April 20, 2009

Chinese Drywall: A Building Controversy

Holland & Knight Alert
Fred J. Lotterhos III

During the construction boom years of 2004-2005, fueled by the active hurricane seasons, the rising cost and shrinking availability of construction materials led some builders to begin importing drywall, including drywall manufactured in China. Now, the Chinese drywall installed throughout the southeastern United States and beyond is the subject of consumer complaints, government investigations, proposed legislation, and of course, litigation.

The problem is that the Chinese drywall contains strontium sulfide, a chemical with a rotten egg smell that critics say takes on corrosive properties when exposed to warm, humid air. Homeowners whose homes were built using this Chinese drywall are lodging complaints ranging from physical symptoms, such as nasal irritation and headaches, to corrosion of copper wiring, air conditioning coils and even bathroom fixtures.

The Florida Department of Health (DOH) has conducted an investigation in which it compared the chemical content of Chinese drywall to a sample of American-made drywall. The test confirmed the presence of strontium sulfide in the Chinese drywall and the absence of strontium sulfide in the American drywall. The DOH also examined the relationship between corroded wiring and air conditioning condensing coils and Chinese drywall, and issued a statement that the corrosion “is suspected to be associated with the presence of Chinese drywall in homes built since 2003.” However, the DOH has also said that they have “not identified data suggesting an imminent or chronic health hazard at this time.”

Shipping records indicate that from 2004-2008, some 540 million pounds of drywall was imported into the United States from China – enough to construct 100,000 homes. Estimates put the number of Florida homes built with Chinese drywall at 35,000. Florida Governor Charlie Crist has sent letters to the Environmental Protection Agency and the Centers for Disease Control asking these federal agencies to conduct air sampling to determine whether the Chinese drywall poses health hazards.

U.S. Senators Bill Nelson (D. Fla.) and Mary Landrieu (D. La.) have introduced legislation in Congress mandating that the Consumer Product Safety Commission (CPSC) study drywall imported from China from 2004-2007. The proposed legislation directs the CPSC to ascertain the drywall’s chemical content, determine whether it creates any health hazards, report on its findings, and ban the sale of the product until such time as the CPSC determines that it is not hazardous. The bill also requires the CPSC to study samples of Chinese drywall taken from homes in Florida, Louisiana, Mississippi, Texas and Virginia. A nationwide recall of Chinese drywall is possible, depending on the CPSC’s findings. The Chinese government is conducting its own studies.

A number of class action lawsuits already have been filed in Florida and elsewhere on behalf of consumers whose homes contain Chinese drywall. The suits seek damages for the cost to remove the drywall, repair or replace corroded materials, and secure alternative living arrangements during remediation, and in some cases, personal injuries. At least one major Florida builder has sued the drywall manufacturer and distributor for the cost the builder expects to incur in repairing homes it built with the Chinese drywall. Most of the suits identify the manufacturer as Knauf Plasterboard Tianjin Co. Ltd., a subsidiary of a German firm with manufacturing facilities in China. However, Knauf, which is conducting its own investigation, says it manufactures only about 20 percent of the drywall imported from China and complies with U.S. and international standards.

Detecting the presence of Chinese drywall in a home or other building is not always easy. A rotten egg smell or signs of premature corrosion of metal materials are possible indicators, but these symptoms do not always manifest. In fact, for buildings located away from the hot, humid southeastern coastal regions, it may be years before the drywall causes any corrosion damage. Some of the Chinese drywall is marked “Made in China” on the back or is stamped with the manufacturer’s name, but this is not always the case. However, environmental consultants can perform tests to confirm the presence of the material.

The presence of Chinese drywall should not automatically lead to the conclusion that the product must be removed and replaced. A number of factors influence that decision, including the chemical composition of the drywall and whether it is causing problems. Furthermore, treatments to eliminate the sulfur fumes and methods for containing the drywall in place are being tried.

Nevertheless, the Chinese drywall problem will affect everyone involved in the chain of distribution, from manufacturers to owners. In addition, insurers will face claims for coverage of the costs associated with the drywall. Chinese drywall has even become a factor in home sales. Realtors have developed disclosure forms to either warn potential buyers that there may be Chinese drywall in the home, or to reassure them that there is not. Over time, the liability costs associated with Chinese drywall are likely to be astronomical.

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