Last week, the Wall Street Journal reported that powerhouse builder Lennar Corp. has identified 400 homes in Florida with Chinese Drywall, and has set aside $39.8 million to repair the homes.

This is an enormous amount of money, and it should be a wake-up call to builders and homeowners who have yet to clash over the Chinese Drywall saga.

Would Lennar Co. really spend $39.8 million to repair a problem that wasn’t its fault? Or of which it didn’t have liability?

The answer is obvious, and here is the wake-up call. To homeowners: Seek remedy from your builders. To builders: Prepare to be sued.

Indeed, time is continuing to tick without an onslaught of suits between builders and homeowners, but one has to believe that this is only a matter of time. Time, however, is on neither party’s side.

Homeowners are facing steadfast deadlines in any warranty claims made, or claims in redhibiation. If they wish to seek damages from any insurer (theirs or the home builders), they are likely facing quickly approaching deadlines.

Builders have deadlines themselves. Once they are sued by homeowners, builders will necessarily turn to their insurance companies and suppliers for reimbursement or indemnity. These suits also have impending statutes of limitations, and questions will loom as to whether the builder successfully mitigated its damages.

Lennar Corp. has been a leader among builders from the get-go on the Chinese Drywall problem.

As Chinese Drywall reports became widespread, Lennar Corp. had already begun examining the problem, replacing faulty drywall, relocating residents, and asserting claims against its subcontractors, suppliers and insurance policies.

Lennar Corp. has a lot of liability in this Chinese Drywall crisis, but in the end, they will likely have a lot of protection. That is due to their foresight and good management of the situtation.

Can the same be said for your company?

The shoe has dropped for one builder who has been working hard to avoid entanglement in the Chinese Drywall defective drywall class actions. According to reports all over the web, Lennar Co. has been officially named in a Florida class action suit over defective drywall.

The significance of Lennar Co.’s involvement with the class action is fairly great, as it begs the question of what exactly distinguishes it from smaller builders who may have also installed Chinese Drywall in homes. Will these smaller builders soon be named in class actions as well?

It also begs the question of whether class action suits are the answer to homeowner’s woes in the Chinese Drywall crisis. The question has been hinted here, and written about by Donald Brenner at the Construction Litigation Law Blog.

With regard to the class action suit, Lennar Co. said it had “already established reserves for the estimated cost of replacing the drywall” it has confirmed to be defective Chinese product “to the extent such costs are not covered by insurance.”

As the risk and exposure of builders opens up, the role of a company’s GL insurance will be examined. More on this later…

It was really only a matter of time.

The Wall Street Journal’s “China Journal” has translated an article written in Chinese that provides us with some insight into how the U.S.’ Chinese Drywall crisis is playing out in Chinese media.

The verdict? They blame America.

According to the report, China is simply confused (and I’m paraphrasing) that Knauf Plasterboard could supply 75% of the drywall for the Beijing Olympics and over a million tons of drywall to countries around the world in 2006 and 2007, yet only receive complaints from the United States.

Xu Luoyi, the head of the National Building Materials Industrial Technology Supervisory Research Center (real organization) offered this potential explanation:

It’s worth considering why this problem has only emerged in the United States. The U.S. credit crisis has caused the real estate market to collapse, and as a result domestic drywall manufacturers have seen their sales suffer and their product is relatively expensive compared to the Chinese-made drywall, so we should also consider these issues.

Cryptic quote from Xu Luoyi, but the commentary does offer a perplexing thought: Why is the United States the only ones complaining? Is it a climate issue? Is it because we’re more litigious than other countries? Or did we coincidentally get the only contaminated drywall?

It is important to note that the concern from China (and its defensiveness) comes at the heels of 2 U.S. Senators proposing federal legislation to put a hold on certain Chinese imports.

As reported by the Wall Street Journal and other news agencies, Louisiana Senator Mary Landrieu has joined Florida Senator Bill Nelson to propose legislation “aimed at initiating a recall and imposing an immediate ban on defective building products from China.” The bill is the latest effort by agencies and legislatures to address problems caused by imported drywall.

The bill – aptly titled the Drywall Safety Act of 2009 – is summarized in a press release from Mary Landrieu’s office as follows:

The centerpiece of their legislation is a resolution pressing the Consumer Product Safety Commission (CPSC) for a recall on Chinese-made drywall, based in part on findings by a Florida homebuilder and state officials who have confirmed the presence of sulfide gases in homes built with the drywall. The Nelson-Landrieu legislation also asks the CPSC to work with federal testing labs and the Environmental Protection Agency to determine the level of hazard posed by certain chemicals and as yet unidentified organic compounds in the drywall. In addition, the legislation calls on the commission to issue an interim ban on imports until it can review federal drywall safety standards to ensure that consumers are protected in the future.

Rather than regurgitate the news, however, we wanted to comment on two things exposed in Sen. Landrieu’s press release.

1. That behind Florida, Louisiana is the second largest recipient of Chinese Drywall. This is a bit of a revealing fact for builders in Louisiana who were a bit unsure of how likely it was that they encountered imported drywall. The press release confirms that “Louisiana has received 60.2 million pounds of imported Chinese drywall, and it may have been used in an estimated 7,000 homes in Louisiana.”
2. That the federal government is not only interested in aiding homeowners, but has builders on its mind as well. Sen. Landrieu’s very quote strikes at the heart of contractors’ concerns, stating “”This defective Chinese drywall represents an attack on our homeowners, a defrauding of our homebuilders and another obstacle on our road to recovery.” While the legislation doesn’t provide any specific relief for homebuilders, the press release seems to consider the homebuilders as victims to the contamination as well, and hope that the bill will “provide clarity to businesses in the construction and homebuilding sectors.”

Good news that homebuilders are not off the federal government’s radar, but cautious news as well – since the primary focus is on the homeowners, and the government is looking for a remedy that doesn’t burden the U.S. taxpayer.

Check out this video from a Florida new-station, who landed an interview with Florida Sen Nelson: