Thoughts on construction law from Christopher G. Hill, Virginia construction lawyer, LEED AP, mediator, and member of the Virginia Legal Elite in Construction Law

Chinese Drywall Checklist For Builders

Scott Wolfe, Jr.For this week’s Guest Post Friday, Musings has its first repeat contributor. Scott G. Wolfe, Jr., of Wolfe Law Group. Wolfe Law Group is a construction law practice with offices in Seattle, WA and New Orleans, LA. The firm publishes the Construction Law Monitor, a blog that provides insight and commentary on construction law issues in Louisiana and Washington.

Insofar as construction news is concerned, Chinese Drywall has been all the rage.

According to reports, drywall imported from China between 2002 and 2008 is exposing homes to toxic elements that may cause health problems, corrodes HVAC components of the home, and damages wiring and other building elements.

What does this mean?

First, obviously, homeowners with Chinese Drywall installed must have the imported materials replaced [and soon]. They must then turn to the damages sustained by them consequential to the tainted drywall.

Second, however, this means that litigation is spreading across affected states like wildfire, rolling foreign manufactures, suppliers and builders of all shapes and sizes into complex litigation that promises on-going debate for years.

Local and national builders and suppliers who installed or supplied Chinese Drywall very likely didn’t know they were delivering a defective product….but nevertheless, they are being named in lawsuits as part of the products chain of supply.

It’s important for these builders and suppliers to act now to limit its exposure in this expensive crisis, and to protect its legal defenses. While a company’s reaction will differ depending on where they are located and how they are implicated in the situation [and, therefore, should retain counsel]…here is a general checklist of things builders and suppliers should keep in mind when faced with Chinese Drywall claims or exposure:

1. Get Counsel. Yes, we just said that…but it’s worth repeating, and repeating at the beginning of this list. An experienced construction litigator will help your company understand your exposure, and will help best position your company to defend Chinese Drywall claims and avoid liability.

Perhaps your company is entitled to statutory indemnity (like in Texas). Perhaps your company can launch an aggressive action against its manufactures and suppliers (like Lennar Co. did). Perhaps your insurance company should be paying for the damages and your counsel (soon to be decided in Builders Mutual v. Dragas Co.)

Speaking with an attorney about your company’s best course of action is important when faced with these complicated and potentially costly disputes.

2. Determine Your Exposure. If you received a Chinese Drywall complaint…your work is half done. However, with or without a complaint, you should examine your work history to determine how much exposure you have to Chinese Drywall claims.

Go through your call-backs looking for imported drywall symptoms and examine where you purchased drywall during the period at issue [2002 – 2008]. This should give you a strong indication of whether your company may have encountered any tainted drywall.

Understanding your potential exposure will help you decide future actions.

3. Mitigate Your Damages. We have mentioned this on the Chinese Drywall Blog time and again. The duty for those involved with litigation and disputes to mitigate its damages may play an important role in the Chinese Drywall crisis.

Must homeowners repair the damages to avoid future deterioration? Must builders, under a home warranty? Must builders warn those homes with Chinese Drywall that the defective – and potentially unhealthy – products are present in the homes?

Take steps now to ensure that the damages, and your exposure, does not worsen.

4. Get Prepared. The Chinese Drywall problem is not going away. In fact, it’s getting bigger and bigger every day. If you have installed or supplied Chinese Drywall, its very likely you’ll be involved with litigation related to the product, and its best to prepare for it now.

(a) Notify Your Insurance Company

(b) Organize files associated with imported drywall (contracts, warranties, insurance policies, etc.)

(c) Map Other Parties – understand who else is involved with each home, which subcontractors and installers were hired, where the drywall was purchased, etc.

More Information:

• Avvo Legal Guilde: What to do if you Supplied or Installed Chinese Drywall

• Chinese Drywall Blog (http://www.chinesedrywallblog.com)

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