Insurance Dispute Lawyer Blog

Toxic chinese drywall that was installed in many Louisiana homes has been discovered to emit sulfur, methane, and other toxins. The drywall is thought to be responsible for homeowner’s health problems and a variety of damage to household appliances. Just recently, a federal judge in New Orleans awarded several homeowners $2.6 million against Chinese drywall manufacturer Taishan Gypsum Co. However, collecting this judgment may prove difficult. If you considering litigation as an option to obtaining the money you need to repair the damage Chinese drywall has caused your home, you are not alone.

While Chinese Law Makes Collecting Judgments Against Toxic Drywall Manufacturer Difficult, there are Options for Homeowners

According to Gordon Gao , a partner in a Beijing firm, it is often very difficult to collect judgments against Chinese companies that were awarded to plaintiffs in US courts.

“‘In general, collecting on a U.S. judgment [in China] is difficult if not impossible,’ says Gordon Gao … Chinese law, he explains, only permits the enforcement of foreign judgments through bilateral treaties. But China doesn’t actually have any such treaties with other countries.”

This means that US courts do not have the power to reach across our nation’s boundaries and force Chinese companies to pay out the damages awarded to US plaintiffs in US courts. However, there are options for New Orleans homeowners hoping to collect from Chinese companies. It is possible that plaintiff’s attorneys can try to have ships carrying Taishan Gypsum Co. products seized. Doing so would allow the courts to decide if the ships may be claimed for their value and sold in order for the plaintiffs to collect their judgments. The ships must be located in US waters at the time of seizure.

If You Installed Tainted Drywall In Your Home, You May Be Able to Sue the Manufacturer for Breach of Implied Warranty or Negligence

Even if you do not have a written warranty from the drywall manufacturer, you may still be able to establish a breach of the implied warranty of “Merchantability.”

Implied Warranty of Merchantability

The Uniform Commercial Code provides that any sales contract that involves a merchant/seller implies a warranty of merchantability without the need for an express contractual agreement. However, in order for this theory to apply, a seller must not have disclaimed it in a written sales contract.

In order to be “merchantable” good must meet several requirements including that the goods must be fit for the ordinary purpose for which such goods are used. Therefore, if you have bought tainted drywall, you may have a case against the manufacturer under a theory of “Implied Warranty of Merchantability.” The drywall you purchase should be “fit” for the purpose of installing in a building. Drywall that exposes occupants of the building to toxins would likely fail to meet this standard.

All the same, it is important to note that the Implied Warranty of Merchantability does not guarantee that the goods must be of the highest quality. Instead, the goods must be of a high enough quality to make them suitable for the purpose for which they were designed. In order to bring a lawsuit, the defect in the good must be a result of a manufacturing flaw, a design defect, or fail to give adequate warnings. Thus, if the toxins in the drywall originated due to an error or negligence on the part of the Chinese manufacturer, you may be able to show a breach of this implied warranty.

Negligence

Generally, a seller can be held liable for negligence if the seller’s product is defective and can be reasonably expected to cause substantial harm to any foreseeable product users. In order to establish a claim for negligence, you must be able to show that the Chinese drywall seller owed a specific duty to you, that the seller breached that duty, that there is a causal connection between the sellers conduct and the injury, and that you suffered damage or injury from the breach.

Under products liability law, a seller has the duty to provide a reasonably safe product in design and manufacture. Thus, the sale of toxic drywall that must be removed from a home due to health concerns likely establishes a breach of this duty to provide a “reasonably safe product.” In addition, if you establish that the defendant’s sale of the defective drywall has caused you damage. Damage may include things such as negative health effects from exposure to the drywall’s toxins, money expended to replace the drywall, and potentially costs associated with finding housing during drywall replacement.

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In a sign of progress for those homeowners who have found themselves buried under the burden of defective Chinese drywall installed in their home, recent court rulings have shown a lot of hope. The federal judge in charge of consolidating and creating a general premise for rulings involving the faulty imported wallboard, Judge Eldon Fallon, has found in favor of homeowners in a variety of locales. This is a marked improvement of where those who own affected property found themselves for the past years that the faulty material has been a problem and demonstrates that hope may be around the corner.

The Herald Tribune reports the ruling has yielded a quality judgment for the plaintiffs

A couple affected by the drywall – Tatum and Charlene Hernandez of Mandeville, La. – are entitled to $164,000, plus attorneys’ fees and court costs.That money includes about $5,400 to pay the Hernandez family for damaged personal property and close to $20,000 to pay for somewhere to live while the repairs are made.

In a sign that indicates positive news for those looking to the stock market in the wake of the Chinese drywall problem, Travelers Insurance has shown limited exposure to the faulty import market. According to the Nasdaq news line, the company has only seen a little over 50 claims tied to the toxic wallboard.

The site reports

Travelers Cos. (TRV), the insurer of businesses, homes and cars, said Friday its customers have reported 52 claims tied to faulty drywall manufactured in China.

In what appears to be a promising development for those who have found themselves the victim of Chinese drywall installed in their home, the government has taken steps to insure that insurers will back their policy holders. As the faulty imported wallboard has been a serious problem for many, insurance companies have begun dropping those with policies to limit their coverage requirements in the event of a suit or claim. Doing so has left many concerned on what will develop if the providers are left to their own interests.

By dropping those who may have Chinese drywall in their homes, insurance companies limit their liability in a way that mirrors their approach to storm damage and the like. In the wake of Hurricane Katrina, many insurance companies claimed that, instead of wind damage, the damage incurred by homes was the result of flood damage. The problem with this was that far too many homeowners possessed wind coverage but not flood coverage and thus were facing little to no payment from their insurance company. This is the same plight faced by those whose polices have been threatened by their providers in the wake of this drywall matter.

The Associated Press reports

The enormous need to rebuild houses after Hurricane Katrina and the end of the housing boom caused American homebuilders and companies to search for cheaper alternative materials to build houses with. The simplest and cheapest solution to this problem for these homeowners was to purchase imported drywall from China. That plan seemed great at the time, until homeowners complained about headaches and respiratory problems along with corroded electrical wiring, appliance outages, rotting walls and damage to personal belongings. An estimated 4,000 to 7,000 Louisiana households have been affected by this problem; however, only 800 Louisiana residents have reported these problems to the Louisiana Recovery Authority. Overall, 3,700 individuals across the nation have reported problems to the CPSC. Many residents are facing large medical and rebuilding fees and are not sure what to do.

Chinese drywall contains significantly higher levels of strontium and sulfur compared to most drywall manufactured in America. It was commonly used as a cheap substitute to American drywall for builders looking to cut costs and expenses. The corrosive problems that have been associated with Chinese drywall are fairly new. American researchers have been conducting several scientific studies for the past year to try and isolate the problem, and finally released the results of that study on April 2nd for Congressional officials and for civil litigation purposes. However, the problems for homeowners who have Chinese drywall in their house go much deeper than that. Those that have filed insurance claims have almost all been denied based on policy exclusions for latent defects or pollution in materials. Other homeowners who have chosen to go the legal route have been told that the 1996 tort reform legislation will likely prevent them from making a full financial recovery because the manufacturers of the defective goods are overseas.

Before 1996, a consumer in Louisiana could pursue a claim against a company and receive full compensation of damage from that company, even if the company was only liable for a small portion of the consumer’s injuries. Applying the old Louisiana law to the situation here, a homeowner who was affected by the Chinese drywall situation would sue the party that installed their drywall. That party, in turn, would then sue companies up the chain until the biggest pockets were reached.