As the Chinese Drywall crisis unfolded over the last few months, news reports were abound of class action litigation against large drywall manufacturers, but it appeared that builders were getting a “free pass” on liability.

Unfortunately, but inevitably, it appears the tide is changing.

Recently, the shoe dropped for Lennar Co., who was arguably the most predominate home building company facing Chinese Drywall claims. While Lennar Co. made every attempt to thwart litigation, suit was formally filed against them just last week, and they are now preparing a defense and examining applicable exclusions in their insurance policies.

However, large building outfits like Lennar Co. or South Kendall Construction Corp. are no longer alone as builder-defendants in Chinese Drywall claims.

Here are some examples from across the affected areas.

Flannigan v. Stafford Custom Homes, Inc.

Last week, a news station in North Carolina reported that a couple with Chinese Drywall had filed suit against their local builder: Stafford Custom Homes, Inc.

The plaintiff’s counsel in that case, Joel R. Rhine of Lea Rhine Rosbrugh & Chleborowicz was kind enough to share a copy of that complaint with the Chinese Drywall Blog, and its available to read here.

The complaint asserts the following claims against the homebuilder…and importantly, the homebuilder alone:

• Breach of Contract;
• Breach of Implied Warranties;
• Breach of Express Warranties;
• Negligence;
• Negligent Misrepresentation;
• Unfair and Deceptive Trade Practices

As mentioned, the suit against Stafford Custom Homes, Inc. is between the homeowner and the homebuilder only, and the plaintiffs did not bring suit against the subcontractor installer, the drywall supplier or the drywall manufacturer.

It will be interesting to watch this action progress, and especially to see how Stafford Custom Homes, Inc. defends itself in the case. Likely, a claim will be made against Stafford’s General Liability insurance policy, and an argument will ensue about the applicability of the pollution exclusion clause.

Further, the builder will be well-served to take a page out of the Lennar Co. defense book, and file suit against its supplier, installer and the drywall manufacturer.

The case is in Wake Count, North Carolina, and is captioned Flannigan v. Stafford Custom Homes, Inc., General Court of Justice Superior Court Division, No. 09CV006759.

We’ll monitor this case as it moves forward.

Pronto v. Venture Supply, LLC, et al.

In Virginia, another couple has brought a claim against their contractor individually, as opposed to a class action, suit. While the news report breaking the story doesn’t mention the contractors name, the couple also brought suit against Venture Supply, L.L.C., who is the purported supplier of the drywall.

Like Stafford Custom Homes, Venture Supply, L.L.C. is a self-proclaimed “locally owned” company.

The couple in this suit – Benjamin and Holly Pronto – are seeking more than $600,000 in damages associated with the Chinese Drywall contamination.

The estimate of damages by the Prontos is a haunting wake-up call to builders who have unknown exposure to Chinese Drywall claims.

Builders Mutual Insurance Company v. The Dragas Co.

This is another case out of Virgina, but unique in that here an insurance company has sued its insured.

The insured, The Dragas Co., is a Virginia builder who has installed Chinese Drywall in Virginia homes.

According to the report in The Virginian-Pilot, Dragas’ insurance company has denied coverage for Chinese Drywall damages, and has filed suit in federal court asking a federal judge to declare who is responsible for the drywall damages. Download the Complaint here.

Thus far, most news about Chinese Drywall litigation concerns class action suits and large building outfits like WCI or Lennar Co. In North Carolina, however, one news station is reporting a different type of claim, and a claim that we’ve foreshadowed here at the Chinese Drywall Blog.

A local couple in North Carolina has brought a direct action against its builder, Stafford Custom Homes, Inc., for the Chinese Drywall damages. The suit is one of the first – if not the firsts – publicized lawsuits whereby a homeowner has directly brought suit against their builder.

Stafford Custom Homes, Inc. is a local N.C. builder like many builders across the country who may be victims of the Chinese Drywall crisis. On its website, it describes its business as follows:

A developer and builder who values family and creates quality communities that enrich the family lifestyle

It’s nearly certain that Stafford Custom Homes – like so many other local builders – innocently installed this Chinese Drywall. Today, however, they are facing complicated litigation and a potential hefty liability to the homeowners.

It will be interesting to watch this case unfold, and especially to see whether the builder’s GL insurance covers the claim or asserts non-coverage under the policy’s pollution exclusions.

Read a copy of the complaint here: Flannigan v. Stafford Custom Homes, Inc.

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.