This article was written by Chris Wilson.

Thousands of people across the country have purchased new homes that contain Chinese Drywall. Unfortunately, the result has been devastating financial and health problems. People living with Chinese drywall have had a number of health effects such as breathing difficulties, coughing, acne, asthma attacks, bloody nose, dizziness, irritated eyes, nausea, headaches, fatigue, gastrointestinal problems, rashes, sinus problems, and sore throats. As well, there are concerns that long-term exposure to Chinese drywall could cause cancer due to prolonged contact with radon. The question on many people’s minds is if their insurance company will cover their health care costs.

The claim most insurers are making regarding covering health care costs is that drywall is considered a builder defect which is not covered under a homeowners’ insurance policy. As well, they have deemed drywall a pre-existing condition that could lead to future damage, which is why insurance providers will not pay out for a claim or renew a homeowner’s policy until the drywall has been removed. They contend that it is a warranty issue and not an insurance issue. There are a number of insurers that have denied claims or canceled insurance policies based on this contention. Homeowners insurance is not designed to cover defective construction or materials; and as a result, they are not liable to pay out for the claim. It is their contention that homeowners must seek compensation from the manufacturer or a company associated with the installation of the drywall. As well, property insurance policies also have pollution exclusions; therefore, they will usually deny claims, which include any medical coverage. That is, Chinese Drywall claims involving sickness from inhaling unsafe gas odors will normally be denied because they do not fall under an insurance company’s definition of “bodily injury.”

When it comes to personal health insurance plans, you have to read the fine print of your policy to determine their definition of ‘bodily’ injury. Many insurance companies will consider a situation like this to be pollution caused by a third party so they do not cover the expenses associated with treatment. It is important to check to see if there is specific criteria outline in your health insurance policy that may result in coverage denial for treatment for drywall exposure.

Many homeowners have filed class action law suits against the manufactures, developers, general contractors, distributors, and builders, to seek compensation for their financial loss and health treatment costs. The lawsuits include claims for private nuisance, breach of warranty, breach of contract, negligence, and unjust enrichment. Most claims ask for financial compensation for medical expenses associated with illnesses resulting from inhaling toxic fumes originating from the drywall. If you have suffered the effects of drywall exposure, you need to consult with your homeowners’ insurance provider and health insurance provider to find out if the condition will be covered. If not, you should consult with a trial lawyer to learn about possible options on how to get compensation.

Once the Chinese Drywall story began dominating news in the construction industry, attorneys, contractors, scientist and inspection outfits naturally looked to cash in on the crisis.

The rush to capitalize on the new demand for drywall inspections and replacement lead Florida’s Palm Beach Post to headline one of its articles on the topic “There’s gold in them there walls.”

While filling a void for services in demand is good, and profitable, those rushing to the aid of Chinese Drywall victims should analysis the legal risk of their new ventures to ensure they aren’t over-exposed and one-day facing expensive litigation and claims.

Here’s a breakdown of some of the legal risk associated with these new ventures.

No Puffing

puffing n. the exaggeration of the good points of a product, a business, real property, and the prospects for future rise in value, profits and growth. Since a certain amount of “puffing” can be expected of any salesman, it cannot be the basis of a lawsuit for fraud or breach of contract unless the exaggeration exceeds the reality. However, if the puffery includes outright lies or has no basis in fact (“Sears Roebuck is building next door to your store site”) a legal action for rescission of the contract or for fraud against the seller is possible.

The Florida Attorney General has already issued a consumer alert for scam artists trying to capitalize on Chinese Drywall problems, and other state’s are likely to follow suit with similar warnings.

While your business may not be a scam, the AG warnings and news reports on related scams will heighten the concern of your customers…and may make your customers over-sensitive to unfulfilled promises of your product or service.

Your company may eventually be exonerated from a complaint to the Attorney General’s office, but it will be subjected to the complaint, incur expense, and possibly find itself with negative press.

To avoid these legal troubles, tell things like it is with your produce and service, and try to avoid “puffing.” It would also help to have an attorney go through your promotional materials and ensure that you are not misrepresenting your company’s services.

Know the Unknown

Here is a fact: it’s impossible to know the unknown. So, why are we suggesting that you do know the unknown? Because we’re suggesting that you simply know that the unknown is there.

And with Chinese Drywall…there is a lot of unknowns.

Anyone setting up a business to remedy, repair, inspect or investigation Chinese Drywall should realize that experts just aren’t yet sure of what causes Chinese Drywall, or how to find it and properly replace it.

If your company purports to repair Chinese Drywall problems, be cautious that a coating may or may not do the trick, that the drywall may or may not need total replacement, and that other building elements may be affected. With the homeowner’s health and integrity of the property at possible risk, incorrect moves can expose you or your company to substantial damages.

Knowing the unknown involves two steps:

- Take inventory of the unknowns associated with your concept; and

- Legally protect yourself with disclaimers, good contracting and clear communication.

Consult Legal Counsel

Since scam artist have increased consumer sensitivity, the legal risks are high and the unknowns are plenty, it’s worth discussing your business plans with counsel.

Through advice and help with contracting, an attorney competent in construction law can help protect your company against liability risks it proceeds to provide services to a new and unpredictable customer.

Learn about good general contracting practices at our firms general construction law blog, the Construction Law Monitor here.

Also, Wolfe Law Group would be happy to review your company’s business model to advise you of its inherent risks, and to help craft a contract that can communicate the risks to the consumer and best protect your business from liability. Contact us to learn more.

Chinese Drywall is all the rage in construction news across Florida, Louisiana and the Gulf South. While some reports have discussed builder liability, the majority of news coverage relates to the potential health effects of the imported drywall and the class actions being filed by plaintiffs attorneys across the country.

All of this news and activity leaves two things curiously out of the conversation:

1) How are homeowners going to get this drywall out of their homes; and

2) Should builders be called upon to replace the defective materials and damages?

Class Actions Aren’t Getting the Drywall Out

Right now, class action attorneys across the Gulf South are collecting names for mega-product liability lawsuits that could last for years. In the interim, however, the class action suits aren’t likely to get the Chinese Drywall out of homes.

So, what are homeowners doing about getting the drywall wall out of their property? What can they do?

Well, unfortunately, the answer to this question leads to the next section of this post, and precisely the reason we’re asking whether builders are getting a ‘free pass’ on Chinese Drywall claims.

It seems that realistically, the only way a homeowner is going to get rid of defective drywall is to either (a) replace it themselves; or (b) contract their builder and make a warranty claim.

The class-actions are focusing on product liability claims against the mega-manufacturers, and therefore, are not assisting their clients with option (b). Since they are tied up in class action litigation, this could leave homeowners literally stuck with the less desirable option (a).

Where Builders Fit In

Builders, local suppliers and other involved parties – while victims themselves – appear to be largely slipping through the cracks in this Chinese Drywall crisis.

Granted, some large builder outfits like Lennar Co. have been involved with litigation, and have even taken the initiative to repair defective drywall. In large part, however, perhaps due to the direction of press on imported drywall, it seems that affected homeowners are contacting class action attorneys and not their contractors.

Should builders be at the center of Chinese Drywall complaints? And notwithstanding this question, should homeowners be at least contacting their builders to take advantage of their warranties, their builders’ insurance policies and more?

More to come…