Drywall settlement offers homeowners potential relief
Joe and Sharon Molinaro say they could lose their Bradenton, Fla., home, which contains tainted drywall imported by manufacturer Knauf Plasterboard Tianjin.
“We had to move out because we were all getting sick,” Sharon says. “We couldn’t pay both rent and mortgage, and the bank has started foreclosure proceedings.”
The Molinaros joined a classaction lawsuit against KPT and, in January, federal judge Eldon Fallon in the Eastern District of Louisiana, who oversees the suit, gave preliminary approval to a settlement. Attorneys for both sides expect the court to issue final approval after a June hearing.
KPT admitted no wrongdoing but agreed to fund remediations for affected homes in Florida and other states. Homeowners may also accept a lump-sum payment in lieu of remediations, but at a lower rate. “We’re confident the judge will approve it because it’s fair,” says Steven Glickstein, lead co-counsel for KPT.
A joint statement issued by KPT and the plaintiffs says about 5,200 homeowners allege their houses contain KPT drywall. Lead plaintiff counsel Russ Herman estimates 70 percent of the Florida houses with Chinese drywall used KPT materials. From 2000 through 2008, builders and remodelers installed the tainted drywall, which emits corrosive gases, in thousands of homes nationwide, primarily in Florida and Louisiana.
The Consumer Product Safety Commission issued detailed remediation standards in September, which involve replacement of all problem drywall, smoke alarms, electrical distribution components, certain fire sprinkler heads, and other home components.
According to the CPSC, consumers should exercise caution in contracting for testing and remediation and confirm references and qualifications before hiring.
Remediating a property involves tearing out the drywall and replacing wiring and HVAC systems, a project costing tens of thousands of dollars. The KPT deal follows a $55 million settlement with Miami-based Banner Supply. Taishan Gypsum, another major supplier based in China, faces an ongoing lawsuit.
Several builders, including highly rated GL Homes in Sunrise, Fla., Centerline Homes and Meritage Homes of Florida, both in Orlando, filed objections to the KPT settlement, saying they believed unclear wording could interfere with their own claims against manufacturers and suppliers, but Judge Fallon ruled the concerns weren’t sufficient to delay the settlement.
KPT committed $200 million upfront for remediations but will continue to pay as much as necessary to complete the work, according to the settlement. Glickstein declined to speculate on the total cost, but Herman’s office estimates repairs will cost between $60 and $80 per square foot.
KPT also committed $30 million to an “other loss fund” to cover such things as relocation, short-sale losses or medical bills for those suffering drywall-related ailments. The settlement covers anyone who filed suit prior to Dec. 10, 2011; and attorneys for both sides believe nearly all affected homeowners have already done so.
The Molinaros hope to recover some of their losses from rent costs and impending foreclosure on the $440,000 home from the “other loss fund,” but doubt they’ll be completely covered because of the cap — if other-loss claims exceed $30 million, plaintiffs won’t receive enough to cover all their claims.
“We decided we don’t ever want to live in the house again,” Sharon says. “We’re just in limbo.”
Some Chinese drywall stories conclude happily for homeowners. Wimauma, Fla., member Sherry Adams and her husband purchased a new home in 2006 from GL Homes. Tests later revealed tainted drywall, although Adams remains unsure who supplied it. In 2011, GL Homes performed a complete remediation.
“They took care of all the costs, moved us into a villa while they did the work, and essentially built a new house,” Adams says. “A lot of builders might have walked away.”