Not all victims of Chinese Drywall are homeowners.   Oftentimes, a tenant is living at a property with Chinese Drywall, or a property owner is a landlord to an apartment or home with Chinese Drywall.

Take, for example, a news story from the Baton Rouge’s Advocate about a tenant who was forced to move out of their rented home because of Chinese Drywall.   Or, a news story about a Florida landlord to an apartment complex housing low-income elderly people, who were evicted en mass because the complex had imported drywall.

These scenarios present interesting legal questions:

• Can a tenant break a lease because of Chinese Drywall?
• Can a landlord evict a tenant because of Chinese Drywall?
• Is Chinese Drywall a “breach” of the lease?
• Should landlords evict / move tenants when properties have Chinese Drywall to avoid responsibility for future health effects?

While the answer to this question will greatly depend upon the terms and provisions with the lease agreement, here is what that Louisiana Civil Code may have to say about the matter.

The Landlord’s Warranties

The landlord makes a number of warranties to its tenants through the Louisiana Civil Code, and it can be argued that the existence of Chinese Drywall at the leased premises is a breach of these warranties.

La. C.C. art 2696, for example, provides that the “lessor warrants…that the thing is suitable for the purpose for which it was leased and…is free of vices or defects.”   This warranty extends to vices “that arise after the delivery of the thing.”    The following code article (2697) indicates that the warranty encompasses vices or defects not known to the lessor.

The landlord may be liable to the tenant for any damages that result from the landlord’s breach in warranty.   These damages may include the cost for alternative accommodations, moving expenses, and sustained personal injury or health damages.

For landlords who are leasing properties with Chinese Drywall, it is important to consider the statutory warranties made to tenants.  The existence of Chinese Drywall may be a breach of their warranties, and if so, landlords are likely liable to tenants for any ensuing damages.

Statutory Termination of the Lease

In addition to the landlord’s warranties, another area of Landlord/Tenant law implicated by Chinese Drywall regards the statutory termination of leases.

La. C.C. art 2714 provides that if a thing is lost or totally destroyed, without the fault of either party, the lease terminates and neither party owes damages to the other.  In the case of partial destruction or “substantial impair[ment], that is not the fault of the lessor, the tenant may dissolve the lease or reduce their rent.   If the lessor is at fault, the tenant may also seek damages.

What’s The Rub?

Chinese Drywall presents some interesting issues for Louisiana Landlord / Tenant law.   Is the existence of Chinese Drywall a vice or defect that breaches the landlord’s warranty, or a partial destruction or “substantial impairment” to the property?    Are landlords entitled to damages, or just dissolution of the lease?    Should the landlord relocate tenants to mitigate its damages?

As is the case with most Chinese Drywall scenarios, as to landlord/tenant laws, there are more questions than answered here.    Landlords and Tenants with Chinese Drywall should seek the counsel and advice of an attorney.

Should Louisiana homeowners be filing homeowner insurance claims for their Chinese Drywall damages?   The answer is complicated, but ultimately, our answer is yes.

Will There Be Coverage?

Over the past few months, we’ve discussed whether insurance companies will cover losses related to Chinese Drywall (See Insurance Coverage category).

Our predication was that claims would be denied based on Pollution Exclusions, and from what we’ve seen so far, insurance companies across the country are beginning to churn out these types of denial letters.

While the talk amongst insurers and adjusters is that these damages are not covered, an insurance company declaring something to be true does not make it so.   The applicability of the “pollution exclusion” will ultimately depend on a number of factors, some known and others currently unknown: (1) the language of the exclusion; (2) The scientific explanation behind the damages; and (3) Your home’s jurisdiction.

What The Blogosphere Says

A quick read of our blog, and you’ll know what we’re saying about homeowners insurance claims:  that insurers may very well be liable for these losses.   But what are some others in the country saying?

An August 2009 article from Inside Counsel has a long discussion (and quotes us!) about suits against homeowner insurers, and notes that the “pollution exclusion” may not be as clear as the insurance companies would like to believe.    The debate is lively in Florida according to the Herald Tribune.  Merlin Law Group’s Property Insurance Coverage Law Blog has a great post about both sides of the argument.

We suggested in the past that Louisiana homeowners may have a better case than homeowners in other states, because of Louisiana’s narrow interpretation of the pollution exclusions applicability.

