, there will be a hearing on class certification on May 27th.

The lawsuit was filed in January 2009 against the German-owned Knauf Plasterboard Tianjin Co. Ltd., that mines and manufactures drywall in China.  The class includes families whose homes were build using Chinese drywall by South Kendall Construction Corp., a homebuilder who has since declared bankruptcy, citing mounting Chinese drywall claims.

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