What To Do…What To Do

This much is clear:  If you don’t file your insurance claim now (or soon), the time available to you to file the claim will pass.   How depressing it would be for homeowners who sat on their hands for this debate to reach a judge 12 or 14 months from now, and the decision to favor homeowners!

This can happen.

Many of the claims available to homeowners, builders, suppliers, subcontractors and other parties to this Chinese Drywall mess are based on a lot of legal mysteries.   How will the New Home Warranty Act be interpreted?   Will insurance policies exclude or cover losses?   Are actions against the suppliers already prescribed?

Who knows – in 12 months, we may know that builders are absolutely not liable in Louisiana, but insurers are, or vice versa.   Homeowners should file insurance claims against their casualty policies, and should file suit against the insurer after the claim is denied, because there very well may be coverage.   And with insurers denying all Chiense Drywall claims, pursuit of the claim through litigation is the only way to get paid.

Will My Premiums Increase?

This is something homeowners should discuss with their insurance agent.   However, it is very possible that premiums may be increased if you assert a claim for insurance coverage.   If the claim is paid, the payment will likely be used in calculating any rate increases.

If the Chinese Drywall loss was just a small $5k or $10k claim, there might be good reason to not file the claim.  However, some Chinese Drywall claims have $50k-100k or more in damages.  Depending on your financial stability, the risk of losing this amount may be greater than the risk of a future premium increase.

We Sue Insurers

Wolfe Law Group has filed suits against homeowners insurance companies related to Chinese Drywall damages, and we’d be happy to discuss filing suit against your insurer, too.    Learn more about our firm by reviewing this promotional brochure.

Are you learning about Chinese Drywall for the first time? Are you looking for representation in a Chinese Drywall dispute?

Check out Wolfe Law Group’s newly published Chinese Drywall brochure and learn how to get started on your drywall lawsuit.

On July 31, 2009, Wolfe Law Group’s Scott Wolfe and Doug Reiser will co-present at Half Moon Seminar’s Chinese Drywall Conference in New Orleans, Louisiana.   The program is titled “Chinese Drywall Problems and Litigation.“  Attorneys, contractors, engineers and architects can all obtain CLE credit for attending the program [register here].

Wolfe & Reiser will co-present during the program’s middle segment, “Exploring the Current Status of Chinese Drywall Claims and Litigation.”

Be sure to attend the program on July 31st in New Orleans.   To get ready, or in case you can’t make it, below is the slide presentation we’ll use during the presentation.

This Wednesday, Scott Wolfe will join the Legal Talk Network to discuss the effects of Chinese Drywall and the status of Chinese Drywall litigation.

The Chinese Drywall episode is on the network’s Lawyer2Lawyer program, hosted by Bob Ambrogi and J. Craig Williams.

Episodes are published as “podcasts” and can be played at the Legal Talk Network website, or you can download the podcast through iTunes.

The website describes the upcoming podcast as follows:

Chinese drywall, which has been used to rebuild New Orleans’ homes damaged in Hurricane Katrina, is allegedly damaging residents’ property as well as their health. Bob Ambrogi and J. Craig Williams will take a look at the effects of Chinese drywall, the mounting lawsuits and what the future holds for the affected residents. Guest(s): Attorney Scott Wolfe, Jr. & TBA

Read more here.

The Chinese Drywall phenomenon continues….and it seems that as each day passes, builders are drawn closer and closer to the crisis.

Last week, we asked whether builders were getting a “free pass” on the Chinese Drywall issue.

However, just a few days later Lennar Co. was named as a party to a class action suit, and this week a local North Carolina construction outfit – Stafford Custom Homes, Inc. – was sued for installing Chinese Drywall.

So how are builders handling Chinese Drywall claims and complaints?

This morning, the Herald Tribune has posted an interesting article on this topic.  Comparing Lennar Co.’s Chinese Drywall methodology with other national builders, the article says this:

Within just a few square miles sit four developments with clusters of affected homes, built by at least three different builders: Lennar Corp., Taylor Morrison and WCI Communities.

The East Manatee homeowners who have been touched by tainted wallboard — tied to corrosion of metals and the subject of an investigation by state and federal health officials to determine whether it poses health risks — find themselves caught up in a situation largely beyond their control.

For many, their experiences have been shaped by the behavior of their builders — whose responses have run the gamut from tearing out the bad drywall in Lennar’s case to taking no action at all.

Read full article.

More important than the question of how builders are handling claims, however, may be the question of how they should be handling claims.